TaxTMI 
TaxTMI 
2026 (1) TMI 166
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....e of which, the application filed by Respondent No. 2, Mytrah Energy (India) Private Limited, under Section 9 of the I & B Code, 2016, has been admitted, leading to the commencement of CIRP proceedings, against the Corporate Debtor, M/s. Naolin Infrastructure Private Limited. 2. To summarize the controversy we are called upon to examine and which forms the genesis of the dispute the following questions arise: (a) Whether there was an admitted amount due to be paid to the Applicant, as referred to in the application filed under Section 9 of the Code, by the Appellant; (b) Whether there was an admitted and established default; and (c) What modalities were required to be adopted for determining the aspect of default, which is the central issue in controversy. 3. The controversy presented by the learned counsel for the Appellant is that civil works were awarded to the Corporate Debtor vide two Purchase Orders (POs) as far back as 08.09.2021. The said Purchase Orders specified the date for completion of work, and time was made the essence of the contract, as mutually agreed upon. The work was required to be completed by 31.12.2021. 4. It is further st....
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....te Limited, in consideration of the payment of advance to the tune of Rs. 2,30,11,558/- paid on 25.05.2022, by the letter to the CD in accordance with the terms of Purchase Order dated 07.04.2022. 9. In a nutshell, the facts that may be summarized from the contents of the said letter are as follows: (i) That there existed a contractual obligation binding inter se among the parties, particularly upon the Appellant, who had issued Cheque No. 892786, amounting to Rs. 2.34 crores, drawn on Karnataka Bank Limited, in favour of M/s Mytrah Vayu (Som) Private Limited, the Purchaser in consideration of the advance payment of Rs. 2,30,11,558/- paid to the Appellant on 25.05.2022. (ii) The Appellant admitted the exchange of the amount referred to in the said communication; and (iii) That the deadline for completion of work, as mentioned in the Demand Notice dated 16.12.2022, stood extended until 10.11.2022. 10. The notice under Section 8 of the I & B Code was issued by the Respondent (Operational Creditor), thereafter on 16.12.2022, for amount of Rs. 2,34,08,250/- with interest @ 24% per annum. The date of default mentioned therein was 30.07.2022 and 15.10.202....
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....not attributable to the Purchaser, the Contractor would be liable to refund amounts corresponding to uncompleted or delayed work, which means that in case work is delayed because of action of Purchaser / Force Majeure, date of default has to be re-determined accordingly. 13. The undertaking given by the Appellant vide its letter dated 07.07.2022 is given below: "The completion date for scope of works is 30.07.2022. In the event of any delay in completion or non-completion of scope of works due to any reason, non-attributable to Purchaser, the Contractor shall be liable to refund the amount for the works which have not been completed or delayed. We further confirm and undertake that, (i) The Bank account from which the Cheque has been issued shall not be closed during the validity period of the Cheque. (ii) We shall not issue any stop payment advice to our Bank towards the Cheque issued by us; and (iii) The Cheque has been duly signed by the authorized signatories of the Contractor as per the Bank Account records. We hereby undertake to indemnify in case of any violation of any of the undertakings mentioned herein this letter.....
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.... deadline of 10.11.2022. 17. The demand notice was consequently issued by the Respondent / Operational Creditor, due to the default in complying with the extended timeline, and was issued on 16.12.2022 under Section 8 of the I&B Code. It is seen that, demand notice was issued after the occurrence of default; exact date of default will not matter because, as long as the demand notice is issued within the limitation period, variation in date of default will not vitiate the CIRP proceedings. In certain cases variation has not been allowed because, Creditors had tried to get around limitation, Section 10A restriction etc. That is not the case agitated by Appellant. 18. Another important feature that requires consideration for determining whether there was an admission of liability. It is seen that the Corporate Debtor, while acknowledging the debt and the liability to pay dues, had itself issued cheques for the amount owed to the Operational Creditor. When these cheques were presented for encashment before the Bank, they were dis-honoured and returned on 25.01.2023. Issuance of the cheque itself amounts to an admission of liability, as it involves tendering a negotiable instrumen....
