M/S Pitti Coal Company vs M/S Mahalaxmi Continental Ltd

[Appeal Filed under Section 61 of the I & B Code, 2016, arising out of impugned order dated 24th February, 2020 passed by the 'Adjudicating Authority' (National Company Law Tribunal, Guwahati Bench, Guwahati) in CP(IB) No. 34/GB/2019]

IN THE MATTER OF:

M/s Pitti Coal Company Through Anil Kumar Pitti Plot No. 329, Arihant Nagar, Meghpur Borichi, Anjar Kutch, Gujarat- 370 110 .. APPELLANT

Versus

1. M/s Mahalaxmi Continental Ltd. Gali No. 8, N H 37 Beltola, Guwahati, Assam - 781 029

Also at: Plot No. 433, Sector 1A, Oslo Circle, Gayatri Mandir Road, Gandhidham

2. Shailandra Kumar Sharma Gali No. 8, N H 37 Beltola, Guwahati, Assam - 781 029

Also at: Plot No. 433, Sector 1A, Oslo Circle, Gayatri Mandir Road, Gandhidham

3. Mr. Naveen Kumar Gupta Gali No. 8, N H 37 Beltola, Guwahati, Assam - 781 029

Also at: Plot No. 433, Sector 1A, Oslo Circle, Gayatri Mandir Road, Gandhidham 4. Sapna Singhal Gali No. 8, N H 37 Beltola, Guwahati, Assam - 781 029

Also at: Plot No. 433, Sector 1A, Oslo Circle, Gayatri Mandir Road, Gandhidham

5. Avdesh Kumar Gali No. 8, N H 37 Beltola, Guwahati, Assam - 781 029

Also at: Plot No. 433, Sector 1A, Oslo Circle, Gayatri Mandir Road, Gandhidham .. Respondents

Present:

For Appellant : Mr. Kushagra Bansal, Ms. Bhavya Nihalani, Mr. Manu Garg Advocates

For Respondent Nos. 1 to 5: Mr. Tarun Verma, Ms. Apoorva Pandey and Mr. Anand Verma, Advocates

JUDGMENT

(VIRTUAL MODE)

M. Venugopal, Member(J):

Background:

The Appellant/Operational Creditor/Applicant has projected the instant

Company Appeal(AT)(Insolvency) No. 943 of 2020 before this 'Tribunal' being

aggrieved against the impugned order' dated 24.02.2020 in CP(IB) No.

34(GB)/2019 passed by the 'Adjudicating Authority' (National Company Law

Tribunal, Guwahati Bench, Guwahati).

2. The 'Adjudicating Authority' (National Company Law Tribunal, Guwahati

Bench, Guwahati) while passing the 'impugned order' in CP(IB) No. 34(GB)/2019

(filed by the Appellation/Operational Creditor/Appellant) under Section 9 of the

I & B Code, 2016 at paragraphs - 8 & 9 had observed the following:

8. "Heard both sides and perused the record. Both sides submitted their arguments in the line of their assertions and pleadings and also replied upon the above citations. From the careful examination of the record and the submissions, it makes it very clear that the OC and the CD have entered into an agreement with regard to purchase and supply of coal and the OC refused to accept the coal supplied by the CD both on the ground of inferior quality and also in not supplying the coal through a particular vessel by name MV Salt Lake City. It also appears that the prices of coal have been dropped after making payment by the OC to the CD at a particular price. The possibility of refusal of acceptance of coal by the OC due to fall of prices cannot be ruled out since the advocate appearing for the applicant during the course of argument refused to accept coal when asked by this Tribunal as to why can't they resolve the issue by accepting coal from the CD as the CD expressed his ready and willingness to supply the coal. The OC did not place any material before the Tribunal to prove the alleged assertion by way of written concluding contract between the parties.

On the other hand, the OC in Part V of the present application under column 6 mentioned as if the operational debt has become due and payable out of breach of contract by the CD as per the provisions contained in Chapter V and VI of Indian Contract Act, 1872. The respondent/CD issued reply in response to the demand notice alleging the failure on the part of the OC in lifting the coal and also accused delay in making timely payment by the OC. It also transpires from the reply and the conduct that the OC is not inclined to accept the material due to obvious reasons. All the above allegations and counter allegations clearly proves a pre-existing dispute between the parties.

