M/S Raunaq Epc International Ltd vs M/S. Hiranmaye Energy Ltd

[Arising out of order dated 10.02.2020 in C.P. (IB) No. 987/KB/2019 passed by the Adjudicating Authority (National Company Law Tribunal), Kolkata Bench, Kolkata.]

IN THE MATTER OF:

M/s. Raunaq EPC International Ltd. Regd. Office: 20, K.M. Mathura Road, Post Office Amar Nagar, Faridabad-121003 (Haryana) ...... Appellant. (Operational Creditor)

Versus

M/s. Hiranmaye Energy Ltd. (formerly known as India Power Corporation Haldia) Limited), Regd. Office: Plot No. X, 1,2 & 3 (2nd Floor) Block-EP, Sector-V, Salt Lake, KOLKATA-700091 ....... Respondent. (Corporate Debtor)

Present: For Appellant: Mr. U.K. Chaudhary, Sr. Advocate along with Ms. Preeti Goel, Mr. Anubhav Goel (CA), Advocates. For Respondent: Mr. Rishav Banerjee, Mr. Rajarshi Banerjee, Mr. Shambo Nandy, Mr. Arijit Mazumdar and Ms. Rajshree Banerjee, Advocates. 2

JUDGMENT

(18th January, 2022)

Justice Anant Bijay Singh;

This Appeal has been preferred by the Appellant (Operational Creditor)

being aggrieved and dissatisfied by the order dated 10.02.2020 passed by the

Ld. Adjudicating Authority (National Company Law Tribunal), Kolkata Bench,

Kolkata in C.P. (IB) No. 987/KB/2019 whereby and where under the

Application filed by the Appellant/Operational Creditor under Section 9 of the

Insolvency and Bankruptcy Code, 2016 (for short IBC) was rejected holding

that the Corporate Debtor (Respondent herein) in the case succeeded in

proving existence of disputes.

2. The facts giving rise to this Appeal are as follows:

i) The Appellant (Operational Creditor) is a Company incorporated under

the Companies Act, 1956. The Appellant (Operational Creditor) was previously

known as M/s Raunaq International Limited and the name of the Operational

Creditor Company was changed from M/s Raunaq International Limited to

M/s Raunaq EPC International Limited.

ii) The Appellant is inter-alia engaged in the business of execution of

Turnkey Jobs of LP Piping Work. The Appellant is a pioneer in the field of LP

Piping work and has completed assignment for various distinguished

Companies like M/s Hindustan Zinc Limited, Adani Power Maharashtra

Limited, NTPC Limited etc.

iii) The Respondent (Corporate Debtor) is also incorporated under the

Companies Act, 1956. The Respondent was previously known as M/s India

Company Appeal (AT) (Insolvency) No. 439 of 2020 3

Power Corporation (Haldia) Limited and later on the name of the Respondent

was changed from M/s India Power Corporation (Haldia) Limited to M/s

Hiranmaye Energy Limited.

iv) The Respondent has issued two Letters of Award dated 25.11.2014 for

supply of Complete LP Piping System Packages (First Part) 3 x 150 MW TPP

and also contract for "Service of Complete LP Piping System Packages (First

Part) for 3 x 150 MW TPP IPC (H) L Haldia Project". In other words, there were

two Letters of Award (i) one for Supply Portion and another (ii) Service Portion

(Annexure - VI at page 112 to 132 of the Appeal Paper Book).

v) Further case is that the Respondent issued amendments to the Letter

of Award for making amendments to the Letter of Award. The scope of work

includes total Lump sum price for unloading, handling, intra site

transportation, site storage, security of items, erection, internal painting, final

painting, wrapping coating, back filling, sand filing testing & commissioning

services of complete LP Piping system (CW & ACW, DM Transfer, DMCW and

Condenser on line tube cleaning system), tanks with all accessories & fittings

inclusive commissioning of IPC(H)L free issue material. The value of the

contract towards "Service Portion" was for a sum of Rs. 4,77,54,300/- and Rs.

20,97,47,000/- towards "Supply Portion" on account of supply of (i) Pipes (ii)

Pipe Fittings and (iii) Plates etc.

vi) Further case is that the supplies of materials were made by the

Appellant to Respondent under the "Letter of Credits" and even then,

substantial payments were late. However, as regards "Service Portion", it was

not supported by "Letter of Credits" and hence payments of Running Account

Company Appeal (AT) (Insolvency) No. 439 of 2020 4

Bills were received late, as would be evident from the statement of payment

received (Annexure-VIA at page 133 to 134 of the Appeal Paper Book).

vii) The Appellant (Operational Creditor) Company from time to time has

raised Running Account Bills for the value of the work done, a statement

showing the details of Running Account Bills raised by the Operational

Creditor upon the Corporate Debtor (Annexure-VII at page 135 to 145 of the

Appeal Paper Book). The statement also shows the adhoc amounts released

by the Corporate Debtor from time to time, were all beyond then stipulated

period of payments within which the Respondent /Corporate Debtor were to

make payment to the Appellant/Operational Creditor.

viii) The Appellant supplied the goods to the Respondent during the period

March, 2015 to March, 2017 and also rendered/provided services towards

installation of LP Piping System and Tank etc. at the project site of the

Respondent during the period August, 2015 to June, 2018.

ix) Further case is that the debt fell due for payment from time to time in

the month of February, March and June, 2018 when these invoices were

submitted for services rendered by the Appellant to the Respondent. These

invoices were also sent in the month of November, 2018 for retention amount.