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....the responsibility of the Appellant. Therefore, non-handing over of the Site cannot be a plea. Further, Appellant in his communication has never referred to these issues while reiterating his commitment to complete the work. Since the Appellant was aware of this fact but did not raise it at any earlier stage of the proceedings, except now in this Company Appeal, the said plea cannot be treated as a defence to contend that the impugned order admitting the CIRP proceedings under Section 9 of the I & B Code, 2016, is bad. (b) The learned counsel for the Appellant further attempted to create doubt regarding the entire proceedings by referring to various email communications on the record of the Company Appeal, which were said to have been sent by the Operational Creditor to the Corporate Debtor. Invariably, the responses sent by the Corporate Debtor to these emails contained assurances regarding remittance of the amount due on account of non-performance of work under the contract and in view of the observations made in the letter dated 15.10.2022, these assurances, given in response to the Operational Creditor's emails, constitute an implied admission of debt and default under....
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....ices". The operative requirement is that the claim must bear some nexus with a provision of goods or services, without specifying who is to be the supplier or receiver. Such an interpretation is also supported by the observations in the BLRC Report, which specifies that operational debt is in relation to operational requirements of an entity. 50.2. Second, Section 8(1) of the IBC read with Rule 5(1) and Form 3 of the 2016 Application Rules makes it abundantly clear that an operational creditor can issue a notice in relation to an operational debt either through a demand notice or an invoice. As such, the presence of an invoice (for having supplied goods or services) is not a sine qua non, since a demand notice can also be issued on the basis of other documents which prove the existence of the debt. This is made even more clear by Regulation 7(2)(b)(i) and (ii) of the CIRP Regulations 2016 which provides an operational creditor, seeking to claim an operational debt in a CIRP, an option between relying on a contract for the supply of goods and services with the corporate debtor or an invoice demanding payment for the goods and services supplied to the corporate debtor. While....
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....gation with evidence. The Learned Tribunal held that the plea was vague and related merely to advances, and such a vague plea could not be construed to satisfy the theory of non-handover of the site. 26. Another question that came up for consideration before the Learned Tribunal was concerned with the effect of registration of a Deed of Assignment, as argued by the learned counsel for the Corporate Debtor. It was submitted that registration of the Assignment Deed was mandatory. This issue, however, is no longer res integra, as it has already been settled that registration of an Assignment Deed is not a condition precedent under the I & B Code. In the present case, the Deed of Assignment dated 29.03.2023, executed between Mytrah Vayu (Som) Private Limited (the original Applicant under Section 9) and Mytrah Energy (India) Private Limited, had the effect of assigning the debt to the latter. The nature and effect of such an assignment do not require registration under the Code for the assignee to step into the shoes of the original applicant under Section 9. The Learned Tribunal relied on the judgment in CFM Asset Reconstruction Pvt. Ltd. v. M.G. Finvest Pvt. Ltd., in COMPANY PETITI....
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....d B Code" as civil proceedings akin to a trial which is not the legislative intent. 20. .................................. 21. The objective of the I and B Code is to ensure re-organization and insolvency resolution of the corporate persons, partnership firms and individuals, in a time-bound manner for maximisation of value of assets of such persons to promote entrepreneurship, availability of credit and balance of interest of all stakeholders. The assignment cannot be challenged in the petition under section 7 and that too by a party who had the knowledge of "assignment deed" as back as in the year 2012, as noted above, the Debts Recovery Tribunal, Chandigarh, when it requested and never challenged the same before a court of competent jurisdiction." 28. The last issue argued by the learned counsel for the Appellant concerns the effect of initiation of proceedings under Section 9 of the I & B Code when a notice under Section 138 of the Negotiable Instruments Act, 1881, and a criminal complaint have already been issued. The issue regarding the effect of pendency of proceedings under Section 138 NI Act is now settled. The mere pendency or continuation of criminal....