9. All the above referred decision relied upon by the advocate appearing for the OC are distinguishable and are not applicable to the facts of the present case on hand. Even otherwise, majority of the decisions cited by the OC are of co-benches of other NCLTs, which are not binding on the Tribunal. In so far as the Order of the Hon'ble NCLAT passed in Unistill Alcoblends Pvt. Ltd Vs. India Brewery & Distillery Pvt. Ltd. (supra) is concerned, the Hon'ble NCLAT reversed the dismissal order of the Adjudicating Authority on account of failure of the respondents to show any document before notice under section 7 was issued to indicate the existence of legal dispute and, therefore, found fault with the Adjudicating Authority in dismissing the above company application. However, in this case, the demand notice was dispatched on 01.06.2019 at 12.24 Noon as per the postal receipts placed by the OC and the CD is expected to receive it at least two/three days thereafter. In the meanwhile the CD has sent an email to the OC on 31.05.2019 at 15.55 Pm alleging so many breaches on the part of the OC which proves the pre-existing disputes between the parties with regard to enforcement of the terms & conditions of the contract. Therefore, this Tribunal is of the considered opinion that this is not a fit case where Section 9 of the IBC can be triggered in the above facts and circumstances and the above Company Petition is liable to be dismissed."

and finally dismissed the 'Application' without costs, with an observation

that the 'Order' of dismissal of the Application will not preclude the Appellant/Operational Creditor/Application from initiating necessary recovery

proceedings before an appropriate legal forum, if it so chooses.

APPELLANT'S CONTENTIONS:

3. Challenging the 'impugned order' dated 24.02.2020 passed by the

'Adjudicating Authority' (National Company Law Tribunal, Guwahati Bench,

Guwahati) in CP No. (IB) 34(GB)/2019 in dismissing the 'Application', the Learned

Counsel for the Appellant/Applicant/Company submits that the 'Adjudicating

Authority' had failed to appreciate that the 1st Respondents in its correspondence

had clearly admitted that a 'contract' was made between both the parties and

further acknowledged the amounts due on its part even after considering

financial losses and interest sum.

4. According to the Learned Counsel for the Appellant, the Appellant had

entered into an agreement with the First Respondent on 27.02.2019, towards the

purchase of the 'Thermal Coal' and as per the agreement, the First

Respondent/Company was supposed to deliver 10,000 MT of 'Thermal Coal' at

the basic value of INR 7700 Plus 400 (compensation cess) plus 5% GST plus 1%

TCS to the Appellant Company within 60 days from the arrival date of the vessel

and payment was to be made in advance 10% approximately INR 80 Lakhs or Rs.

1 Crores towards cash and carry for the lifting of the Coal from the vessel and

this is substantiated from the WhatsApp on 27.02.2019 between the Officials of

both the parties.

5. The Learned Counsel for the Appellant brings to the notice of this 'Tribunal'

that even after the execution of the agreement on 27.02.2019, the Appellant made

an advance payment to the First Respondent for a sum of Rs 1,75,00,000/- by

07.03.2019, as evident from the Ledger Account statement maintained by both the parties. In fact, the Appellant had approached the First Respondent

continuously to know about the name of the vessel and load portal report of the

vessel and that the First Respondent through WhatsApp reply dated 03.03.2019

had mention the vessel name 'Salt Lake City' and further blurred Load Portal

Report on 14.03.2019 and that the First Respondent had prolonged the entire

process of furnishing information and had not disclosed the arrival date of the

vessel at the Port. After noting the ignorant behaviour of the First Respondent,

the Appellant, on 16.03.2019 through WhatsApp message intimated the First

Respondent to terminate the Agreement and the legible Load Portal Report was

immediately forwarded to the Appellant.

6. The Learned Counsel for the Appellant points out that after the receipt of

the Load Portal Report of the vessel, viz., Salt Lake City, the Appellant had agreed

to lift the coal after scrutinizing the quality of the coal and further entered into a

'Sale Agreement' with its customers. Indeed, the 'Appellant' initiated the lifting

process from 18.03.2019 from the vessel Salt Lake City and that although, the

First Respondent was providing Thermal Coal from the Vessel viz., Salt Lake City

by raised invoices of different vessels of USA Defolt as evident from the invoices

dated 19.03.2019.

