G. Shivramkrishna vs Isgec Covema Ltd. & Anr

G. Shivramkrishna, Director, M/s OM Shakti Renergies Limited H.8-2-293/52/DKN/2, Road No. 51, Jubilee Hills, Hyderabad- 500 033 Telengana .. Appellant

Vs.

1. M/s Isgec Covema Limited Represented by its Constituted Attorney, Mr. Kapil Kumar Singh, D-860, New Friends Colony, New Delhi- 110 065

Also at:

A-4, Sector-24, NOIDA, Uttar Pradesh- 201301

2. M/s Om Shakti Renergies Limited, Represented by IRP Mr. Chilla Rajesh, H.8-2-293/52/DKN/2, Road No. 51, Jubilee Hills, Hyderabad- 500 033 Telengana .. Respondents

Present:

For Appellant: Mr. Bhagabati Prasad Paohy, Advocate

For Respondents: Mr. Shambhu Sharan, Mr. Yaman Kumar and Mr. Shashaank Bhansal, Advocate

Company Appeal(AT)(Insolvency) No. 1109 of 2019 Page 1 of 19 JUDGMENT

( 7th February, 2020)

KANTHI NARAHARI, MEMBER(T)

The present Appeal arises out of the order dated 16th

September, 2019 passed by the Adjudicating Authority (National

Company Law Tribunal, Hyderabad), Hyderabad in CP(IB) No.

277/9/HDB/2019 whereby the Adjudicating Authority admitted the

Application filed by the Applicant/Operational Creditor- M/s Isgec

Covema Limited - Respondent No. 1 herein under Section 9 of

Insolvency and Bankruptcy Code, 2016 (in short 'IBC').

2. The Appellant herein against whom 'Corporate Insolvency

Resolution Process' (in short 'CIRP') was initiated by the Adjudicating

Authority preferred the present Appeal challenging the order of

admission. The Appellant herein challenged the Impugned Order of

admission on the following grounds namely:

a) "Section 9 Application has been filed belatedly for

the reason that the operational debt was dated

back to 05.12.2002;

b) The statutory Demand Notice has not been

delivered/served to the Corporate Debtor herein

and finding of the Adjudicating Authority that the

Demand Notice has been duly served, and the

Company Appeal(AT)(Insolvency) No. 1109 of 2019 Page 2 of 19 Postal track record has been filed through a Memo

is grossly erroneous.

c) The Adjudicating Authority failed to appreciate

that the Operational Creditor - Respondent No. 1

herein has not attached a copy of the invoice to

the Demand Notice as required under Section 8(1)

of IBC for malafide reasons as the alleged

Proforma Invoice is highly belated i.e.,

05.02.2002.

d) That the Adjudicating Authority failed to

appreciate that the notice of the Company Petition

was not served to the Appellant herein even

through e-mail describing the fact that the e-mail

ID of the Appellant (Corporate Debtor) is available

on the MCA portal. The finding of the Adjudicating

Authority that the claim is within period of

limitation is grossly erroneous and the

Adjudicating Authority has not discussed the

starting point of limitation."

3. Learned Counsel for the Appellant vehemently opposed the

admission of the Application by the Adjudicating Authority and

submitted that the Adjudicating Authority ought to have considered

and rejected the Application on the grounds as mentioned above. He

submitted that the Appellant had not received the Demand Notice and

Company Appeal(AT)(Insolvency) No. 1109 of 2019 Page 3 of 19 the copy of Application filed under Section 9 of IBC before the

Adjudicating Authority.

4. On the other hand, learned Counsel appearing on behalf of the

Respondent No. 1 submits that the Demand Notice has been served on

the Appellant and filed proof of service before the Adjudicating

Authority. Further, the copy of the Application filed before

Adjudicating Authority has been sent to the Appellant. However, the

same was returned with remark, 'left' and subsequently, notices have

been sent to the changed address as available on the MCA Portal and

the same has been delivered to the Appellant. He submitted that the

Appellant had failed to appear before the Adjudicating Authority in

spite of service of notice and failed to reply to the Demand Notice. The

Adjudicating Authority had afforded opportunities to the Appellant

herein. However, the Appellant had not appeared before the Tribunal

nor filed any Reply affidavit to the Application. The Adjudicating

Authority had considered all aspects and admitted the Application on

the basis of available records and factual position.

