Battula Anjaneyulu vs Dbm Geotechnics & Construction Pvt Ltd

[Arising out of Order dated 20th December, 2018 passed by the Adjudicating Authority (National Company Law Tribunal) Mumbai Bench in the Company Petition (Insolvency & Bankruptcy) No. 1282 of 2017].

IN THE MATTER OF: Mr. Battula Anjaneyulu .....Appellant Vs. DBM Geotechnics & Constructions Pvt. Ltd. ......Respondent

Present : For Appellant: Mr. Gautam Ankhad, Mr. Murtaza Kachwalla, Mr. Ashdin Chivalwala, Mr. B. Anjaneyulu, Ms. Amrita Sarkar, Ms. Nimita Kaul and Ms. Ekta Bhasin, Advocates For Respondents: Mr. Aditya, Advocate

J U D G M E N T

SUDHANSU JYOTI MUKHOPADHAYA, J.

1. The present Appeal challenges the impugned order dated 20th December,

2018 passed by the Adjudicating Authority, Mumbai rejecting the petition filed

by Appellant under section 9 of the Insolvency and Bankruptcy Code by the

Appellant against the Respondent.

....contd./

2. Learned Counsel for the Appellant submitted that the Impugned Order

ought to be set aside as it has erroneously held that there were pre-existing

disputes between the parties. On the contrary, the facts demonstrate no such

pre-existing dispute and the Respondent sought to raise a false bogey only after

service of the demand notices dated 10th May, 2017 on them.

3. The case of the Appellant is that the Respondent issued various work

orders to the Appellant for carrying out different kinds of work such as marine

piling, labour supply, anchor-wall chipping, cage fabrication, etc. The Appellant

raised R.A. bills and invoices. Part payments were made from time to time by

the Respondent for the work carried out. Out of the total amount of about Rs.

43 crores worth of work done, approximately Rs. 28 crores were paid over a

period of time and there remained a pending amount of Rs. 14,62,18,995/-.

4. He further stated that the Respondent from time to time reassured the

Appellant that the payments would be released. The Respondent by emails

dated 8th May, 2012 and 26th December, 2014 admitted that they are in

financial difficulty and that amounts are due and payable to the Appellant. The

relevant portion of the emails dated 8th May, 2012 and 25th December, 2014 are

quoted below respectively.

E.mail dated 8th May, 2012 : -

"Dear Anjaneyulu,

Company Appeal (AT) (Insolvency)No. 261 of 2019 2 We really regret the delay in your payment..

We could not pay you last week due to cash flow problem..

But We are trying to pay you this week.."

Email dated 25th December, 2014:

"We are aware with the situation of

Agardanda as you have not received

the committed payment from DPL. We

wish to inform you we trying our best

to release the part payment to you".

5. It is stated that repeated reminders were sent by the Appellant to

the Respondent on 8th January, 2013, 8th April, 2013, 18th June, 2013 and

8th July 2013. There was no denial of liability nor did the Respondent raise

any dispute on quality or quantity.

6. It is stated that as no payment was forthcoming 13 demand notices

(Form 3) were issued to the Respondent on 10th May, 2017. Out of the total

13 demand notices issued, the present petition was filed for 6 demand

notices for a total amount of Rs. 14,62,18,995/-. The said demand notices

were duly received by the Respondent on 12th May, 2017.

Company Appeal (AT) (Insolvency)No. 261 of 2019 3

7. It is alleged that as a counter blast, the Respondent after receipt of

the demand notices on 12th May, 2017, with the sole intention to defeat and

dislodge the legitimate claim of the Appellant, filed Summary Suit No. 297 of

2017 on 17th May, 2017 before the Hon'ble High Court at Bombay and

thereafter responded to the demand notices vide their Advocates letter dated

22nd May, 2017 disputing the amounts demanded on false, frivolous and

baseless grounds. Vide order dated 10th October, 2017 unconditional leave

to defend was granted to the Appellant by the Hon'ble High Court at Bombay.

8. He further stated that the Respondent has acknowledged the work

of the Appellant and has issued work completion certificates. The

Respondent has made part payments as late as 17th March, 2015 and has

deducted TDS @ 1% for the entire amounts billed. The claim is therefore

within limitation.

