Fabtech Projects And Engineers Pvt. ... vs Hindustan Petroleum Corporation Ltd

[Arising out of Order dated 21.01.2025 passed by the Adjudicating Authority (National Company Law Tribunal), Mumbai Bench Court-III in IA No.712/2022 in CP No.1222/2019]

IN THE MATTER OF:

Fabtech Projects and Engineers Pvt. Ltd. ...Appellant (Formerly Fabtech Projects and Engineers Ltd.)

Versus

Hindustan Petroleum Corporation Ltd. ...Respondent

Present:

For Appellant: Mr. Chaitanya, Advocate.

For Respondents: Mr. T. Sundar Ramanathan, Ms. Sukanya Vishwanathan, Mr. Krishan Singhal, Advocates.

JUDGMENT

(23rd April, 2025)

Ashok Bhushan, J.

This Appeal by Successful Resolution Applicant has been filed

challenging the order dated 21.01.2025 passed by the Adjudicating

Authority (National Company Law Tribunal) Mumbai Bench, Court-III

rejecting IA No.712 of 2022 filed by the Appellant.

2. Brief facts necessary to be noticed for deciding the appeal are:- 2

2.1. Hindustan Petroleum Corporation Limited had floated a tender for

construction of 3 x 500 MT capacity mounded storage vessels at Purnea LPG

Plant and had issued Purchase Orders on special terms and conditions of

the Contract. Various Purchase Orders were issued by Hindustan Petroleum

Corporation Limited to the Corporate Debtor- 'Fabtech Projects and

Engineers Ltd.' between 31.07.2018 to 09.07.2019 for construction of

mounded storage vessels. On Section 7 application filed by the Bank of

Maharashtra, Corporate Insolvency Resolution Process (CIRP) against the

Corporate Debtor commenced on 24.09.2019. In the CIRP of the Corporate

Debtor, a Resolution Plan submitted by Manjeet Cotton Private Limited and

Parason Machinery (India) Private Limited was approved by the Committee

of Creditors (CoC) and thereafter by Adjudicating Authority on 16.11.2021.

Resolution Plan contemplated extension for period of 12 months. IA No.712

of 2022 was filed by the Applicant/Appellant praying for various reliefs. The

application was resisted by the Hindustan Petroleum Corporation Limited.

Adjudicating Authority by the impugned order has rejected the application,

aggrieved by which order, this Appeal has been filed.

3. We have heard Counsel for the Appellant as well as Counsel appearing

for the Respondent.

4. Counsel for the Appellant in support of the Appeal contends that in

pursuance of the approval of the plan on 16.11.2021 which provided 12

months extension for completion of ongoing projects, the Respondent was

not entitled to deduct any liquidated damages from the final invoices of the

Company Appeal (AT) (Insolvency) No. 373 of 2025 3

Corporate Debtor. No claim for liquidated damages was made by the

Respondent. The approved Resolution Plan is binding on the Respondent

and all other concerned and it cannot act contrary to the Resolution Plan by

realising liquidated damages. No claim having been submitted, liquidated

damages cannot be illegally retained by the Respondent. Appellant has

relied on an order passed by the Adjudicating Authority in IA No.303 of

2022 as well as the order of this Tribunal dated 05.07.2022 in Company

Appeal (AT) (Insolvency) No.716 of 2022 which judgment was fully applicable

and has been erroneously distinguished by the Adjudicating Authority. It is

submitted that the observation of the Adjudicating Authority that Resolution

Professional never raised objection is not correct. Resolution Professional

has by letter dated 20.11.2019 had requested that no liquidated damages be

levied. It is submitted that after approval of the Resolution Plan, all claims

stand extinguished. Respondent cannot deduct liquidated damages from

final invoices without filing any claim.