In fact, the Respondent has been deducting amounts from the Running

Account Bills on account of "Retention Money" which was payable after the

completion of the project.

x) The Appellant has successfully completed their part of the Job to the

entire satisfaction of the Respondent as early as February, 2018. Since the

work has been completed to their entire satisfaction, therefore, there was no

Company Appeal (AT) (Insolvency) No. 439 of 2020 5

cause for concern or issue and hence, there had not been any letter or E-mail

or correspondence from the side of the Respondent to the Appellant pointing

out any finger or issue or concern.

xi) The Appellant has successfully executed their contract and as a result

of which, the Respondent issued a Work Completion Certificate dated

28.02.2019 certifying that the work has been completed in May, 2018

(Annexure VIII at page 146 to 153 of the Appeal Paper Book).

xii) The project was delayed solely because of the default, neglect and

breaches on the part of Respondent in performing their obligation and to cite

few instance: a) delay in approval of drawing and documents, b) delay in

approval of supply/service BBU/Price break-up, c) delay in opening of Letter

of Credit, d) delay in attending inspection, e) delay in release of advance and

bills payment, f) delay in release of work fronts.

xiii) Further case is that the default and delay was solely due to the reasons

attributable to the Respondent. The Respondent did not write a single letter

after January, 2016 about any delay, default, neglect or breach by the

Appellant in performance, execution and completion of the whole project.

xiv) The regular outstanding of Rs. 31,65,374/-, the Joint Managing

Director of the Appellant / Operational Creditor sent an email dated

11.10.2018 to Mr. Jyotirmay Bhaumik, Whole Time Director of the

Respondent / Corporate Debtor. Despite receipt of the email, no payment has

been released by the Respondent to the Appellant and the same time, the

Respondent had naver denied their liability to the undisputed payment of a

sum of Rs. 31,65,374/- on account of Running Account Bills.

Company Appeal (AT) (Insolvency) No. 439 of 2020 6

xv) Further case is that the Appellant / Operational Creditor has sent a

notice dated 04.06.2019 under Section 8 of the IBC to the Respondent /

Corporate Debtor (Annexure- XXII at page 194 to 208 of the Appeal Paper

Book).

xvi) Despite receipt of the legal notice, the Respondent did not release any

payment, thereafter, the Appellant/Operational Creditor filed an Application

under Section 9 of the IBC against the Respondent/Corporate Debtor and the

same was rejected by the Ld. Adjudicating Authority on 10.02.2020. Hence

this Appeal.

Submissions on behalf of the Appellant

3. The Learned Counsel for the Appellant during the course of arguments

and his memo of Appeal along with Written Submissions submitted that the

Respondent / Corporate Debtor issued Two Letters of Award dated

25.11.2014 for Supply of Complete LP Piping Systems Packages (First Part)

3x150 MW TPP and also contract for "Service of Complete LP Piping System

Packages (First Part) for 3x150 MW TPP IPC(H)L Haldia Project (at page 112

to 132 of the Appeal Paper Book).

4. It is further submitted that the Appellant commenced the execution

fully mobilizing, Plant, Machinery, Working capital, Man-power and facilities.

The supply of pipes and other materials were against Letter of Credit (for short

LC) to be opened by the Respondent. The payments for supplies were received

in time but, however, the Respondent on many occasions, delayed opening

Letter of Credit. However, in service contract, there was no provision of LC

Company Appeal (AT) (Insolvency) No. 439 of 2020 7

and therefore there were regular delays and default on the part of the

Respondent in paying Running Account Bills.

5. It is further submitted that the Respondent has relied upon E-mails

written during 18.05.2015 to 12.09.2016 in their Reply to Notice under

Section 8 of the IBC in order to "inject", "manufacture" create Pre-existing

disputes which never existed.

6. It is further submitted that the Appellant raised three Invoices dated

23.02.2018, 20.03.2018 and 25.06.2018 all aggregating to Rs. 31,65,374/-

on account of "Construction Services" rendered by the Appellant to the

Respondent. The Appellant also raised two Invoices both dated 31.11.2018 on

account of "Retention Money" aggregating to Rs. 1,28,77,256/-. As per

contract a sum of Rs. 1,28,77,256/- pertains to the "Deductions" made from

time to time by the Respondent from various "Running Account Bills"

submitted by the Appellant to the Respondent. Thus, a total sum of Rs.

1,60,42,630/- admittedly and undisputedly payable by the Respondent to the

Appellant. But after receipt of these Invoices, there is no letter, email or

communication alleging any defect, deficiency, neglect and breaches on the

part of the Appellant towards any counter claim, claims, losses, damages,

recoveries or dues till 30.09.2020.

