TaxTMI 
TaxTMI 
TaxTMI 
2026 (3) TMI 206
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....and Bankruptcy Code, 2016 ("Code"). What did Appellant plead before AA? 2. The Appellant/ Operational Creditor, a registered Partnership Firm was engaged by the Respondent / Corporate Debtor ('CD') for works related to wind energy projects and various Work orders and Purchase orders were issued by the Respondent/ Corporate Debtor for the same. It is claimed that the said Work Orders and Purchase Order were admittedly completed by May 2019 and the Appellant/ Operational Creditor raised a total of 75 invoices for the same amounting to Rs. 111,02,60,040/- (One Hundred and Eleven Crore Two Lakhs Sixty Thousand and Forty Rupees) vide letters dated 20.07.2018, 05.08.2018, 15.08.2018, 25.08.2018, 10.09.2018, 03.10.2018, 30.10.2018, 01.11.2018, 29.03.2019 and 14.05.2019. Despite acknowledging and admitting the invoices raised, the Respondent/ Corporate Debtor has only made part payments of approx. INR 85 crores against work done. These payments were ad hoc and on account basis wherein payment of approx. Rs 59.87 Crores was made to the Appellant/ Operational Creditor during the period from 20.04.2016 to 07.05.2019. Further payments of approx. Rs 25.42 Crores were made by Respondent/ C....
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....RE A1. c. That the Operational Creditor is engaged in the business of setting up wind projects. d. That the Operational Debtor engaged the Operational Creditor for works related to 50 MW wind power project at Sadala, Gujarat Project which was awarded to the Operational Debtor by SJVNL. e. That the Operational Debtor issued Work / Purchase Orders bearing No(s). 5300009998 dated 15.07.2018 for "Supply and Erection of 33kV Panther Line", 5300009999 dated 15.07.2018 for "Construction of WTG FND - 92HH", 5300010000 dated 15.07.2018 for "Erection of USS", 5300009996 dated 15.07.2018 for "Supply and Erection of 33kV Panther Line", 5100015260 dated 15.07.2018 for "Supply of USS Equipment and Accessories", 5300009965 dated 17.10.2018 for "Construction of WTG FND - 92HH", 5300009967 dated 17.10.2019 for "Erection of USS", 5100015224 dated 17.10.2018 for "Supply of USS Equipment and Accessories", 5300009988 dated 23.10.2018 for "Supply and Erection of 33kV Dog Line" and 5300009986 dated 23.10.2018 for "Supply and Erection of 33kV Panther Line". The true copies of the Purchase / Work Orders dated 15.07.2018, 17.10.2018 and 23.10.2018 are annexed herewith as ANNEXURE ....
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.... to Rs. 25,72,70,275/- (Rupees Twenty Five Crores Seventy Two Lakhs Seventy Thousand Two Hundred and Seventy Five Only) along with interest @ 24% p.a. from the date of default till date but to no avail. It is reiterated that the supply of equipment and installation work carried out by the Operational Creditor was to the complete satisfaction of the Operational Debtor and the Operational Debtor never raised any issue with respect to the same during or after the completion of the work by the Operational Creditor. However, despite the same, the Operational Debtor did not make payment of the due amount to the Operational Creditor and has repeatedly sought time to make payment by way of frivolous excuses. That the delay in payments by Operational Debtor has prolonged the whole process and the Operational Creditor has been constrained to keep following up for the said payments, to no avail. k. Vide several emails, the Operational Creditor has sought payments towards the outstanding invoices. However, till date there has been no reply from the officials of the Operational Debtor to said emails addressed by the Operational Creditor to the Operational Debtor regarding payment of th....
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....ously and as an afterthought, issued a legal notice dated 04.02.2020, claiming a false and made-up amount of Rs. 54,50,00,000/- (Rupees Fifty Four Crores Fifty Lakhs Only) from the Operational Creditor and by way of the same legal notice, sought to invoke arbitration, in the event that the Operational Creditor fails to make the aforesaid payment within 30 days from the receipt of said legal notice. p. That the stance taken by the Operational Debtor is not only arbitrary but also irrational and without any factual basis as the Operational Debtor was duty bound to make regular and timely payments. It is submitted that the Operational Debtor has no locus to demand said payment from the Operational Creditor. The Operational Debtor has issued the said legal notice with fraudulent intention and wrongfully attempted to invoke arbitration only after the receipt of the Demand Notice issued by the Operational Creditor under the provisions of IBC, 2016. That instead of fulfilling its legal obligations of making payment towards the debt owed by the Operational Debtor to the Operational Creditor, the Operational Debtor has sought to employ fraudulent and malicious delaying tactics, muc....