5. Heard learned Counsel appearing for the respective parties.

Perused the pleadings and citations relied upon by them.

FACTS

6. The Respondent No. 1 herein filed an Application before the

Adjudicating on 03.04.2019 in a prescribed Form-V. Part-II of the

Form at serial no. 5 (Page-63), the address of the Respondent No. 2

Company Appeal(AT)(Insolvency) No. 1109 of 2019 Page 4 of 19 herein has been mentioned as M/s Om Shakati Renergies Limited,

H.No. 8-2-684/3/15, Bhavani Nagar, Road No. 12, Banjara Hills. In

part-IV of the said Rorm (page-64), the amount of Operational debt and

due is shown as Rs. 1,89,02,200/-. It is stated that the debt has fallen

due on 30.05.2013 and again on 27.01.2016. In serial no. 2 of Part-IV

(page-65), the date of default shown as 02.02.2019 and the amount

payable as per Clause-1 of the award is Rs. 65,18,000/- and the

interest calculated @ 24% per annum till 22.01.2019 is Rs.

1,23,84,200/-. The total amount claimed to be in default is Rs.

1,89,02,200/-. It is a fact that Respondent No. 2 owed a debt of Rs.

24,60,000/- to the Respondent No. 1 i.e., Operational Creditor with

regard to a Work Order placed on him by the Respondent No. 2 on

05.12.2002. Thereafter, there were existence of disputes between the

parties.

7. By an order dated 26.04.2010, the Hon'ble High Court of Andhra

Pradesh appointed a Sole Arbitrator to resolve the disputes between

the parties arising out of the above work order dated 05.12.2002. Both

the parties appeared before the Sole Arbitrator and the Sole Arbitrator

passed the award on 30.05.2013 (page-30-47) awarding an amount of

Rs. 65,18,000/- to be paid to the Claimant i.e., Respondent No. 1 by

the Respondent No. 2 along with interest @ 24 % per annum from the

date of claim of settlement till the actual payment of amount.

8. Even the Award was passed on 30.05.2013, Respondent No. 2

Company had not honoured the Award. Respondent No. 1 issued a

Company Appeal(AT)(Insolvency) No. 1109 of 2019 Page 5 of 19 Demand Notice on Respondent No. 2 dated 06.11.2013 (Page-48) for

payment of awarded amount and filed a Postal Receipt showing

despatch of Notice to the Respondent No. 2 dated 07.11.2013 at 9:58

hrs. (page-50) and the Track Result of Indian Post Office filed at page-

51 of Paper Book which shows that the Article/consignment has been

dispatched on 13.11.2013. Respondent No. 2 filed Original Petition

bearing No. 739 of 2014 before XXIV Additional Chief Judge, City

Court, Hyderabad seeking to set aside the Award passed by the Sole

Arbitrator dated 30.05.2013. Learned XXIV Additional Chief Judge,

City Court, Hyderabad dismissed the said Original Petition by an order

dated 27.01.2016, the same is reproduced here at. "Petitioner called

absent. No representation. Hence this petition is dismissed without

costs."

9. Learned Counsel for the Respondent No. 1 herein submitted that

after dismissal of the Original Petition filed by the Respondent No. 2

herein the Award attained finality and neither the Appellant nor the

Respondent No. 2 preferred any Appeal against the said dismissal

order dated 27.01.2016.

10. Respondent No. 1 issued Demand Notice under Section 8 of IBC

dated 22.01.2019 demanding payment of Rs. 1,89,02,200/- (Page 53).

The Demand Notice was sent through Courier to the Respondent No.

2 and the Track Report of the Courier has been filed at page no. 57

which shows that the said Demand Notice has been delivered to the

Respondent No. 2 on 24.01.2019.

Company Appeal(AT)(Insolvency) No. 1109 of 2019 Page 6 of 19

11. Learned Counsel for the Appellant contended that the Registered

Office of the Respondent No. 2 has been changed and the same has

been notified by the Registrar of Companies (in short RoC). We have

perused Form No. 22 at page 70 of the concerned RoC wherefrom it

appears that the Registered Office of the Company has changed w.e.f.

