TaxTMI 
TaxTMI 
2026 (5) TMI 1171
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.... 9 of the IBC. Submissions of the Appellant: 2. The Appellant - Shreenathji Infratech - Operational Creditor (OC) is a partnership firm registered in MP and is engaged in the business of construction of civil and engineering works, mining, drilling, earthwork. The Appellant brings to our notice that various work orders dated 14 September 2018, 10 September 2018, and 5 January 2019 were awarded to it by the Corporate Debtor Company-M/s Namasthetu Infratech, for the installation of mobile stone crushing plants, earthwork in excavation and supplying and filling muroom in depressions. The Appellant also brings to our notice that the Airport Authority of India (AAI) on 3rd September 2019 issued a letter to one M/s Vishal Infratech Limited for the removal of the stone crusher installed in the airport site. AAI stopped the Operational Creditor from carrying out the work in the said site on the ground of lack of approval to carry out the crushing work. The Appellant also claims that the District Collector granted requisite approvals and permission to the Operational Creditor to carry out upgradation work in the said site on 12 September 2019. Appellant claims that the CD Company from....
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.... outstanding amount together with interest thereon to the Appellant because there is a substantial cost of financing involved for every business. 5. The Respondent Company, in its reply to the company petition filed by the Appellant before the Ld. Adjudicating Authority, has not objected to or disputed the non-performance of the contract. Silence or non-denial of specific allegations by the Respondent Company implies acceptance of those allegations. In the present case, the Respondent company has neither refuted the claims regarding the completion of work as assigned under the contract nor provided any evidence to counter the assertions of the Appellant regarding the performance of its obligations. The failure of the Respondent Company to specifically deny or challenge the completion of work under the contract constitutes an implied admission of the facts asserted by the Appellant. According to legal principles, particularly under Order VIII Rule 5 of the Civil Procedure Code, 1908, which states that every allegation of fact in the plaint, if not denied specifically or by necessary implication, shall be taken to be admitted. The order passed by the Ld. Adjudicating Authority fai....
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....ntested facts presented by the Appellant. The Hon'ble Supreme Court in Union of India Vs. Ibrahim Uddin & Anr. (2012) 8 SCC 148 emphasized the necessity for judicial orders to reflect consideration of all material evidence and arguments. An order that fails to address uncontested claims is flawed and warrants appellate intervention. So much so, in Vishnu Dutt Sharma Vs. Daya. Sapra (2009) 13 SCC 729, the Supreme Court held that non-denial of specific allegations leads to an inference of admission of such facts. Adjudicating Authority has failed to recognize, the undisputed completion of the work and directing the Respondent company to make the due payments to the Appellant. 8. The whole contract for up-gradation of Jabalpur Airport took place at the initiation of the AAI, they were aware of the work carried out in the given site and being in the knowledge that the requisite permission not being taken by the Respondent Company or by the Vishal Infrastructure Ltd. with whom the AAI had executed the contract, it was their responsibility to stop the crushers from being installed, instead, they chose to maintain the status quo and interfered after one year, after the Appellant ha....
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.... restrained from doing so by the AAI. That the intervention by AAI constitutes a force majeure event or an instance of frustration of contract under Section 56 of the Indian Contract Act, 1872, as the performance of the contract became impossible due to an unforeseen and uncontrollable external event. Adjudicating Authority ought to have seen that performance of a contract is excused when prevented by an act of government or a regulatory authority. In Satyabrata Ghose Vs. Mugneeram Bangor & Co. (1954 AIR 44, 1954 SCR 310), the Hon'ble Supreme Court held that a contract becomes void when its performance is rendered impossible due to circumstances beyond the control of the parties. Adjudicating Authority erroneously attributed non-performance to the Appellant without considering the legal and factual context of AAI's intervention. Adjudicating Authority failed to recognize that the stoppage of work by AAI, a governmental authority and absolves the Appellant from any liability of non-performance under the contract. The principle that parties are discharged from contractual obligations when performance is made impossible by an unforeseen event is well-established. The Hon'b....