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....Debtor has for the first time raised any such dispute and that too only after the issuance of Demand Notice under the provisions of the Code by the Operational Creditor. The legal notice issued by the Operational Debtor is baseless and hence, is not a genuine dispute. t. As laid down by way of a catena of judgments, such a legal notice must bring to the notice of the Operational Creditor the "existence" of a dispute or the fact that a suit or arbitration proceeding relating to a dispute is pending between the parties. Since the legal notice issued by the Operational Debtor is in itself for invocation of arbitration, it cannot be said that a dispute is pending between the parties. In fact, the said notice is a feeble attempt by the Operational Debtor to establish a false, frivolous and baseless dispute. Therefore, there is no plausible contention which requires further investigation and that the "dispute" brought forth by the Operational Debtor is contrary to the true and correct facts of the case and entirely unsupported by evidence. u. In the above circumstances, owing to the failure of the Operational Debtor in making payment towards the said invoices in order t....
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....rder? 5. The AA dismissed the CP mainly on the grounds of pre-existing dispute as also on the ground that there is no default since the due date as per Clause 38 of the Work Order did not exist when the invoices are raised. The Relevant portion of the orders is as follows: "Reasons 17. One of the objections taken by the Corporate Debtor is regarding registration of partnership firm of Operational Creditor. In view of rulings in Rourkela Steel Syndicate vs. Metistech Fabricators Pvt. Ltd. Company Appeal (AT) (Insolvency) No. 924 of 2022 by NCLAT and OPJK Paper Company V/s. International Print-o-Pac Ltd. (C.P.(IB)-240/ND/2022, cited by Operational Creditor, the application under Section 9 of Insolvency and Bankruptcy Code, 2016 are proceedings and has not a suit. Therefore, the provisions of Partnership Act will not be applicable and the petition is maintainable. Apart from this, the Operational Creditor also filed a document regarding registration of their partnership firm by filing IA No.1244 of 2023. Therefore, the contention of Corporate Debtor that the petition is not maintainable holds no water. 18. According to Corporate Debtor, there is pre-exist....
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....as a dispute between them on various issues relating to the work. It appears that the notice of arbitration was issued after receiving demand notice but the Operational Creditor appeared before Arbitration Tribunal and contested the matter. It is not the defence of Corporate Debtor that only because the arbitration proceedings are initiated there were pre-existing disputes but such disputes were also raised in various correspondences between the parties. The Pre-existing disputes can also be proved by other evidence than the arbitration proceedings. There appears that the disputes truly exist and is not the hypothetical. This fact is also brought to the notice of Creditor in the reply given by the Corporate Debtor to the demand notice which was issued within 10 days from receipt of notice. The Corporate Debtor specifically mentioned various disputes in its reply. In support, he has also produced series of emails. From this fact the pre-existing disputes evidences. "In Mobilox, case (cited supra) it is also held that, all that the adjudicating authority is to see at this stage is whether there is a plausible contention which requires further investigation and that the "dispute" is n....
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.... 103 of the Petition, which in total amounts to INR 3,60,71,169. The remaining invoices have not been disputed by the Corporate Debtor. 7. A discrepancy in the invoices was alleged in the email of 13.11.2018 but no discrepancy was pointed in the email of 22.11.2018 issued after 09 days. The only issue raised was that the invoices and quantity are accepted but final amount is subject to certain costs which is to be discussed at the time of final reconciliation. Such costs were extraneous costs such as LD, generation loss and idle charges unconnected with the invoices. None of this qualifies as any defence with respect to the proceedings initiated through Form 4 of the Code which is based on invoices for work done and accepted. Additionally, the proceedings of arbitration initiated against SJVNL the Respondent/ Corporate Debtor did not put any blame on the Appellant/ Operational Creditor for Liquidated Damages, generation loss / idle charges but rather these costs were blamed solely on SJVNL, the project owner and thus clearly implying that no delay was attributable to the Appellant/ Operational Creditor and therefore all claims of Liquidated. 8. Appellant further states that t....
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....tifying the same which clearly shows the frivolous nature of dispute raised and a clear after thought. 12. Merely because the 'Corporate Debtor' has disputed the claim by showing that there is certain counter claim, it cannot be held that there is pre-existence of dispute, in absence of any evidence to suggest that dispute was raised prior to the issuance of demand notice under Section 8(1) or invoice. 13. The Respondent/ Corporate Debtor with a fraudulent intention invoked the arbitration only as a counter blast to the proceedings initiated by the Appellant/ Operational Creditor under Section 9 the Code. 14. Respondent/ Corporate Debtor never sent any notice or email to the Appellant/ Operational Creditor alleging any delay or deficiencies in the work prior to the issuance of the demand notice. 15. NCLT also failed to consider that the Respondent/ Corporate Debtor has made a frivolous attempt to raise sham, vague and moonshine defence to establish a pre-existing dispute amongst parties to present matter. 16. NCLT while observing in the impugned order that the date of default was not mentioned by the Appellant/ Operational Creditor erred in not considering that the D....
