Abc India Limited vs Oriental Epc Private Limited

NATIONAL COMPANY LAW APPELLATE TRIBUNAL, PRINCIPAL BENCH, NEW DELHI Company Appeal(AT) (Ins)No. 1128 of 2020

IN THE MATTER OF:

ABC India Limited P-10, New CIT Road, Kolkata - 700 073 And Corporate Office 40/8, Ballygunge Circular Road, Kolkata - 700 019 Represented by Shri Sunip Mandal Legal Officer/Legal Representatives ...Appellant

Vs.

Oriental EPC Pvt. Ltd. (formerly known as Oriental Nicco Projects Pvt. Ltd) S.V.Kinariwala Marg, Law Garden, Ellisbridge, Ahmedabad - 380 006 ...Respondent

Present: For Appellant: Mr. Tritharkar Das, Ms. Rituparna Saha, Mr. Kaushik Chatterjee and Mr. Samridhi Solanki, Advocates.

For Respondents: Mr. Pinaki Reddy and Sharda Garg, Advocates.

DR. ASHOK KUMAR MISHRA, TECHNICAL MEMBER

1. The present appeal has been filed by the 'Appellant' under Section 61 of the 'Insolvency

and Bankruptcy Code, 2016' (in short 'Code') against the impugned order dated

12.02.2020 passed by the 'Adjudicating Authority' (National Company Law Tribunal),

Ahmedabad Bench in CP(IB) No.620/NCLT/AHM/2018.

Company Appeal (AT) (Ins) No.1128 of 2020 Page 1 of 9

2. Brief facts of the case have presented by the Appellant in pleadings/submissions made by

the Ld. Counsels are stated hereunder:

a. The Appellant/OC was awarded by the Respondent/ Corporate Debtor (CD) three

works orders against Letter of Intent (LOI) dated 01.02.2016. The three works orders

are of 15.02.2016, 11.04.2016 & 04.04.201.

b. It has also been stated that value of first work order was amended at a figure which was

approximately the three times of the value of original first order by changing the scope

of work. The Appellant raised bills to the tune of Rs.6,39,55,775/- out of which the

Respondent paid Rs.5,31,34,343/- resulting into a sum of Rs.78,22,421/- due and

payable by the Respondent. Site in charge of the Respondent has certified the bill in

spite of that and repeated reminders, the outstanding amount has not yet been cleared.

The Appellant has issued a demand notice under Section 8 of the Code dated

26.04.2018 to the Respondent. The Respondent has replied to the demand notice vide

their letter dated 04.05.2018. The Respondent has disputed the dues on various count

such as Liquidated Damage (LD) issue, performance bank guarantee issue etc.

c. The Appellant has also stated that it cannot be covered under pre-existing dispute as

the Respondent has continue to place multiple orders between April, 2016 to

December, 2017. The Appellant has filed petition under the Code with Adjudicating

Authority on 02.11.2018 for unpaid Operational Debt amounting to Rs.78,22,421/-.

However, the Respondent filed a money suit in the year 2019 in City Civil Court at

Kolkata claiming Liquidated Damages etc.

d. The Adjudicating Authority has rejected their petition on account of disputes

considering the disputes as genuine disputes and not spurious, hypothetical or illusory.

Company Appeal (AT) (Ins) No.1128 of 2020 Page 2 of 9 e. The Appellant has also stated that the four letters dated 09.04.2016, 18.04.2016,

19.10.2016 & 22.11.2016 alleging delay in execution of the work by the Appellant

could not have been considered as pre-existing dispute. If that be so, than why they

have placed further orders in April, 2016 and December, 2017 even has enlarged the

scope of the work on the first work order. So as per the Appellant, the Appeal deserves

to be allowed and has requested to set aside the order of the Adjudicating Authority

dated 12.02.2020 and his application filed before the Adjudicating Authority be

admitted etc.