16.04.2019 and the new address reflects as H. No. 8-2-

293/52/DKN/2, Road No. 51, Jubilee Hills, Hyderabad, Telangana-

500 033. It is to be seen that when the Application under Section 9

was filed before the Adjudicating Authority on 02.04.2019, the

Registered Office of the Respondent No. 2 was at the address i.e., M/s

Om Shakthi Renergies Limited, H.No. 8-2-684/3/15, Bhavani Nagar,

Road No. 12, Banjara Hills, Hyderabad.

12. Learned Counsel for the Respondent No. 1 submitted that the

Adjudicating Authority in its order dated 01.05.2109 recorded that the

Notice on the Corporate Debtor i.e., Respondent No. 2 herein has been

served and proof of service to that effect has been filed by the

Respondent No. 1 herein.

13. We have perused the Order sheet of the Adjudicating Authority

dated 01.05.2019 (page-11 of the Reply) wherein it is stated that the

Notice was served on Respondent No. 2 herein for appearance and filed

proof of service. Vide order dated 06.06.2019 (page -28 of Reply),

learned Adjudicating Authority recorded that the Notice was returned

un-served and directed issue fresh Notice to the Corporate Debtor

Company Appeal(AT)(Insolvency) No. 1109 of 2019 Page 7 of 19 (Respondent No. 2) and directed learned Counsel to serve on the

Corporate Debtor (Respondent No. 2) to file proof of service.

14. Vide order dated 03.07.2019 (page 13 of the Reply), learned

Adjudicating Authority recorded that learned Counsel for the

Operation Creditor present and reported that the Notice sent to the

Corporate Debtor was returned with the endorsement "left". She again

requested to order fresh Notices to the Corporate Debtor and also to

the Directors of the Company and further notices to be sent to the e-

mail address of the Corporate Debtor Company. Learned Adjudicating

Authority directed to provide address particulars of the Directors of the

Company including new address of the Corporate Debtor and also e-

mail address in the Registry and directed Registry to prepare fresh

Notice on 29.07.2019 (page-14 of the Reply). Learned Adjudicating

Authority recorded that none appeared for the Corporate Debtor.

Learned Counsel reported that Notices were served on the Corporate

Debtor as well as on the Directors. On 05.08.2019 (page 15 of the

Reply), learned Adjudicating Authority recorded that Counsel for the

Operational Creditors are not present. He has filed a Memo along with

Annexure stating that Notice was served on the Company. Notices

issued to the Directors were returned unserved with endorsement 'left'.

Since notice was served on the Corporate Debtor Company, service

held is sufficient. Further in the said order it is recorded that

Representative for Corporate Debtor is called absent. Corporate Debtor

is treated as absent. Learned Counsel Operational Creditor is directed

Company Appeal(AT)(Insolvency) No. 1109 of 2019 Page 8 of 19 to suggest the name of IRP and also file his consent in Form-2.

Subsequently, the matter was listed before the learned Adjudicating

Authority on several occasions and passed the Admission Order on

16.09.2019. Learned Adjudicating Authority at paragraphs 3,4,5,6 of

the ordered observed as under:

...

3. The Operational Creditor filed Form-5. It is

clear from the record that Operational

Creditor sent Demand Notice in Form-3 to the

corporate debtor to its address. Operational

Creditor also filed Arbitral Award marked as

Annexure-C. The Operational Creditor also

filed copy of the Hon'ble Additional Chief

Judge Order marked as Annexure-D. The

Operation Creditor also filed copy of the

Demand notice for payment of awarded

amount along with postal receipt and POD

marked as Annexure-E. Operational Creditor

filed copy of demand notice issued u/s 8 of

the I&B Code, 2016 along with courier receipt

and POD which is marked and annexed as

Annexure- F. Thus, Operational Creditor filed

documentary proof in support of the claim

and also placed evidence that Corporate

Company Appeal(AT)(Insolvency) No. 1109 of 2019 Page 9 of 19 Debtor committed default. Therefore, petition

is liable to be admitted.

4. We have heard the Counsel for operational

creditor. This Petition is filed by operational

creditor under section 9 of I&B Code.