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.... d. ROW issue relate to SDLT- 119 Firm Action Plant. As the WTG is erected long back. e. Completion of balance feeder work. f. Balance work completion schedule. g. All pending document submission schedule related to Road & Line ROW. 20. Thereafter, even on 13.11.2018, on account of discrepancies in the invoices the Respondent No. l had communicated to the Appellant. Thereafter, on 22.11.2018, the Respondent No.1 have shared comments on the invoices submitted by the Appellant with specific note stating "the comments and acceptance of qty is based on the invoices submitted. This is not the final amount considered as we have not considered LD, Generation loss and ideal charges which lnox has paid to its customer. This needs to be discussed separately at the time of final reconciliation". Respondent No.1 had suffered various losses by way of liquidated damages and arbitration award by the customers on account of delay in work by the Appellant. Further the reconciliation was pending, and the deduction of LD was to be discussed with the Appellant. 21. The said issue of reconciliation was explained by the Answering Respondent No.1 by Email dated 05....
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....ociates to the tune of Rs.3,83,34,3 8,000/- Evidently the Appellant has claimed invoices for the Sadla Project and further, on the basis of MOUs between the parties the liquidated damages of Maharashtra Projects was to be recovered from Sadla Project. Thus, even otherwise the invoices claimed in Section 9 petition could not be claimed prior to reconciliation of accounts. 25. The Answering Respondent No.1 had time and again communicated to the appellant herein for reconciliation since it had huge receivables against the appellant herein and the Answering Respondent No.1 had suffered liquidated damages. The Adjudicating Authority had considered these communications between the parties and have referred in the impugned order. That, the Answering Respondent No. l had time and again requested the appellant herein for reconciliation of the accounts as well as pending points however, the Appellant herein had opted for issuing demand notice instead on reconciliation. The Hon'ble Apex Court in the case of Sabarmati Gas Ltd. vs. Shah Alloys Ltd. reported in AIR 2023 SC 288 has interpreted the term reconciliation and has held that a communication for reconciliation would reveal existen....
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....ration by notice of invocation dated 04.02.2020. Answering Respondent No. 1 had filed Arbitration Petition No.1094 of 2022 before the Hon'ble High Court of New Delhi under Section 11(3) and (4) of the Arbitration and Conciliation Act, I996 and by an order dated 24.01.2023, the Hon'ble High Court of New Delhi on request by both the parties have agreed for sole arbitrator instead of 3 Members Arbitral Tribunal. The Answering Respondent No. l herein had filed claim of Rs.95,98,08,670/- against the Appellant and these aspects were brought on record of Section 9 petition by an additional affidavit dated 10.07.2023. 29. Further the Appellant had filed counter claim of Rs.61,87,59,500/-, before the above arbitration proceedings which included the claim made in the Section 9 Petition. This aspect was brought to the notice of the Hon'ble Ld. Adjudicating Authority in the written arguments filed by the Corporate Debtor. 30. Adjudicating Authority had heard both the parties and reserved Section 9 Petition on 22.11.2023 and on 24.11.2023 the Arbitration Tribunal comprising of Hon'ble Sole Arbitrator Mr. Justice D.K. Jain, Former Judge Supreme Court of India had terminated....
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....'ble Apex Court has opined that when agreement within the parties carries arbitration clause and arbitration proceedings being pending the parties shall be left with liberty to raise all contentions before the arbitrator. That, in the case of Sabarmati Gas Limited vs. Shah Alloys Limited the demand notice was issued on 01.04.2017 while the notice of arbitration was dated 29.11.2019, however, the arbitration proceedings being pending, the Hon'ble Apex Court directed the parties for adjudication before the arbitrator. The relevant para of the said judgment is incorporated hereinbelow: - "..... 39. In the contextual situation, it is also relevant to refer to the fact, rightly taken note of by the NCLT, that the Respondent herein had filed a Commercial Suit No. 92/2017 on 28.04.2017 before the Commercial Court in Ahmedabad, claiming damages for the loss suffered by it due to discontinuation of gas supply. True that on 12.07.2018, the said Commercial Civil Suit was dismissed by the Commercial Court at Ahmedabad on the ground of being barred by limitation. Annexure-B would reveal that against the judgment of dismissal in the said suit, the Respondent herein had ....