7. The Learned Counsel for the Appellant takes a stand that when the

Appellant had objected to the conduct of the First Respondent, the First

Respondent admitted its mistake and further assured the Appellant that the

invoices in future would be raised with the proper mention of the vessel viz., Salt

Lake City. Also the Appellant lifted the coal from the vessel Salt Lake City till

29.03.2019 without any default and made part payments of INR 50,00,000/- on

03.04.2019, 09.04.2019 and 24.04.2019 without any objections.

8. The categorical plea of the Appellant is that the First Respondent never

raised any issue of 'Delay Payment' with the Appellant, during the course of

transaction. The First Respondent, on 26.04.2019 shared Load Portal Report of

another vessel 'JSW Salem' and further informed the Appellant that the

remaining quantity of 7600 MT was sold by the First Respondent to another party.

The Appellant had issued a reply on 29.04.2019 to the First Respondent stating

that it cannot act as per its own whim and fancies and further mentioned that

the First Respondent is bound to honour the terms and conditions as agreed to

between the parties on 27.02.2019.

9. The Learned Counsel for the Appellant points out that the First Respondent

through e-mail dated 31.05.2019 had admitted to the fact that the 'Agreement'

was entered between the parties and lifting period of coal was agreed for two

months for vessel arrival. Moreover, in the e-mail dated 31.05.2019, the First

Respondent had admitted to the fact that the vessel had reached at 'Kandla Port'

on 08.03.2019 and keeping in view the statement of the First Respondent, the

Appellant had the lifting period of two months from 08.03.2019 till 08.05.2019.

However, the First Respondent had sold 'Thermal Coal' on 29.04.2019 as evident

from the WhatsApp chat conversation between the parties.

10. According to the Learned Counsel for the Appellant, the First Respondent

had acknowledged the due amount and further clearly stated that the refund

could be made after forfeiting security and adjusting all losses and claims

incurred by the First Respondent.

11. The Learned Counsel for the Appellant submits that the First Respondent

is liable to refund a sum which is over and above Rs. 1 Lakh notwithstanding

with the fact that the Appellant had made an advance payment of more than INR 2 Crores to the First Respondent and even after subtracting the aforesaid losses

to the First Respondent.

12. The Learned Counsel for the Appellant contents that the Appellant had

issued a 'Demand Notice' under Section 8 of the I & BC Code, 2016 upon the First

Respondent/Company for effecting the payment of unpaid operational debt

2,22,38,286/- together with interest of 24% per annum. As a matter of fact, the

First Respondent in para 2.14 of its Reply dated 17.05.2019 had admitted to the

fact that it is liable to refund the amount after deducting 10% Security Deposit of

INR 80 Lakhs and adjusting the differential price loss of INR 500/MT which comes

around INR 40 Lakhs approximately.

13. The grievance of the Appellant is that the First Respondent had clearly

failed to make refunds even after accepting each liability, which had resulted in

filing of the Application under Section 9 of the I & B Code for initiating CIRP

against the First Respondent/Company before the 'Adjudicating Authority' and

the same came to be dismissed as per Order dated 24.02.2020 of the

'Adjudicating Authority'.

14. The Learned Counsel for the Appellant forcefully submits that there is no

'pre-existing' dispute between the parties and in fact, the First Respondent had

admitted its liability of more than Rs. 1 Lakh (Vide para 2.14 of its Reply dated

17.06.219). In this regard, the Learned Counsel for the Appellant comes out with

a plea that the Appellant on 02.05.2019 had paid an advance of Rs. 1,97,08,063/-

and that there is a clear admission on the part of the First Respondent to a sum

of Rs. 1,51,08,063/-.

15. The Learned Counsel for the Appellant adverts to the fact that the First

Respondent in its e-mail dated 31.05.2019 had admitted to the fact that the Appellant had made an advance payment of Rs. 80 Lakhs to the First Respondent

and also paid a Sum Rs. 95,00,000/- by 30.09.2015 irrespective of the fact that

the Appellant had only lifted coal of Rs. 20,00,000/-. In fact, that the Appellant

was to make an advance payment of 10% or Rs. 1 Crore towards 'Security Deposit'

and balance payment was to be made on cash and carry basis. i.e., invoices basis

in which the First Respondent was supposed to supply coal to the Appellant.

