TaxTMI 
TaxTMI 
TaxTMI 
2025 (11) TMI 530
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....lso request that the Respondent be directed to remove the blacklisting imposed on the Corporate Debtor. Furthermore, the Appellant prays for the release of retention money amounting to approximately Rs. 27,14,940, which is currently held by the Respondent, along with the release of the final payment of around Rs. 36,40,441.61 for the work completed. Beyond these specific monetary reliefs, the Appellant also asks the court to pass any other orders it deems fit and just, considering the facts of the case. 3. These reliefs are grounded on the contention that the termination of the contract was triggered by the insolvency of the Corporate Debtor, and therefore, the moratorium under Section 14 of the Insolvency and Bankruptcy Code should protect against such termination. 4. Appellant - Liquidator (Appellant in Liquidator Mr. Pradeep Upadhyay) contends that the CIRP was initiated against the Corporate Debtor (CD) (CD in M/s Dugal Associates Private Limited) on 11.11.2019. 5. It claims that under an Agreement dated 07.10.2016 CD was engaged in a civil construction project for BIDA (BIDA - Bhadohi Industrial Development Authority). Appellant claims that while approximately 90% of ....
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....hat the action of the Respondent was triggered by the insolvency of the CD. 9. The Appellant promptly objected to the termination and forfeiture via letters dated 30.01.2020, 04.02.2020 and 07.02.2020, asserting that only minor work remained, which could be swiftly completed under RPs supervision. Letter dated 04.02.2020 clearly which demonstrates that the delays in contract were not attributable to the CD. 10. Appellant further claims that the Respondent BIDA issued a fresh tender on 12.02.2020 for the residual work, violating the Code and the moratorium. On 26.02.2020, the Appellant filed IA No. 1619/2020 before the Hon'ble NCLT seeking redress. Appellant claims that due to the blacklisting of the CD, nobody took interest in Resolution Plan and finally the COC recommended the CD for Liquidation. Thereafter, on 12.01.2022, the Adjudicating Authority ordered liquidation of the Corporate Debtor and appointed the Appellant as Liquidator. Despite notices, BIDA failed to participate in IA 1619/2020 and was proceeded ex parte on 24.02.2022. Later, BIDA filed IA No. 6030/2022 seeking recall of the ex parte order, which was allowed on 04.01.2023 subject to costs. The reply filed....
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....on of a provision for moratorium in terms of Section 14 of IBC during the pendency of CIRP of the Corporate Debtor, is only to ensure that the Corporate Debtor is transferred or sold as a "going concern" and thus maximize the asset value of the Corporate Debtor, for the benefit and in the interests of all the stakeholders. 15. Appellant claims that IBC is a complete code and Section 238 overrides all other laws. The NCLT in its residuary jurisdiction is empowered to stay the termination of the agreement if it satisfies the criteria laid down by the Hon'ble Supreme Court in Gujarat Urja Vikas vs Amit Gupta & ORs" in Civil Appeal No. 9241 of 2019 (2021) 7 SCC 209: 2021 SCC ONLINE SC 194. In the present appeal, the termination of the agreement was triggered by the insolvency of the Corporate Debtor in view of the averments made hereinabove. Hence, the present appeal be allowed and relief as prayed in the appeal be granted in the interest of justice. 16. Appellant contends that nearly five years have elapsed since the filing of the application by the IRP, and in the intervening period, the contract in question has been awarded to another party. Consequently, the issue relatin....
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....an inspection was conducted on 01.02.2018, which revealed serious irregularities on the part of the Corporate Debtor. The Public Works Department submitted its inspection report on 23.02.2018 detailing the findings. e) That vide letter dated 16.04.2018, the Assistant Engineer, BIDA, directed the Corporate Debtor to increase the workforce to expedite project completion, as the original timeline had lapsed. Subsequently, vide letter dated 01.05.2018, the Assistant Engineer informed the Corporate Debtor that the completion deadline had been extended to 30.07.2018, and the project was required to be completed within the revised timeframe. f) Thereafter, vide letter dated 25.05.2018, BIDA warned the Corporate Debtor to complete the project, failing which blacklisting would ensue. Subsequently, on 12.09.2018, the Executive Engineer directed the Corporate Debtor to rectify the discrepancies identified in the Enquiry Report of the Civil Engineering Department, IIT- BHU, with immediate effect. Further, BIDA extended the project completion deadline to 31.12.2018, vide letter dated 28.09.2018. g) The Respondent further submitted that following the extension, BIDA is....