Operational creditor filed Form-5 and

furnished the information with regrd to the

operational debt which is committed default

by corporate debtor.

5. The Notice was served on the corporate

debtor, Post track record is filed through

Memo. Learned Counsel contended that

corporate debtor has not replied or failed to

defend. The claim is submitted within period

of time prescribed under Limitation act,

1963. Thus, the claim is within limitation.

There is no representation or reply by the

Corporate Debtor. Corporate debtor was

served with notice before admission

however, corporate debtor remained absent

and it did not contest the claim.

6. In view of the above we are of the considered

view that the operational creditor has been

able to establish un disputed debt against

corporate debtor and the corporate debtor

Company Appeal(AT)(Insolvency) No. 1109 of 2019 Page 10 of 19 has been in default with regard to the

payment of dues to the operational creditor

amounting to Rs. 1,89,02,200/-. The

Operational creditor is able to establish

through documents that corporate debtor

committed default of operational debt and

there is no pre existing dispute. Thus, this

Petition is complete and is liable to be

admitted."

...

15. From the perusal of the order, learned Adjudicating Authority

was satisfied with the Notice served on the Corporate Debtor i.e.,

Respondent No. 2 herein and the Postal Track Report filed through

Memo. Further, learned Adjudicating Authority recorded that the claim

is submitted within a period prescribed under Limitation Act, 1963.

Thus the claim is within limitation. There is no representation nor any

reply by the Corporate Debtor. The Corporate Debtor was served with

notice before Admission. However, the Corporate Debtor remained

absent and it did not contest the claim.

16. From the records filed by the Respondent No. 1 with regard to

the service of Demand Notice dated 22.01.2109 and the Application

dated 03.04.2019 filed before the Adjudicating Authority, it is

unequivocal that the Notices were served on the Corporate Debtor prior

to the change of Registered Office i.e., on 16.04.2019. Further the

learned Adjudicating Authority after filing of the Application ordered

Company Appeal(AT)(Insolvency) No. 1109 of 2019 Page 11 of 19 notice to be served to the new address of the Corporate Debtor and its

Directors. As per the Direction of the learned Adjudicating Authority,

Respondent No. 1 herein had taken steps in serving the Notice on

Respondent No. 2. Learned Counsel for the 1st Respondent relied upon

judgment of this Tribunal (page-4 of WS of R-1) in the matter of

"Alloysmin Industries Vs. Raman Casting Private Limited" passed

in Company Appeal(AT)(Insolvency) No. 684 of 2018 whereby this

Tribunal held that if the Demand Notice under Section 8(1) of IBC is

served on the Corporate Debtor either on its Registered Office or its

Corporate Office, it should be treated as valid service of Notice under

Section 8(1) of IBC and Application under Section 9 of IBC on failure

of payment if filed after 10 days' is maintainable. As discussed above,

the statutory Demand Notice under Section 8 and courier receipt and

the delivery report evidencing proper service has already been filed has

at page 56 and 57 of the Appeal Paper Book. Thus, we held that there

is ample proof that the Notice had been served on Respondent No. 2

by the Respondent No. 1.

17. With regard to the limitation and admitting the Application,

which is a time barred claim is concerned, we are of view that the claim

is not time barred for the following reasons as stated here at. It is an

admitted fact that Respondent No. 2 owe a debt to the Respondent No.

1 and failed to pay the debt to Respondent No. 1. Respondent No. 1

invoked the jurisdiction of arbitration. The Respondent No. 2

participated in the Arbitral proceeding before the Sole Arbitrator

Company Appeal(AT)(Insolvency) No. 1109 of 2019 Page 12 of 19 through their Counsel and it is evident from the Award of the Sole

Arbitrator that the Respondent No. 2 contested the matter. The learned

Sole Arbitrator had passed the Award and the same is binding on

Respondent No. 2. However, Respondent No. 2 challenged the said

Award under Section 34 of the Arbitration and Conciliation Act, 1996

by filing Original Application before Learned XXIV Additional Chief

Judge, City Court, Hyderabad and having not pursued the Petition by

the Respondent No. 2, the Petition came to be dismissed on

27.01.2016. Thus the Award has attained its finality. We are of the

view that by passing Award by the learned Sole Arbitrator, the amount

has been crystalized and by default in payment and by not honouring

the Award, the amount became due and payable. The Respondent No.