Therefore, an argument is advanced on behalf of the Appellant that there was no

lapse whatsoever qua payment against the purchase coal and the 'Appellant' had

complied with the agreed 'Terms and Conditions'.

16. The Learned Counsel for the Appellant contends that the First Respondent

had sold the remaining quantity of coal 7600 MT to the third party to make profit

as the rate of coal was Rs. 8250/MT whereas the transaction with 'Appellant' was

made at Rs. 8100/MT.

FIRST RESPONDENT'S SUBMISSIONS:

17. The Learned Counsel for the First Respondent submits that First

Respondent/Company was always ready and willing to perform its part of the

obligation of supplying of coal under the purported Agreement dated 27.02.2019.

However, the Appellant itself had tried various methods to terminate the

'Agreement' due to the reason for fall of prices of coal after entering an Agreement

with the First Respondent and this was recorded in the 'impugned order' dated

24.02.2020 at paragraph-8 which runs to the following effect":

8......." The possibility of refusal of acceptance of coal by the

OC due to fall of prices cannot be ruled out since the advocate

appearing for the applicant during the course of argument

refused to accept coal when asked by this Tribunal as to why can't they resolve the issue by accepting coal from the CD as

the CD expressed his ready and willingness to supply the

coal".....

18. According to the Learned Counsel for the First Respondent, there were pre-

existing disputes between the 'Appellant and 'First Respondent' on various

accounts in terms of the Agreement dated 27.02.2019 and the same was duly

raised by the First Respondent in the e-mail dated 31.05.2019 which was in reply

to the Appellant's e-mail dated 02.05.2019.

19. The Learned Counsel for the First Respondent takes a plea that for the

'Demand Notice' of the Appellant dated 31.05.2019, (Received by the First

Respondent on 08.06.2019) a 'Reply' was issued by the First Respondent on

17.06.2019 wherein the 'pre-existing disputes' were pointed out.

20. The Learned Counsel for the First Respondent submits that the 'Agreement

dated 27.02.2019 entered between the Appellant and the First Respondent of

Company was 'inconclusive' one and the said 'Agreement' is not a proper

'Agreement' and the same has no signature of the 'Appellant' and hence there is

no 'concluded contract' between the parties.

21. The Learned Counsel for the First Respondent contends that 1476.36 MT

of coal was supplied to the 'Appellant', but the 'Appellant' had stated in the

instant 'Appeal' and 'Rejoinder' and that the remaining 7600 MT of coal was sold

by the First Respondent without the approval of the 'Appellant'. The aforesaid

averment is unsustainable because of the fact that 10000 MT minus 1476.36 MT

is equal to 8523.64 MT. In this regard, it is pointed out on the side of the First

Respondent that the purported 'Agreement' was for the supply 10000 MT of coal and further that the perusal of the Invoices and Ledger annexed by the Appellant

make it clear that 1476.36 MT of coal was supplied to the 'Appellant'.

22. The Learned Counsel for the First Respondent submits that the First

Respondent had never, even once, acknowledged any amount to be due to the

'Appellant'. Further, the e-mail dated 31.05.2019 of the First Respondent is a

mere 'offer' to the 'Appellant' thjat the First Respondent will be willing to supply

the balance amount of coal, subject to the Appellant making payment of full cargo

value, or alternatively, the 'Appellant' who terminate the 'Agreement' for the part

performed after forfeiting the 'Security Deposit', 'Adjustment of all Losses',

'Interests', 'Costs' and Expenses and claims incurred by the First Respondent

including but limited to differential due to present fallen market price of Coal from

the Appellant's advance payment and refund the balance, if any, to the Appellant.

Therefore, the aforesaid statement does not amount to 'Acknowledgement of Debt'

in any way.

23. The Learned Counsel for the First Respondent comes out with an

agreement that before filing and Application under Section 9 of the I & B Code,

the 'Appellant' had not informed to the First Respondent in regard to the

purported agreement nor agreed to deduction of losses incurred by the First

Respondent and rather demanded Rs. 200/MT as profit over the remaining un-

lifted quantity of coal without any rhyme or reason.

24. The Learned Counsel for the First Respondent urges before this Tribunal

that there was no obligation on the part of the First Respondent as per Agreement

dated 27.02.2019 to supply coal from the 'Vessel MV Salt Lake City'. In fact, the

'Dispute', as regards the 'particularity of the Vessel' initiated was there from the

commencement of supply of coal by the First Respondent.