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....s time and again requested the Appellant herein to reconcile the accounts of the Appellant. However, the Appellant without any reconciliation and attempt for settling the disputes between the parties straight away filed the Section 9 petition. 33. Respondent No.1 further avers that the present appeal suffers from misjoinder of parties, as the Appellant has joined directors and ex-director of the Answering Respondent No. I while challenging the dismissal of Section 9 petition. Such attempt itself demonstrate the malicious intent of the Appellant to pressurize the Answering Respondent No. l and by joining ex-director who has already left the Answering Respondent No. l in present appeal would harm the reputation of the Answering Respondent No. l. Answering Respondent No. I is a listed entity and joining individuals in an appeal before this Appellate Tribunal on an order of dismissal of Section 9 petition is itself a malafide attempt to arm twist individuals who are managing the Answering Respondent No. l in their capacity and/or holding office in their individual capacity are being dragged in the present litigation. Joining a third party i.e. Respondent No.5 herein, who has already....
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....conditions of MoU dated 07.01.2016 shall be deemed to be part of the work order. [@71 APB]. 39. We are informed that as per the target commissioning period, Appellant-Operational Creditor which was executing the works for the Respondent-Corporate Debtor delayed it beyond the agreed period between the parties and there is a claim that Corporate Debtor incurred huge losses and also suffered liquidated damages from its customers. The Respondent has listed various Liquidated Damages (LD) and ongoing litigations on account of delay which are noted as below: "a. LD of Rs.33,20,76,452/- and GST on LD to the tune of Rs.6,95,72,580/- by SJVNL and a counter claim by SJVNL for Rs.500 Crores. b. LD of Rs.3.15 Crores by ReNew Ltd. c. LD of Rs.7,34,00,000/- from Green Infrawind Energy Ltd. d. LD of Rs.3,22,77,116/- from DJ Malpani Group e. Award of Rs.12,68,59,503/- Rs.7,21,10,039/- and Rs.7,06,92,384/- to Surbhi and SJP on account of partners of the appellant." 40. Furthermore, there was email exchange going on between them to settle the accounts, the brief description of which is noted as below. 17.08.2018 Para 7 of the impugned order Em....
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.... correspondence between the parties shows that there was a dispute with respect to work on various counts. Also there were tax issues between them. In one of the email dated 05.12.2018, it is mentioned that "Please come and reconcile as there are many anomalies as regard to your account in totality same has to be discussed with project development and project execution along with settlement and reconciliation of Maharashtra invoices which are pending for years together. As Maruti and Bajrang are one and the same company, hence, complete reconciliation for Gujarat and Maharashtra is must to do. 20. There was also a dispute regarding amount payable which is also admitted by the Operational Creditor. It is also pertinent to note that the Operational Creditor itself admitted that some invoices were disputed by the Corporate Debtor due to discrepancies in it. So also, the account was not finalised and discussion is needed at the time of final reconciliation." 43. From the pleadings and particularly email exchange which is on record, one can safely come to a conclusion that these are not spurious or moonshine disputes and these were pre-existing disputes. Thus, the Company pe....
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....ted and approved. The aforesaid facts revealed from Annexure 40 together with the stand taken by the Respondent in the letter dated 04. 01.2013 (Annexure 36) would reveal the existence of a pre-existing dispute between the parties. In the contextual situation it is only apposite to be remindful of the observation in Mobilox Innovations (P) Ltd. {supra) that in doing the act of separating the grain from chaff the Court need not to be satisfied that the defence is likely to succeed. It is enough that a dispute exists between the parties and in other words, what is to be seen is whether there was a plausible contention requiring investigation for the purpose of adjudication. Taking note of the nature of the dispute of the Respondent as referred hereinbefore in respect of the claim made by the Appellant, we do not find any reason to disagree with the concurrent findings of the Tribunals that there existed a 'pre-existing dispute' between the parties before the receipt of demand notice Under Section 8, IBC. In other words, the dismissal of the application Under Section 9 IBC on the ground of 'pre-existing dispute' cannot be held to be patently illegal or perverse. We als....
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....ne the merits of the dispute except to the extent indicated above. So long as a dispute truly exists in fact and is not spurious, hypothetical or illusory, the adjudicating authority has to reject the application ..." This judgement fully supports the case of the Respondent No.1 in the rejection of the Appeal. 49. Thus, in the facts and circumstances of the case, without relying on the arguments raised by the Respondent No1 that the event of default has not happened and also not relying on the pending arbitration as also misjoinder of parties, we find that owing to the pre-existing dispute, particularly due to pending reconciliation, Section 9 Petition under the Code is not maintainable and accordingly, the appeal deserves to be dismissed. 50. When the matter was taken up for pronouncement on 13.02.2026, the Counsel for the Appellant appeared and submitted that Appellant and the Respondents have settled their dispute and they have filed an IA No. 1161 of 2026 on 13.12.2025 but this IA was not yet taken on the record by the registry. On perusal of this IA No. 1161 of 2026, which was presented in the open court, we note that it has the following prayers: "2. That su....