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....d order on 27.01.2020, citing the moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016. Subsequent emails were sent by the RP on 30.01.2020 and 04.02.2020, followed by a letter from the Assistant Engineer, BIDA, dated 03.02.2020, directing the Corporate Debtor to complete the measurement work. In its reply dated 04.02.2020, BIDA stated that it had not received prior communication from the RP or the Corporate Debtor regarding the commencement of insolvency proceedings and had only become aware of it during the RP's meeting with the CEO on 27.01.2020, at which time no formal documentation was shared. k) Further emails were sent by the RP on 04.02.2020 and 07.02.2020 requesting release of EMD and security deposit and review of the blacklisting order. BIDA responded on 07.02.2020, detailing the losses sustained due to non-completion of the work and offering cooperation in case any documents were required by the RP. On 10.07.2020, the RP informed BIDA of his intention to visit the project site for measurement. In response, BIDA, via its Executive Engineer, communicated on 31.07.2020 that the project remained incomplete and reiterated its readiness to facilita....
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....ked. This is evident from the Appellant's communications dated 1 August 2018, 17 September 2018, 1 October 2018 and 11 October 2018. In its email dated 13 October 2018 the Appellant specifically noted that the housekeeping staff being provided by the Corporate Debtor was inadequate. The Appellant was apparently constrained to deploy its own staff for housekeeping, evinced from its email dated 19 November 2018. The Corporate Debtor has admitted that the Appellant was using its own housekeeping staff and deducting the costs from the invoice. The Appellant again intimated the Corporate Debtor to change faulty batteries of the UPS and provide cleaning products in its email dated 3 February 2019. The termination notice dated 10 June 2019 also clearly lays down the deficiencies in the services of the Corporate Debtor. The termination notice enumerated the following deficiencies: xxx 26. In Gujarat Urja (supra), the contract in question was terminated by a third party based on an ipso facto clause, i.e., the fact of insolvency itself constituted an event of default. It was in that context, this Court held that the contractual dispute between the parties arose in rela....
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....s the sole contract for the sale of electricity which was entered into by the corporate debtor. In doing so, we reiterate that NCLT would have been empowered to set aside the termination of PPA in this case because the termination took place solely on the ground of insolvency. The jurisdiction of NCLT Under Section 60(5)(c) of IBC cannot be invoked in matters where a termination may take place on grounds unrelated to the insolvency of the corporate debtor. Even more crucially, it cannot even be invoked in the event of a legitimate termination of a contract based on an ipso facto Clause like Article 9.2.1(e) herein, if such termination will not have the effect of making certain the death of the corporate debtor. As such, in all future cases, NCLT would have to be wary of setting aside valid contractual terminations which would merely dilute the value of the corporate debtor, and not push it to its corporate death by virtue of it being the corporate debtor's sole contract (as was the case in this matter's unique factual matrix). 177. The terms of our intervention in the present case are limited. Judicial intervention should not create a fertile ground for the revival....
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....pondent was within its rights to terminate the contract. It has nothing to do with the initiation of the CIRP proceedings. The situation described by the Hon'ble Supreme Court in above cited case that "there is nothing to indicate that the termination of the Facilities Agreement was motivated by the insolvency of the Corporate Debtor. The trajectory of events makes it clear that the alleged breaches noted in the termination notice dated 10 June 2019 were not a smokescreen to terminate the agreement because of the insolvency of the Corporate Debtor" is very much similar to the present case. 24. The Adjudicating Authority also describes similar situation in the present case, as noted in the per the impugned which is noted herein for better appreciation of the matter: "... 17. It is found that the respondent is neither supplying any goods or services to the Corporate Debtor in terms of Section 14(2) nor is it recovering any property that is in possession or occupation of the Corporate Debtor as the owner or lessor of such property as envisioned under Section 14 (1)(d). Rather, it is availing of the services of the Corporate Debtor and which in turn had to complete....
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....n of the CIRP against the Corporate Debtor. The sequence and nature of events preceding the termination clearly demonstrate that the decision to terminate the agreement was a result of the Corporate Debtor's sustained non-compliance and operational shortcomings. The termination notice dated 28.01.2020 specifically sets out the breaches committed by the Corporate Debtor, and there is no indication that these were contrived or artificially manufactured grounds used as a pretext to exit the contract due to the insolvency proceedings. Further we record that the termination notice dated 28.01.2020 also clearly lays down the deficiencies in the services of the Corporate Debtor. 22. Therefore, it cannot be said that the invocation of the termination was a smokescreen to circumvent the moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016. The trajectory of events leading to the termination supports the conclusion that the termination was founded on legitimate contractual grounds, and not as a reaction to the Corporate Debtor's insolvency status." 25. Accordingly, we are compelled to hold that the National Company Law Tribunal (NCLT) does not possess a....