Enoch Infrabuild Llp vs Archon Powerinfra India Private ...

Enoch Infrabuild LLP ....Appellant Vs.

Archon Powerinfra India Pvt. Ltd. ...Respondent For Appellant: Mr. Ketan Parikh, Mr. Karan Valecha, Advocates.

For Respondent: Mr. Arjun Sheth, Ms. Henna George, Ms. Kriti Kothari, Advocates.

ORDER

(Through Virtual Mode)

28.07.2022: Heard Learned Counsel for the Appellant and Learned

Counsel for the Respondent.

2. This Appeal has been filed against the order dated 27.04.2022 passed

by the Adjudicating Authority (National Company Law Tribunal), Ahmedabad,

Special Bench, Court-I, which order has been passed in I.A No. 677 of 2021 in

CP (IB) 611 of 2019. The Appellant has filed an Application under Section 7 of

the IBC for initiating Corporate Insolvency Resolution Process (CIRP) against

the Respondent claiming a financial debt of Rs. 1,85,00,000/- and Application

I.A 677 of 2021 was filed by the Corporate Debtor for bringing certain

documents in defense. The Adjudicating Authority heard the parties and has

passed the impugned order on 27.04.2022. In paragraph 12, it was held that

the Application under Section 7 filed by the Appellant was not maintainable 2

and the same stands rejected and accordingly, the Application I.A No. 677 of

2021 was also rejected.

3. Shri Ketan Parikh, Learned Counsel appearing for the Appellant

challenging the order contends that the Adjudicating Authority committed

error in holding that there was no financial debt whereas in view of the

minutes of the meeting dated 16.03.2018 r/w Sub-Contract Agreement dated

07.03.2017 and 24.08.2017, it was financial debt. He submits that the

Appellant has invested amount in the project to the extent of 50% as per first

Sub-Contract Agreement dated 07.03.2017 and 66% as per contract dated

24.08.2017. It is submitted that the minutes dated 16.03.2018 makes it clear

that the amount was admitted and payment is to be made by the Corporate

Debtor to the Appellant. He has relied on the Affidavit filed by the Corporate

Debtor before the Calcutta High Court in WP No. 18440/2019 between the

Corporate Debtor and the Indian Oil Corporation. He submits that in the said

Affidavit the Corporate Debtor has referred to the Appellant as the Financial

Creditor.

4. Learned Counsel for the Respondent submits that the contract between

the Respondent, Appellant was only sub-contractor for carrying out the project

which was allotted to the Corporate Debtor by Indian Oil Corporation. He

clarified that the averment in the Affidavit which was relied by the Counsel for

the Appellant is no more relevant since ultimately the Calcutta High Court in

its judgment dated 11.06.2021 has held the contract a sub-contract.

Comp. App. (AT) (Ins.) No. 799 of 2022 3

5. We have considered the submissions of the parties and perused the

record.

6. The Appellant has filed the copy of the Sub-Contract Agreement dated

07.03.2017 and subsequent supplementary contract dated 24.08.2017 which

clearly mentions that it is sub-contract agreement with regard to the project

"Construction of New Plant Shed and Allied Civil, Structural and Enabling

works at Budge Budge BP, West Bengal- Tender No- WBSO/LPGE/PT-01/16-

17". The tender was allotted to the Corporate Debtor who for carrying out the

project entered into the Sub-Contract Agreement with the Appellant. The

terms and conditions under which project was to be carried out had been

mentioned in the Agreement, and Learned Counsel for the Appellant has relief

to paragraphs 3 and 4 of the Sub-Contract Agreement which is to the following

effect:-

"3) All financial arrangement required for the said project shall be arranged by party of first Part and party of the second part equally.

4) All type of payments from IOCL shall be received in the Cash Credit Account of party of First Part (Account No. 121013023969) with Dena Bank, Satellite Branch, Ahmedabad. The party of the first part shall release 50% of the payment(s) to the party of the second part immediately from the receipt of payment from the Employer to the party of the first part after deducting Deposit, Income Tax and VAT as applicable rate."

Comp. App. (AT) (Ins.) No. 799 of 2022 4

7. Both the sub-contract which has been brought on the record clearly

indicate that financial liability taken by the Appellant as well as the Corporate

Debtor towards carrying out the project was divided and all those financial

liabilities were towards the completion of the project. There was no

disbursement of the loan for the time value of money which is essential

requirement for a debt to be treated as financial debt under Section 5(8) of the

IBC.

8. The minutes of meeting dated 16.03.2018 on which Counsel for the

Appellant has much relied admits the liability of the Corporate Debtor to make

the payment. The mere fact that the Corporate Debtor has admitted liability

to make payment in its minutes of meeting does not change the character of

the transaction into a financial debt. In Clause 18 of the contract contains

arbitration clause, for settling amicably by mutual consultation and thereafter

approaching the arbitration as per Arbitration & Conciliation Act, 1996. The

Appellant ought to have taken recourse to Clause 18 of the Sub-Contract

Agreement dated 07.03.2017 and these issues could not have been decided in

IBC proceedings. The Adjudicating Authority has rightly held that it was not

financial debt and rejected Section 7 Application.

9. Learned Counsel for the Appellant also contended that the judgment

could not have been delivered under Rule 151 of the NCLT Rules, 2016. The

order which is preface to the judgment reads as follows:-

"The matters were heard almost in the month of March but orders could not be pronounced because Technical Member was not available. Technical

Comp. App. (AT) (Ins.) No. 799 of 2022 5

Member will not be available for another couple of weeks, hence, matter cannot be kept pending for pronouncement because hearing was concluded almost a month ago. Hence orders are pronounced invoking Rules 151 of NCLT Rules, 2016 with consent of other Member."

10. We are of the view that there is no error in delivering the judgment

invoking Rule 151 of the NCLT Rules, 2016 due to absence of Technical

Member who has already agreed with the judgment.

11. We do not find any merit in this Appeal. The Appeal is dismissed.

[Justice Ashok Bhushan] Chairperson

[Justice M. Satyanarayana Murthy] Member (Judicial)

[Barun Mitra] Member (Technical) Anjali/nn

Comp. App. (AT) (Ins.) No. 799 of 2022