5. Counsel for the Respondent refuting the submissions of the Counsel

for the Appellant submits that the liquidated damages which was sought to

be refunded did not relate to any claim prior to CIRP. The Resolution

Professional after Corporate Debtor was put in CIRP approached the

Respondent and requested to permit the execution of the project. Resolution

Professional agreed to act in terms of the Purchase Order. Resolution

Professional, however, failed to complete the work and missed the various

milestones and schedules. Show-cause notices were issued by the

Hindustan Petroleum Corporation Limited as to why liquidated damages be

Company Appeal (AT) (Insolvency) No. 373 of 2025 4

not imposed and there being no satisfactory reply, liquidated damages

@0.5% of every week of delay subject to a maximum of 5% of the total

contract value was deducted in the running bills. After approval of the plan

on 16.11.2021 certain liquidated damages were deducted which has already

been refunded by the Appellant as has been noticed in the impugned order

amounting to Rs.31,67,727.69/-. There was no question of filing any claim

by Hindustan Petroleum Corporation Limited since there was no claim prior

to CIRP period. There was no claim required to be filed by the Respondent

since no amount was due on the Corporate Debtor. Liquidated damages

were deducted from bills as per the terms and conditions of the contract

which cannot be claimed to be refunded after Successful Resolution

Applicant coming to picture after getting the plan approved. The Resolution

Plan only extinguishes the claims that were subsisting on the day of

Resolution Plan. No claim of Respondent was subsisting on the day of

Resolution Plan, hence, there is no question of any extinguishment.

Extension of 12 months' time was given for completion of the project,

however, which extension did not provide for refund of liquidated damages

already deducted. Mere extension of time by itself would not mean that

Respondent has not suffered delay in the work but it was merely granting

time for completion of the work. Judgment relied by Appellant of this

Tribunal in "Indian Oil Corporation Ltd. vs. Manjeet Cotton Pvt. Ltd. &

Ors.- Comp. App. (AT) (Ins.) No.716 of 2022" is distinguishable as the

claim of IOCL was admitted by the Resolution Professional and dealt in the

Company Appeal (AT) (Insolvency) No. 373 of 2025 5

Resolution Plan which is not comparable to the liquidated damages that

were already deducted and was not covered by the Resolution Plan.

6. We have considered the submissions of the Counsel for the parties

and perused the record.

7. In the present case, the Appellant was Successful Resolution

Applicant whose Resolution Plan was approved on 16.11.2021. The

Corporate Debtor under the various Purchase Orders issued by Hindustan

Petroleum Corporation Limited was carrying out the contract for

construction of 3 x 500 MT Capacity Mounded Storage Vessels. Resolution

Professional after commencement of the CIRP had approached the

Respondent with intent to carry out the contract work on the same terms

and conditions. The terms and conditions of the Purchase Order provided

for deduction of liquidated damages from the invoices on account of the

delay as per the terms and conditions. The materials on record indicate that

present is not a case of any claim of the Respondent of prior to CIRP period.

In the continuation of the CIRP period, invoices were issued by the

Respondent in which liquidated damages were deducted as per the terms

and conditions which were part of the running contract. The submission of

the Appellant is that Resolution Plan contemplated extension of 12 months'

period for completion of the contract. The submission of the Respondent is

that 12 months' period was granted for completion i.e. 12 months from

16.11.2021. It is submitted that extension of 12 months' period for

completion of the contract does not have any effect on the liquidated

Company Appeal (AT) (Insolvency) No. 373 of 2025 6

damages which were deducted from the invoices as per the terms and

conditions of the Purchase Order. Insofar as liquidated damages which were

deducted after 16.11.2021 it has been noticed by the Adjudicating Authority

itself that the Respondent has refunded the amount of Rs.31,67,727.69/-

which is noted in paragraph 14 of the order, which is as follows:-

"14. As far as the liquidated damages deducted by HPCL is concerned, it is seen that during the pendency-of this matter; the Respondent/HPCL had refunded Rs. 31,67,727.69 being liquidated damages "deducted for the period after 16.11.2021 i.e. the date of approval of resolution plan by this Tribunal."