3. The Adjudicating Authority in its order dated 12.02.2020 has observed that there is a delay

in execution of the work, various correspondence between 09th April 2016 to November

2017 reflects slow progress of work, delayed in clearance of calculation, dispute in quality

of work, issue of submission of Performance Bank Guarantee, levy of LD as per contract

term etc., and has also observed that in its reply to the demand notice, the Respondent vide

letter dated 26.04.2018 has disputed the claim and has intimated to the Petitioner after

deduction of various amount only Rs. 6007/- is payable and has further observed that in

case of dispute, the Adjudicating Authority is not the forum to examine and adjudicate the

same claim and determine due and recoverable amount. It is not a substitute to a recovery

forum. The operational debt is not free from dispute and has finally rejected the petition of

the Appellant under Section 9 of the Code.

4. While the Respondent/CD has stated that in a project work changing of contractors do

upset the programme. Hence, they have not changed the contractor and went on placing

work order to complete the project work well in time.

5. They have also stated that the Appellant/OC failed to complete and delivere the contracted

works within stipulated time as mentioned in the respective works orders leading to huge

Company Appeal (AT) (Ins) No.1128 of 2020 Page 3 of 9 losses suffered by the Respondent/CD. The delay was 145 days in first work order, 191

days in second work order and the delay of 27 days to complete the third work order. They

have also issued five letters in 2016 to the Appellant regarding the slow progress of work

and lack of manpower assigned for the task which has not been denied by the Appellant.

The Respondent has also stated that the workorder carries a term of LD , PBG etc .The

Respondent has also submitted that the Appellant has not submitted valid Performance

bank guarantee till the warranty period as per the contractual terms. The Appellant has

failed to provide documentary evidence of the payment of royalties, local taxes etc. as per

the contractual terms. As a result of all this, the Respondent has replied to the Demand

notice raising all such issues.

6. The Respondent has also filed Money Suit No.16 of 2019 against the Appellant on or about

09.01.2019 before the City Civil Court at Calcutta seeking LD of Rs.30,53,802/- and on

account of losses suffered due to such delay further damages of Rs.50 lakhs. In any case

this is post issue of demand notice. The Respondent has also stated that it is a company

which is earning profits and has several workmen and staffs and paying taxes well in time.

They have also alleged that the Appellant wants to pressurize the Respondent

Company/CD to extort money by filing petition under the Code.

7. We have gone through the submissions made by the Ld. counsels for the parties, order

passed by the Adjudicating Authority and available input on record and are observing as

follows:

a. The Appellant has no doubt issued a demand notice as required under the Code for

initiation of proceedings under Section 9 of the Code. For brevity and clarity, we are

reproducing Section 8 & 9 of the Code:

Company Appeal (AT) (Ins) No.1128 of 2020 Page 4 of 9 "Section 8: Insolvency resolution by operational creditor.

(1) An operational creditor may, on the occurrence of a default,

deliver a demand notice of unpaid operational debt or copy of

an invoice demanding payment of the amount involved in the

default to the corporate debtor in such form and manner as may

be prescribed.

(2) The corporate debtor shall, within a period of ten days of

the receipt of the demand notice or copy of the invoice

mentioned in sub-section (1) bring to the notice of the

operational creditor--

(a) existence of a dispute, [if any, or] record of the pendency of

the suit or arbitration proceedings filed before the receipt of

such notice or invoice in relation to such dispute;

(b) the [payment] of unpaid operational debt--

(i) by sending an attested copy of the record of electronic

transfer of the unpaid amount from the bank account of the

corporate debtor; or

(ii) by sending an attested copy of record that the operational

creditor has encashed a cheque issued by the corporate debtor.

Explanation.--For the purposes of this section, a "demand

notice" means a notice served by an operational creditor to the

corporate debtor demanding [payment] of the operational debt

in respect of which the default has occurred.

Company Appeal (AT) (Ins) No.1128 of 2020 Page 5 of 9 Section 9 - Application for initiation of corporate insolvency

resolution process by operational creditor.

(1) After the expiry of the period of ten days from the date of

delivery of the notice or invoice demanding payment under

subsection (1) of section 8, if the operational creditor does not

receive payment from the corporate debtor or notice of the

dispute under sub-section (2) of section 8, the operational

creditor may file an application before the Adjudicating

Authority for initiating a corporate insolvency resolution

process.