25. The Learned Counsel for the First Respondent, brings to the notice of this

'Tribunal' that the Appellant had filed a Police complaint against the First

Respondent, on 14.05.2019 (FIR No. 0254 dated 17.07.2019 being registered)

regarding the 'supply of coal' and this itself shows that there was a pre-existing

dispute between the Appellant and the First Respondent.

FIRST RESPONDENT'S DECISIONS:

26. The Learned Counsel for the First Respondent relies on the Judgment of

the Hon'ble Supreme Court dated 31.08.2017 (vide Civil Appeal No. 8337-8338

of 2017) in 'Innoventive Industries Ltd. Vs. ICICI Bank wherein at paragraph

29 wherein it is observed as under:

29. "The scheme of Section 7 stands in contrast with the scheme under Section 8 where an operational creditor is, on the occurrence of a default, to first deliver a demand notice of the unpaid debt to the operational debtor in the manner provided in Section 8(1) of the Code. Under Section 8(2), the corporate debtor can, within a period of 10 days of receipt of the demand notice or copy of the invoice mentioned in sub-section (1), bring to the notice of the operational creditor the existence of a dispute or the record of the pendency of a suit or arbitration proceedings, which is pre-existing - i.e. before such notice or invoice was received by the corporate debtor. The moment there is existence of such a dispute, the operational creditor gets out of the clutches of the Code."

27. The Learned Counsel for the First Respondent cites the decision of the

Hon'ble Supreme Court in "Mobilox Innovations Pvt. Ltd. Vs. Kirusa Software

Pvt. Ltd. (2018) 1 SCC 353 at Spl. Pages 404 and 405 wherein at paragraph-54

it is observed as under:

54. "According to learned counsel for the respondent, the definition of "dispute" would indicate that since the NDA does not fall within any of the three sub-clauses of Section 5(6), no "dispute" is there on the facts of this case. We are afraid that we cannot accede to such a contention. First and foremost, the definition is an inclusive one, and we have seen that the word "includes" substituted the word "means" which occurred in the first Insolvency and Bankruptcy Bill. Secondly, the present is not a case of a suit or arbitration proceeding filed before receipt of notice - Section 5(6) only deals with suits or arbitration proceedings which must "relate to" one of the three sub-clauses, either directly or indirectly. We have seen that a "dispute" is said to exist, so long as there is a real dispute as to payment between the parties that would fall within the inclusive definition contained in Section 5(6). The correspondence between the parties would show that on 30th January, 2015, the appellant clearly informed the respondent that they had displayed the appellant's confidential client information and client campaign information on a public platform which constituted a breach of trust and a breach of the NDA between the parties. They were further told that all amounts that were due to them were withheld till the time the matter is resolved.

On 10th February, 2015, the respondent referred to the NDA of 26th December, 2014 and denied that there was a breach of the NDA. The respondent went on to state that the appellant's claim is unfounded and untenable, and that the appellant is trying to avoid its financial obligations, and that a sum of Rs.19,08,202.57 should be paid within one week, failing which the respondent would be forced to explore legal options and initiate legal process for recovery of the said amount. This e-mail was refuted by the appellant by an e-mail dated 26th February, 2015 and the appellant went on to state that it had lost business from various clients as a result of the respondent's breaches. Curiously, after this date, the respondent remained silent, and thereafter, by an e-mail dated 20th June, 2016, the respondent wished to revive business relations and stated that it would like to follow up for payments which are long stuck up. This was followed by an e-mail dated 25th June, 2016 to finalize the time and place for a meeting. On 28th June, 2016, the appellant wrote to the respondent again to finalize the time and place. Apparently, nothing came of the aforesaid e-mails and the appellant then fired the last shot on 19th September, 2016, reiterating that no payments are due as the NDA was breached."