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....held that a party to a contract who suffers from a breach by the other party is entitled to stop performance until the breach is rectified. 11. Adjudicating Authority, in its judgment and order vide dated 17.05.2024, failed to consider the severe financial impact and operational constraints faced by the Appellant due to the non-payment of dues by the Respondent Company. Adjudicating Authority's judgment and order vide dated 17.05.2024 is erroneous and unjust as it overlooks the fundamental breach of contract by the Respondent Company and the resulting inability of the Appellant to continue work without receiving the outstanding payments. Adjudicating Authority failed to see that the AAI issued the notice on 03.09.2019 to the Vishal Infrastructure Ltd. to stop the crushing work and remove the crushers. The work at the said site was stopped because of the notice dated 03.09.2019. The AAI. continued to release the running bill payments in the. favour of Vishal Infrastructure Ltd. knowing fully well that the Respondent company is not making the said payments to the Appellant through Respondent company for the work being done at the AAI site. Adjudicating Authority failed to see ....
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....r contract. The matter of contract cannot be questioned in a writ petition under Article 226 of the Constitution of India. Be that as it may, the prayer made herein is for initiation of an enquiry. In case the plea of the petitioner is to be accepted then an enquiry has to be ordered on the finding that certain illegalities have been committed by the respondents under contract. Therefore, once again the terms of the agreement would have to be scrutinized to find out if there is any violation and only after coming to a conclusion that there are violations that subsequent orders could be passed. Even assuming this exercise is to be done, the same would not, under any circumstances, result in the initiation of an enquiry against any of the respondents, since what is contended is based on the violation of the terms and conditions of the contract. If that were to be so, the petitioner has a remedy elsewhere. Therefore the prayer sought for by the petitioner herein for the initiation of an enquiry, in our considered view, would not arise in the facts and circumstances of this case. 6. Even otherwise, the relief sought for is to direct respondent No.1 to constitute an enquiry for....
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....described as "a pre-existing dispute" as understood by the Hon'ble Supreme Court in the decision in Mobilox Innovations (P) Ltd. versus Kirusa Software (P) Ltd. The answer is in negative. Adjudicating Authority has erred to see that the plea of non-performance of the contract may have had with the Respondent with the precondition that the said contract executed between the Respondent and Appellant did not have invalidation from the AAI, as, the project was of AAI and the Respondent was to perform the work, as, assigned by Vishal infrastructure ltd, however, the said work i.e. installation of crushing plant was never allowed by the AAI. Adjudicating Authority has erred to see that mere by averring non-performance does not suffice the purpose, as, against the non-performance as alleged, the Respondent has not taken any legal recourse against the Appellant, therefore, there is no question of non-performance of contract subsisted. The Respondent was never aggrieved by the act of the Appellant and therefore, did not initiate any legal recourse against the Appellant. The same depicts the Respondent had no grievance to redress qua Appellant. Submissions of the Respondent 16. The....
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....f crushed aggregate with all required facilities in compliance with the work order dated 14 September 2018. Furthermore, the validity of the said work was twelve months; however, despite the repeated assurances, the Appellant failed to supply the crushed aggregate as per the grading requirement form WMM, and GSB mix as per the terms and conditions of the work order. 21. As per the work order dated 14 September 2018, the Appellant was supposed to supply GSB quantity of 5,040,000 CFT; however, the quantity supplied by the Appellant was 131,444 CFT only up to March 2019, leaving a balance of 4,908,556 CFT, which the Respondent had to acquire from other agencies for which the Respondent had to incur additional costs for acquiring the same. The Respondent incurred about Rs. 88,867,952 for acquiring the balance 4,908,556 CFT. 22. If the Appellant had done their work on time, then the Respondent would have spent Rs. 6,01,298,11 (Rs. 49,08,556 X Rs. 12.25 per CFT). However, the extra cost that they had to spend was Rs. 88,86,952/- less Rs. 6,01,298,11/-which comes to Rs. 2,87,38,141/- excluding GST and Rs. 3,39,11,066 including GST at the rate of 18%. The Resp....