1 had rightly invoked jurisdiction of the Adjudicating Authority under

Section 9 of the IBC after issuance of Demand Notice as prescribed

under Section 8 of IBC. The Respondent No. 2 had not replied nor

brought any dispute with regard to the claim made by Respondent No.

1.

18. Learned Counsel for the Appellant submitted that the learned

Adjudicating Authority should not have admitted the Application since

the IBC cannot be invoked for execution of an Award. In this regard,

we are of the view that the word 'Creditor' has been defined in Section

3(10) of IBC which reads as under:

"creditor" means any person to whom a debt is owed

and includes financial creditor, operational creditor,

Company Appeal(AT)(Insolvency) No. 1109 of 2019 Page 13 of 19 a secured creditor and unsecured creditor and a

decree-holder"

The Respondent No. 1 is a Decree-Holder in the eye of law.

Learned Counsel for the Appellant submitted that the Impugned Order

is in the teeth of the settled law with the provision of Article 137 of the

Limitation Act, 1963 shall be applicable for filing a petition under

Sections 7 & 9 of the IBC. It is submitted that the Hon'ble Supreme

Court in the matter of "B.K. Educational Services Pvt. Ltd. Vs.

Parag Gupta & Associates" [2018(14) Scale 482] wherein the Hon'ble

Supreme Court held that the Limitation Act will apply to Sections 7 &

9 of IBC at paragraph 27 of the said Judgment and the relevant part of

judgement reads as under:

...

"27. It is thus clear that since the Limitation Act

is applicable to applications filed under Sections 7

and 9 of the Code from the inception of the Code,

Article 137 of the Limitation Act gets attracted. "The

right to sue" therefore, accrues when a default

occurs. If the default has occurred over three years

prior to the date of filing of the application, the

application would be barred under Article 137 of the

Limitation Act, save and except in those cases

where, in the facts of the case. Section 5 of the

Company Appeal(AT)(Insolvency) No. 1109 of 2019 Page 14 of 19 Limitation act may be applied to condone the delay

in filing such application."

..

[Emphasis supplied]

19. The Hon'ble Supreme Court held that the right to sue therefore

accrues when a default occurs. If the default has occurred over three

years prior to the date of filing of the Application, the Applicant would

be barred under Article 137 of the Limitation Act. The Hon'ble Supreme

Court gave exception in those cases wherein the facts of the case

Section 5 of the Limitation Act may be applied to condone the delay in

filing such Application. Therefore, there is an exception in the facts of

the case to invoke Section 5 of the Limitation Act to condone the delay.

However, the facts of the present case are different. In the present case,

admittedly, there was an Award passed by the Sole Arbitrator on

30.05.2013. However, Respondent No. 2 challenged the said Award

before Learned XXIV Additional Chief Judge, City Court, Hyderabad

and the Hon'ble Court dismissed the said petition on 27.01.2016. It is

admitted that after dismissal of the petition under Section 34 of the

Arbitration and Conciliation Act by the learned XXIV Additional Chief

Judge, City Court, Hyderabad, there is no appeal preferred by

Respondent No. 2. Section 34 of the Arbitration and Conciliation Act

falls in Chapter-7 of the Act which empowers for filing Application for

setting aside the Arbitral Award. By the said Chapter of the Arbitration

Company Appeal(AT)(Insolvency) No. 1109 of 2019 Page 15 of 19 and Conciliation Act, 1996, an Appeal lies under Section 37 against

the said Order. The said provision is reproduced herein below:

...

"37. Appealable orders.--

(1) An appeal shall lie from the following orders

(and from no others) to the Court authorised by law to

hear appeals from original decrees of the Court

passing the order, namely:--

(a) granting or refusing to grant any measure

under section 9;

(b) setting aside or refusing to set aside an

arbitral award under section 34.

(2) An appeal shall also lie to a Court from an order

granting of the arbitral tribunal.--

(a) accepting the plea referred in sub-section (2)

or sub-section (3) of section 16; or

(b) granting or refusing to grant an interim

measure under section 17.