28. The Learned Counsel for the First Respondent adverts to the Judgment

of this 'Tribunal' dated 23.07.2019 in Ahluwalia Contracts (India) Limited

Vs Raheja Developers Limited [Comp. App (AT)(Ins.) No. 703 of 2018 wherein

at paragraph-18 it is observed as under:

18... "it is clear that the existence of dispute must be pre-

existing i.e. it must exist before the receipt of the demand notice or invoice. If it comes to the notice of the Adjudicating Authority that the 'operational debt' is exceeding Rs. 1 lakh and the application shows that the aforesaid debt is due and payable and has not been paid, in such case, in absence of any existence of a dispute between the parties or the record of the pendency of a suit or arbitration proceeding filed before the receipt of the demand notice of the unpaid 'operational debt', the application under Section 9 cannot be rejected and is required to be admitted."

29. The Learned Counsel for the First Respondent refers to the Judgment of

the Hon'ble Supreme in U.P. Rajkiya Nirman Nigam Ltd. vs. Indure Pvt. Ltd. & Ors. Reported in (1996) 2 SCC 667 at Spl page 672 wherein at paragraph -8

it is observed as under:

8. "From this factual matrix, the question arises: whether there emerged any concluded contract pursuant to which the parties are bound by the terms and conditions of the tenders submitted to the Board and for further performance? It is seen that the tenders were not jointly signed by the appellant and the respondent but were unilaterally submitted to the Board by the appellant and were later on withdrawn. There did not exist any concluded contract between the Board and the appellant for the performance of the work as per terms and conditions of the tenders floated by the Board. Under Section 32 it was a contingent contract until it was accepted by the Board. In this background, the question emerges: whether there is an arbitration agreement between the parties? It is see; that clause [141 of the agreement [subject to the dispute whether it is arbitrable under clause [14] which is yet another issue with which were are not concerned] independently does not come into existence unless there is a concluded contract pursuant to the proposal made by the appellant on June 22, 1984 or a counter-proposal by the respondent dated June 26, 1984. It is not the case of the respondent that there exist any such independent arbitration agreement."

30. The Learned Counsel for the First Respondent seeks in aid of the

Judgment dated 18.03.2020 of this Tribunal in "Mr. Gajendra Parihar V. M/s

Devi Industrial Engineers" [vide Comp. App (AT)(Ins) No 1370 of 2019] to

support the case of the Appellant that when there was 'Pre-existing Dispute'

between the parties, then, the Application filed under Section 9 of I & B Code

should not have been admitted.

31. The Learned Counsel for the First Respondent adverts to the Judgment

of this 'Tribunal' dated 18.11.2019 in Vinod Mittal v. Rays Power exports

Private Limited [vide Comp. App (AT)(Ins) 851 of 2019] and the Judgment of

this Tribunal dated 12.04.2021 in M/s Micra Systems Pvt. Ltd. Vs. M/s

Masters India Pvt. Ltd. [vide Comp. App(AT)(Ins) no. 823 of 2020] for the

proposition that when there exists 'Pre-existing Disputes' between the parties,

the Applications cannot be decided in a summary proceeding under Section 9

of I & B Code.

DISCUSSIONS:

32. In the Application filed by the Appellant/Applicant/Operational Creditor

in CP(IB) 34(GB)/2019 before the 'Adjudicating Authority' under part -IV

'Particulars of Operational Debt' it is mentioned as follows:

1 TOTAL AMOUNT Rs. 2,22,38,286/- (Rupees Two OF DEBT Crore Twenty Two Lacs Thirty Eight Thousand Two Hundred Eighty Six Only) including interest of an amount of Rs.

13,30,218/- (Rupees Thirteen Lacs Thirty Thousand Two Hundred eighteen Only) till 22.07.2019 i.e. against the payment made by the M/s Pitti Coal Company annually till date, under the code, from the Operational Debtor towards the payment to be made in lieu of acknowledged, unpaid and admitted due amounts, under the code.

33. The Appellant/Applicant/Operational Creditor had filed the Application

in CP No. (IB)-34(GB)/2019 before the 'Adjudicating Authority' wherein it

mentioned that it is filing the Application under Section 9 of the I & B Code

seeking to initiate CIRP against the First Respondent based on the ground that

the First Respondent/Operational Debtor is indebted and is unable to pay its

admitted, acknowledged and undisputed outstanding sum of Rs. 2,22,38,286/-

including interest of an amount of Rs. 13,30,218/- till 22.07.2019 against the

payment made by the Appellant/Operational Creditor for the Invoices and final

Bills raised by the First Respondent/Operational Creditor.