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.... • 20 June 2019 • 25 June 2019 • 26 June 2019 • 5 July 2019 • 8 August 2019 • 21 October 2019 • 15 November 2019 not only disputing the quality of work done but also the minuscule quantity being supplied by the Appellant under the said contracts/work orders. In these letters, the Respondent time and again called upon the Appellant to rectify their mistakes in executing the contract, to provide GST returns, as after claiming GST from the Respondent, the Appellant did not deposit the same with the Department. By letters dated 5th July 2019 and 15 November 2019, the Respondent terminated the contract and cancelled the orders given to the Appellant, as the Appellant had only provided about 2% of the quantity under the orders dated 14 September 2018, 10 December 2018, and 5 January 2019. The Appellant has deliberately not filed the above-mentioned letters before the NCLT and also before the Appellate Tribunal. 27. The Appellant's purported claim is not a debt at all under the provisions of Section 3(11) and/or operational debt under Section 5(21) of the IBC. Since the Appellant's purport....
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.... letter of the Airport Authority of India dated 3rd September 2019, is baseless and cannot be referred to appreciate the case of the petitioner. The petitioner was given the task which had to be completed by March 2019. The incomplete task on the part of the petitioner clearly shows that it is the petitioner who has failed to perform his assigned task within the stipulated time period. We find no infirmity on the part of the Adjudicating Authority in coming to this conclusion that it is the petitioner who has failed to perform his assigned task within the stipulated time period. Even if there was no permission for excavation from 12th September 2019 as claimed by the Appellant, we observe that the contract should have been completed before that day. However, we find that the contract was not even 3% completed after the completion of one year from the date of issuance of the work order. 35. We also observe from the reply of the Respondent that it wrote many letters to the Appellant on 11 June 201, 14 June 2019, 20 June 2019, 25 June 2019, 26 June 2019, 5 July 2019, 8 August 2019, 21 October 2019, 15 November 2019 not only disputing the quality of work done but also the minuscule ....
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....39;s case is that AAI stopped it from performing the work because there was no permission, and this was known to the Respondent from day one. We observe that such an argument is not tenable as the letter of removal of stone crusher installed in the airport site was issued on 3rd September 2019, and AAI had stopped the operational contractor from carrying out the work in the said site on the ground of lack of approval to carry out crushing work. It is important to note that the work order was issued by the Appellant on 14th September 2018, and the validity of the said work order was for 12 months. Therefore, the whole work was to be completed by 14th September 2019. During this period, there was a lot of correspondence with respect to the delay and further subcontracting by the Appellant and finally, the Respondent had already issued the notice for termination on 5th July 2019 and finally the work order on 15 November 2019. We further note that the Appellant issued the notice invoking the provisions of the code on 16th December 2019 demanding payment and filed the appeal under Section 9 of the Code on 20th January 2022, which is almost after more than a year. In the meantime, the Ap....
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....Hon'ble High Court of Madhya Pradesh, Principal Seat at Jabalpur. We find that the writ petition was dismissed, and separately the Adjudicating Authority has clearly brought out the preexisting disputes. Therefore, the order in the writ petition before the Hon'ble High Court of Madhya Pradesh has no relevance. 45. We thus observe that the disputes raised by the Appellant in the appeal and the petition are disputed questions of facts, and hence the same can only be decided by way of a trial and not before this forum and they are pre-existing disputes and the Adjudicating Authority cannot be faulted upon in dismissing the Appeal under Section 9 of the Code. Order 46. Accordingly, the appeal is hereby dismissed and all related IAs are also disposed of accordingly. No orders as to costs. ============= Document 1 Date : 25.06.2019 Ref no : NIPL/MUM/JBL/02/2019-20 NOTA TARY To Shreenathji infrastructure Civil & Mining Contractor, A-3/605 Aakriti Green, Bhopal-462042 SAYVAR GOVT. O Kind Attn: Shri. Amit Malpani NDIA Sub: Default in carrying out the work Dear Sir, You have been entrusted with the work of supplying and filling good worth obtain....