9. According to Learned Counsel, the following facts shows that there

is no dispute about the work of the Appellant.

a. Admitted financial difficulties in its emails

dated 8th May, 2012 and 25th December, 2014

and that amounts are due and payable to the

Appellant (Ground Z);

b. Made part payments from time to time;

Company Appeal (AT) (Insolvency)No. 261 of 2019 4 c. Issued work completion certificates (See Ground

EE);

d. Deducted 1% TDS on the amounts billed by the

Appellant (Ground AA);

e. Gave additional contracts to the Appellant

every year from time to time;

f. Has never communicated any grievances

contemporaneously until the issuance of the

demand notices (Ground CC & KK).

10. The case of the Respondent is that it awarded the sub-contract

mainly for the labour works (for pilling work, deck structure work, etc.) to the

Appellant, on back to back basis. The terms of the Principal Contracts, inter

alia including specifications, time frames, penalties and liquidated damages

were applicable to the Sub Contracts.

11. It is also submitted that the Appellant while executing the works

under the Sub-Contracts, consistently failed to maintain the desired progress

of the works. The predominant reasons of its failures of the Appellant were (a)

inadequate deployment of the resources, (b) unsatisfactory and faulty quality

of the resources (i.e. equipment and manpower), (c) deployment of

inappropriate and improper methods for execution of the work, and (d)

abandoning the Sub Contract works.

Company Appeal (AT) (Insolvency)No. 261 of 2019 5

12. It is submitted that as a result of the failures by the Appellant, the

completion periods of the projects were prolonged, which attracted the

imposition of the liquidated damages, termination, forfeiture of security

deposits, earnest money, balance payments, invocation of the bank

guarantees, blacklisting, banning etc.

13. It is further submitted that the Respondent brought to the notices

of the Appellant the adverse actions being taken by the Clients from time to

time. The Appellant was therefore fully aware of the imposition of penalty

and damages by the Client and liability of the Appellant towards the same.

14. It is also submitted that the termination of the main / principal

contact led to automatic terminations of the sub-contact which were back to

back to the main contract.

15. Learned counsel for the Respondent submitted that the Respondent

called upon the appellant to make good the losses suffered by it for the

reasons attributable to the Appellant; the Appellant was not forthcoming for

making good the losses despite various request and reminders; therefore, the

Respondent contemplated filing a suit before Bombay High Court and thus

instructed their solicitors. The various emails including emails dated

Company Appeal (AT) (Insolvency)No. 261 of 2019 6 03.04.2017, 05.05.2017 and 9.05.2017 exchanged in this regards which are

prior to issuance of Demand Notice dated 10.05.2017.

16. Therefore, it is stated, it can be concluded that though the

Respondent filed the Summary suit before the Hon'ble Bombay High Court

on 16.05.2017, the preparation for the legal suit was commenced much prior

to issuance of Demand Notices and the disputes were in existence much

prior to the filing of the suit.

17. It is further contended that the Respondent also categorically

conveyed in its reply dated 22.05.2017 that the Respondent has already filed

the Summary Suit on 16.05.2017 before the Hon'ble Bombay High Court.

18. Learned counsel appearing on behalf of the Respondent referring to

the Demand Notice also submitted that the claim is barred by limitation,

therefore, no debt is payable. However, we are not deciding such issue as the

Suit is pending before the Bombay High Court.

19. From the submission made by the parties, emails and

communications, we find that there is a pre-existing dispute about the work

which were brought to the notice of the Appellant prior to the Demand Notice

dated 10.05.2017. The emails dated 03.04.2017, 05.05.2017 and 09.05.2017

Company Appeal (AT) (Insolvency)No. 261 of 2019 7 is by the Respondent taking step for award for imposition of penalty for

damage and having taken adverse action has also not been disputed. We

find, no merit in this appeal. It is accordingly dismissed. No costs.

[Justice S. J. Mukhopadhaya] Chairperson

[Justice A. I. S. Cheema] Member (Judicial)

[Kanthi Narahari] Member (Technical)

New Delhi

2nd July, 2019

ss

Company Appeal (AT) (Insolvency)No. 261 of 2019 8