34. The Appellant/Operation Creditor had issued a 'Demand Notice' dated

31.05.2019 to the First Respondent and its Directors [under Rule 5 of the

Insolvency and Bankruptcy (Application to Adjudicating Authority), Rules 2016}

whereby and whereunder a demand was made for the payment of an unpaid

operational debt' from the First Respondent/Operational Debtor for an amount

of Rs. 1,97,08,068/- excluding interest against the breach of contract as the

'Operational Debtor' had failed to deliver goods and had not refunded the

advance sum paid by the Appellant.

35. The Appellant also had averred in the Notice dated 31.05.2019 that 'Debt'

became due on account of 'Breach of contract' committed by the First

Respondent/Operation Debt as per provisions contained in Chapter V & VI of the

Indian Contract, 1972. In fact, the First Respondent/Operational Debtor (through

its Directors) was requested by the Appellant's Advocate in the 'Demand Notice' dated 31.05.2019 unconditionally to repay the 'Operation Debt in Default' in full

within 10 days from the receipt of the same failing which the 'CIRP' will be

initiated.

36. The First Respondent/Operational Debtor through its Advocate had issued

a 'Reply' dated 17.06.2019 to the Appellant's Counsel wherein at paragraph 2.14

it is stated as under:

2.14 "Still, My Clients by an email dated 31.05.2019 offered to further deliver materials as per agreed quantity from another vessel subject to your clients paying full cargo value along with interest for delay since 12.042019 till date of payment and also provide the earliest lifting schedule, or in the alternative, to terminate unperformed quantity or the order in which case My Clients would forfeit the 10% security deposit of Rs. 80 Lakhs and adjust the differential price loss of Rs. 500 per MT from advance money and refund the remaining balance to your clients."

37. According to the Appellant it had paid a sum of Rs. 1,97,08,063/-being an

Advance amount as per calculation sheet [vide page 47 to 51 of the Rejoinder filed

by it in the instant 'Company Appeal'. Therefore, it is contended on behalf of the

Appellant that the First Respondent had admitted a sum of Rs. 1,51,08,063/-

[Vide Calculation Sheet page 47 to 50 of the Appellant's Rejoinder].

38. On behalf of the Appellant, it is pointed out that the Appellant after agreeing

to the 'Terms and Conditions' of the Agreement dated 27.02.2019 entered into

between the Appellant/First Respondent of the Company had paid advance sum

to the extent, Rs. 1,75,00,000/- till 07.03.2019.

39. The contents of the e-mail dated 31.05.2019 (15:57) sent by the First

Respondent's Advocate addressed to the Appellant/Operational Creditor (with reference to the e-mail dated 02.05.2019 of the Appellant's Director) at

paragraphs 1 to 6 proceeds to the following effect:

1. "The deal was confirmed on 27.2.2019 for sale of High NCV NAOO Coal ( 6900 NAR) for 10,000 MT to you @ Rs. 8100 + GST +TCS basis, subject to advance payment of 10% security deposit and balance payment within 45 days on cash 7 carry basis and the lifting period was agree for 2 months from vessel arrival.

2. You also confirmed the deal and paid total security deposit of Rs. 80 Lakhs on 28.02.2019 & 01.03.2019.

However, Vessel names, discharge ports, load port reports, quantity allocation and D.O.s were to be shared with your later.

3. We also offered you material from one of the vessels arrived at Kandla Port on 08.03.2019, shared with you the load port report but you could lift only 346.72 MT of coal in March 2019.

4. As agreed by you, the full amount was payable within 45 days, i.e., 12.04.2019 but till date we have not received the full payment form you

5. Meanwhile, you intended to cancel the order for 4-5K MT on some pretext or the other which we outright rejected and requested you to speed up your lifting of materials at the earliest.

6. However, during telephonic discussion, we agreed to cooperate and sell out some quantity subject to differential price (Rs. 500 per MT) to be borne by you to avoid the burden of interest and port rent charges on you."

and the above indicates that some violations on the part of the 'Appellant'

relating to the 'Agreement'/'Contract', were pointed out on the side of the First

Respondent, which go to establish that there were pre-existing disputes between the parties, as regards the fulfilment of the covenants of the

'Agreement'/'Contracts' dated 27.02.2019 entered into between the parties, in

respect of 'purchase of coal'.