(3) No second appeal shall lie from an order passed

in appeal under this section, but nothing in this

section shall affect or take away any right to appeal

to the Supreme Court.

.... [Emphasis supplied]

Company Appeal(AT)(Insolvency) No. 1109 of 2019 Page 16 of 19 From the reading of the above provision, an Appeal shall lie from

the following orders to the Court authorised by law to hear the Appeal

beyond original Decree of the Court passing order namely:

(a) granting or refusing to grant any measure under

section 9;

(b) setting aside or refusing to set aside an arbitral

award under section 34.

20. As per Article 116 of the Limitation Act 1963, which is under

the Second Division Appeal, the period prescribed is 90 days to file

Appeal before the High Court from any Decree/Order. Against the

order passed under Section 34 of the Arbitration and Conciliation Act,

1996, the only Appeal lies under Section 37 of the Arbitration and

Conciliation Act 1996 before the Hon'ble High Court and the limitation

for the said period is covered under Article 116 of the Limitation Act

which is under the caption of Second Division appeal.

21. In the present case, the learned XXIV Additional Chief Judge,

City Court, Hyderabad, dismissed the petition on 27.01.2016 and the

statutory period for filing Appeal under Section 37 of Arbitration and

Conciliation Act is 90 days in case of Decree. The Appeal under Section

37 of the Arbitration and Conciliation Act excludes the limitation from

27.04.2016 i.e. 90 days from 27.1.2016 as per Article 116 of the

Limitation Act and if three years is taken from 27.01.2016, following

the Judgment of the Hon'ble Supreme court in the above decision [B.K.

Company Appeal(AT)(Insolvency) No. 1109 of 2019 Page 17 of 19 Educational.. supra] and as per Article 137 of the Limitation Act, three

years' period would expire on 27.04.2019. Whilst, the Application

under Section 9 of IBC filed on 03.04.2019. Accordingly, it is well

within the period of limitation.

22. The learned Counsel for Respondent No. 1 submitted that the

Hon'ble Supreme Court in the matter of "K. Kishan Vs. Vijay Nirman

Company Private Limited" reported in (2018)17 SCC 662 held in

paragraph-27 of the Judgment as under:

...

"27. We repeat with emphasis that under

our Code, insofar as an operational debt is

concerned, all that has to be seen is whether the

said debt can be said to be disputed, and we have

no doubt in stating that the filing of a Section 34

petition against an arbitral award shows that a

pre-existing dispute which culminates at the first

stage of the proceedings in an award, continues

even after the award, at least till the final

adjudicatory process under Section 34 and 37 has

taken place."

... [Emphasis supplied]

23. We are of the view that the said Judgment is squarely applicable

to the facts of the present case. For the reason that

Application/Petition under Section 34, Arbitration and Conciliation

Company Appeal(AT)(Insolvency) No. 1109 of 2019 Page 18 of 19 Act, 1996 has been dismissed on 27.01.2016 and the period for

preferring the Appeal under Section 37 of the Act i.e. 90 days is

excluded, the period of limitation would commence from 27.04.2016

and as per the Judgment of the Hon'ble Supreme Court in the matter

of "B.K. Educational Services Pvt. Ltd. Vs. Parag Gupta &

Associates" [2018(14) Scale 482] (supra) i.e. three years' period of

Limitation would expire on 27.04.2019. As stated supra, applying the

principle and the law laid down by the Hon'ble Supreme Court in the

matter "K. Kishan Vs. Vijay Nirman Company Private Limited"

reported in (2018)17 SCC 662 the facts are squarely applicable in the

present case. We conclude that the Application filed by the Applicant

before the Adjudicating Authority is within the period of limitation.

24. In view of the above discussion and the provisions of law and the

applicability of the judgement of the Hon'ble Supreme Court, we do not

find any merit in the Appeal. Accordingly, the Appeal is dismissed.

However, no orders as to cost.

[Justice Venugopal M.] Member (Judicial)

(Kanthi Narahari) Member(Technical)

(V P Singh) Member(Technical) Akc

Company Appeal(AT)(Insolvency) No. 1109 of 2019 Page 19 of 19