(2) The application under sub-section (1) shall be filed in such

form and manner and accompanied with such fee as may be

prescribed.

(3) The operational creditor shall, along with the application

furnish--

(a) a copy of the invoice demanding payment or demand notice

delivered by the operational creditor to the corporate debtor;

(b) an affidavit to the effect that there is no notice given by the

corporate debtor relating to a dispute of the unpaid operational

debt;

(c) a copy of the certificate from the financial institutions

maintaining accounts of the operational creditor confirming

that there is no payment of an unpaid operational debt [by the

corporate debtor, if available;]

Company Appeal (AT) (Ins) No.1128 of 2020 Page 6 of 9

(d) a copy of any record with information utility confirming that

there is no payment of an unpaid operational debt by the

corporate debtor, if available; and

(e) any other proof confirming that there is no payment of any

unpaid operational debt by the corporate debtor or such other

information, as may be prescribed.]

(4) An operational creditor initiating a corporate insolvency

resolution process under this section, may propose a resolution

professional to act as an interim resolution professional. (5)

The Adjudicating Authority shall, within fourteen days of the

receipt of the application under sub-section (2), by an order--

(i) admit the application and communicate such decision to the

operational creditor and the corporate debtor if,--

(a) the application made under sub-section (2) is complete;

(b) there is no [payment] of the unpaid operational debt;

(c) the invoice or notice for payment to the corporate debtor

has been delivered by the operational creditor;

(d) no notice of dispute has been received by the operational

creditor or there is no record of dispute in the information

utility; and

(e) there is no disciplinary proceeding pending against any

resolution professional proposed under sub-section (4), if any.

(ii) reject the application and communicate such decision to the

operational creditor and the corporate debtor, if--

Company Appeal (AT) (Ins) No.1128 of 2020 Page 7 of 9

(a) the application made under sub-section (2) is incomplete;

(b) there has been [payment] of the unpaid operational debt;

(c) the creditor has not delivered the invoice or notice for

payment to the corporate debtor;

(d) notice of dispute has been received by the operational

creditor or there is a record of dispute in the information utility;

or

(e) any disciplinary proceeding is pending against any

proposed resolution professional:

Provided that Adjudicating Authority, shall before rejecting an

application under sub-clause (a) of clause (ii) give a notice to

the applicant to rectify the defect in his application within seven

days of the date of receipt of such notice from the adjudicating

Authority.

(6) The corporate insolvency resolution process shall

commence from the date of admission of the application under

sub-section (5) of this section."

b. The Respondent, too , has also replied the same elaborating the disputes involved and

has provided item wise deduction etc. including the issue of deduction of LD,

Performance bank guarantee and other terms of payment (page 251 -252 of the Appeal

paper book).

c. It is true that in a project work change of contractor results into delays and increased

costs. So, in a commercial organization an understanding is always created to get the

job done through the same contractor.

Company Appeal (AT) (Ins) No.1128 of 2020 Page 8 of 9 d. Deduction on account of LD and Performance bank guarantee is a part of contractual

terms and hence the Code is being a summary proceeding, the voracity of the statement

cannot be examined like a trial court.

e. Pre-existing dispute and chasing for payment also cannot be ruled out in this instant

case.

f. The Hon'ble Supreme Court in Civil Appeal No.9597 of 2018, "Transmission

Corporation of Andhra Pradesh limited Vs. Equipment Conductors and Cables

Limited" vide para 15 has already held that IBC is not intended to be a substitute to a

recovery forum and also laid down that whenever there is existence of real dispute, the

IBC provisions cannot be invoked.

g. Considering the above facts and circumstances of the case and the law laid down on

the subject, we are not in a position to set aside the order of the Adjudicating Authority

and we uphold the order of the Adjudicating Authority dated 12.02.2020. Accordingly,

the Appeal is dismissed. No order as to costs.

[Justice Ashok Bhushan] Chairperson

(Dr. Ashok Kumar Mishra) Member(Technical)

(Dr. Alok Srivastava) Member (Technical)

31st January, 2022

New Delhi

Raushan.K

Company Appeal (AT) (Ins) No.1128 of 2020 Page 9 of 9