40. In the instant case, the First Respondent/Operational Debtor has come out

with the plea that 1476.36 MT of coal was supplied to the Appellant/Operational

Creditor [based on the Invoices and Ledger of the Appellant] though the

'Agreement' was towards the supply of 10000 MT of coal. Hence, the balance

quantity is equal to 8523. 64 MT as claimed by the First Respondent. Therefore,

the First Respondent/Operational Debtor rebuts the stand of the Appellant in the

instant Appeal and in rejoinder that balance 7600 MT of Coal was sold by the

First Respond without the approval of the First Respondent and in this regard,

there is enough force, in the stand taken on behalf of the First Respondent.

DISPUTE:

41. The dispute as defined in Section 5 (6) of the I & BC is not to be restricted

to the pending lis or proceedings within the limited purview of 'Suit' or

'Arbitration' proceedings and the term 'includes' should be read as 'means and

includes' including the proceedings initiated or pending before Consumer Court,

Tribunal, Labour Court or Mediation, Conciliation etc.

AMBIT OF DISPUTE

42. The 'Adjudicating Authority' under the I & B Code is required to examine

prior to the admission or rejection of an Application as per Section 9 of the Code

as to whether the Dispute projected by the 'Corporate Debtor' qualifies as a

'Dispute' as per Section 5(6) of the Code and whether Notice of Dispute given by

the 'Corporate Debtor' satisfies the conditions enumerated in Section 8 (2) of the

Code.

PRE-EXISTING DISPUTE:

43. It is the duty of the 'Adjudicating Authority' to find out whether there is a

plausible plea which necessitates more investigation and the 'dispute' is not weak

one or an assertion of facts unsupported by materials/evidence. If the 'Dispute'

truly exists in fact and not an imaginary or an illusory or spurious one, then, the

'Adjudicating Authority' is bound to turn down the Application.

VIOLATION OF AGREEMENT/CONTRACT:

44. To be noted, as per Section 73 of the Indian Contract Act, 1872 which deals

with 'compensation for loss or damage caused by breach of contract', this Section

can be pressed into service by the concerned party only when a contract was

broken and a violation of the said Agreement/Contract ought to be established

before proceeding about the issue of 'damages'.

45. Suffice it, for this Tribunal to make a pertinent mention that whether there

was a violation of the 'Agreement'/'Contract' is to be determined and further the

same is to be established under the 'Violations' is to be proved before a 'Competent

Civil Court'. It cannot be gainsaid that that in a Civil Suit to enforce a contract, it

is essential to find out what the terms of the Contract/Agreement are, with a view

to decide about the breech as per decision 'BiBi Durga Devi Vs. Shivram' AIR

1932 Lahore 148.

46. As far as the present case is concerned, in the instant case, between

Appellant/First Respondent, there are 'Pre-Existing' 'Disputes' and they are quite

tangible/substantial one and as such, the plausible contentions projected/raised

by the parties to the present Appeal require further investigation and in short, the

dispute is not to be determined by the 'Adjudicating Authority'/Appellate Tribunal

in a Summary Jurisdiction under I & B Code. The 'Adjudicating Authority' is not a Court of Law and the 'CIRP' is not an adversial litigation. The 'Adjudicating

Authority' is not to decide the Application under I & BC like a 'Money Claim' under

the I & B Code. Viewed in that perspective, the 'Adjudicating Authority' is not

supposed to go into the aspect of dispute in a thread bare fashion or on merits.

47. In the light of foregoing detailed discussions, considering the facts and

circumstances of the case and also this 'Tribunal' on going through the 'impugned

order' dated 24.02.2020 in CP(IB) No. 34/GB/2019 passed by the 'Adjudicating

Authority' in rejecting the Section 9 Application filed by the Appellant/Operational

Creditor/Applicant is free from legal infirmities. Consequently, the 'Appeal' sans

merits.

Result:

In fine, the instant Company Appeal (AT)(Ins) 943 of 2020 is dismissed. No

costs. I.A. 2466/2020 (seeking exemption to file Certified copy of the 'Impugned

Order' dated 24.02.2020 passed by the 'Adjudicating Authority') is closed.

[Justice M. Venugopal] Member(Judicial)

(V.P. Singh) Member(Technical)

(Dr. Ashok Kumar Mishra) Member(Technical) 11th January, 2022 Bm/Akc