8. The reliance on the approved Resolution Plan regarding

extinguishment of the claim has no effect on the liquidated damages which

were already deducted by Hindustan Petroleum Corporation Limited from

the invoices as per the terms and conditions of the Purchase Order. When

the Resolution Professional was allowed to carry on the contract work after

initiation of the CIRP, the said contract has to be carried out as per the

terms and conditions and deduction of the liquidated damages from the

invoices being part of the terms and conditions for carrying out the contract

that cannot be faulted nor any direction after approval of the Resolution

Plan can be issued for refund of such liquidated damages. Extension of 12

months is extension for completion of the work and liquidated damages

deducted after 16.11.2021 has already been refunded. We, thus, are of the

view that the Adjudicating Authority did not commit any error in rejecting

Company Appeal (AT) (Insolvency) No. 373 of 2025 7

the application filed by the Appellant. The order passed by the Adjudicating

Authority and the Appellate Tribunal in IOCL matter has also been dealt

with by the Adjudicating Authority in paragraphs 16 and 17 which are as

follows:-

"16. However, we note that the facts in IA/303/2022 are distinguishable for the reason that IOCL had pre- CIRP claims which was admitted by the RP and were duly dealt with in the resolution plan whereas herein, HPCL has no pre-CIRP claims against the corporate Debtor and no claim as such was submitted to the RP. The liquidated damages pertained to the period during the CIRP which was deducted by HPCL, as per the contract between the parties. It is also seen that the order passed in IA/303 is distinguishable on one more aspect. The IOCL, in that case, had issued a letter cautioning initiation of proceedings against 'the Resolution Applicant to· recover its claim against which this Tribunal held that the "said claim has been duly treated in the Resolution Plan and IOCL cannot initiate any proceedings in respect to such claims."

17. Admittedly, the Respondent herein has ho pending claims against the Corporate Debtor and we see that no liability has been fastened upon the Applicant to make any payment towards the liquidated ·damages. Therefore, ·the"· order dated 20.04.2022 in IA/303/2022 has no applicability in the present case."

9. Judgement of this Tribunal in "Indian Oil Corporation Ltd." (supra)

which has been relied by the Appellant where order passed by the

Company Appeal (AT) (Insolvency) No. 373 of 2025 8

Adjudicating Authority on 20.04.2022 in IA No.303 of 2022 was challenged.

In paragraph 2 of the judgment, this Tribunal made following observations:-

"2. This Appeal has been filed against the order dated 20.04.2022 passed by the Adjudicating Authority (National Company Law Tribunal), Mumbai Bench, Court- III by which the Adjudicating Authority decided the I.A 303 of 2022 filed by the Successful Resolution Applicant- 'Manjeet Cotton Private Limited'. The Application was allowed by passing following order:-

"14. In view of the above, the Bench "Allows" IA 303/2022 with the following directions:-

(i) All claims, liquidated damages, advances etc and interest on advances up to the date of the Resolution Plan approved by the Adjudicating Authority stands extinguished and cannot be agitated by IOCL in future as the said claim has been duly treated by the Resolution Applicant in the Resolution Plan and IOCL cannot initiate any proceedings in respect to such claims.

(ii) The Resolution Plan as approved by the Committee of Creditors ("CoC") is binding on all the parties and, therefore, the period as provided in the Resolution Plan, i.e., the period for completion of the projects under the existing contract shall stand extended for a period of 12 months from the date of NCLT approval/ final Order for completion of pending work."

This Tribunal in paragraph 5 has made following observations:-

"5. The order passed by the Adjudicating Authority clearly mentioned that all claims, liquidated damages,

Company Appeal (AT) (Insolvency) No. 373 of 2025 9

advances etc. and interest on advances up to the date of the Resolution Plan approved by the Adjudicating Authority stands extinguished and cannot be agitated by the Appellant in future. No exception can be taken to the aforesaid direction because the claim was up to the date of the approval of the Resolution Plan. In event, any future obligation arises of the Corporate Debtor/ Successful Resolution Applicant, it is open for the parties to take recourse in accordance with the terms and conditions and the order impugned cannot govern any future events and consequences."

10. What was held in the above case was that all claims, liquidated

damages, advances stands extinguished. The present is a case where it is

not the case of the Hindustan Petroleum Corporation Limited that any claim

towards liquidated damages is due on the corporate debtor nor any claim

prior to CIRP or during the CIRP was filed. The present is a case where

Successful Resolution Applicant after approval of the plan was asking for

refund of deducted liquidated damages which deduction was made from

invoices during the currency of the contract as per the terms and conditions

of the contract. Thus, extinguishment of the claims, liquidated damages on

account of approval of the plan has no effect on the liquidated damages

already deducted as per terms and conditions of the contract. It is true that

any claim which was not filed or not part of the Resolution Plan shall stand

extinguished on the approval of the Resolution Plan but that does not mean

that any liquidated damages deducted during currency of the contract

should be allowed to be refunded to the Successful Resolution Applicant.

Company Appeal (AT) (Insolvency) No. 373 of 2025 10

11. We, thus, do not find any error in the order of the Adjudicating

Authority dismissing the Application filed by the Appellant. There is no merit

in the Appeal. The Appeal is dismissed.

[Justice Ashok Bhushan] Chairperson

[Barun Mitra] Member (Technical)

[Arun Baroka] Member (Technical)

New Delhi Anjali

Company Appeal (AT) (Insolvency) No. 373 of 2025