7. It is further submitted that the Respondent issued "Unconditional" and

"Unqualified" "Work Completion Certificate" dated 28.02.2019 (at page 146 of

the Appeal Paper Book) certifying that the work covered under the contract

has been actually completed on 31.05.2018 to their entire satisfaction.

Company Appeal (AT) (Insolvency) No. 439 of 2020 8

8. It is further submitted that the Appellant before start of the project, the

Appellant had furnished two Performance Bank Guarantee (from 09.12.2014

valid upto 17.09.2018 with claim period upto 17.12.2018) for a sum of Rs.

2,07,74,700/- and Rs. 47,75,300/- issued by ICICI Bank favoring the

Respondent and were unconditionally discharged/released by the

Respondent vide their letter dated 17.08.2018 (at page 364 of the Appeal

Paper Book) without any claim.

9. It is further submitted that the Appellant furnished Contract

Performance Guarantee both dated 17.07.2018 (at page 80 to 85 of the Reply

Affidavit) valid upto 31.03.2019 as per proforma furnished by the Respondent

and thereafter these Performance Guarantee also stood expired/lapsed

automatically unconditionally without any claim.

10. It is further submitted that the Respondent is relying on various emails

written during the year 2015 and September, 2016 in their Reply to the

statutory Notice under Section 8 of the IBC. However, some letters pertaining

to the period 2016 or for the year 2017 have now been filed for the first time

while filing Reply to this Appeal which did not see the light of the day earlier.

11. It is further submitted that the Appellant relying on the Judgment of

this Appellate Tribunal in the case of "Unistill Alcoblends Pvt. Ltd. Vs. India

Brewery & Distillery Pvt. Ltd. Company Appeal (AT) (Insolvency) No. 162

of 2019" held as follows:

" 7. Considering the documents pointed out by the leaned

Counsel for the Appellant, and the fact that the learned

Counsel for the Respondent is unable to show us any

Company Appeal (AT) (Insolvency) No. 439 of 2020 9

document before the Notice under Section 8 was issued

which would indicate that there was any dispute

communicated by the Respondent to the Appellant, we find

that the Adjudicating Authority erred in dismissing the

Section 9 Application observing that "it is deemed that there

is dispute prior filing the instant petition". What was

relevant was to see whether there was pre-existing dispute

when Section 8 Notice was issued."

12. It is further submitted that the Appellant relying on the Judgment

passed by this Appellate Tribunal in the case of "Ahluwalia Contracts (India)

Ltd. Vs. Raheja Developers Ltd. Company Appeal (AT) (Insolvency) No.

703 of 2018" wherein the Appellate Tribunal held that "From the aforesaid

decision, 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".

13. It is further submitted that the based on these submissions the Ld.

Adjudicating Authority has not considered the facts of the case and have not

properly appreciated the law and judgment cited by the Appellant during the

course of argument, therefore, the impugned order cannot be sustained in the

eye of law and fit to be set aside and the Appeal be allowed.

Submissions on behalf of the Respondent

14. The Learned Counsel for the Respondent / Corporate Debtor during the

course of arguments and in his Reply Affidavit along with Written

Submissions, submitted that the amount claimed by the Appellant /

Company Appeal (AT) (Insolvency) No. 439 of 2020 10

Operational Creditor as a purported unpaid operational debt is not payable in

fact and or law.

15. It is further submitted that the Respondent is entitled to Liquidated

Damages under the Contract amounting to 10% of contract value as per

clause 9 of both the Supply and Service Contract and this amounts to Rs.

2,57,50,130/- i.e. much in excess of the amount claimed by the Appellant.

16. It is further submitted that the additionally and without prejudice to

the aforesaid the Respondent is entitled to retain Rs. 1,28,75,065/- as per

Payment Terms of Clause 6(c) and Cause 6(d) of the Supply and Service

contracts respectively since the Appellant failed to ensure closure of all punch

points and submission of valid performance bank guarantee as per the terms

of the said clauses 6(c) and 6(d).

17. It is further submitted that the Respondent has paid the Appellant a

cumulative amount of Rs. 23,49,00,000/- in good faith which is more than

91% of the Contract value. Therefore, necessary and proper reconciliation of

accounts reflects excess payment by the Respondent amounting to Rs.

1,60,25,195/- which the Respondent is also entitled to recover from the

Appellant.

18. It is further submitted that the Appellant has admittedly violated

multiple contractual obligations while purportedly attempting to perform the

same and these breaches and/or omissions were duly notified by the

Respondent multiple times via written correspondence exchanged between

the parties hereto much prior to the issuance of statutory notice of demand

under the IBC.

Company Appeal (AT) (Insolvency) No. 439 of 2020 11

19. It is further submitted that the Ld. Adjudicating Authority had noted

the same and based on these rejected the Application filed under Section 9 of

the IBC. The Ld. Adjudicating Authority had taken note of the email dated

27.03.2015 sent by the Respondent (at page 52 of the Reply Affidavit), HEL's

email to Appellant on 30.03.2015 (at page 53 of the Reply Affidavit), HEL's

email to Appellant on 06.04.2015 (at page 54 of the Reply Affidavit), HEL's

email to Appellant on 30.04.2015 (at page 56 of the Reply Affidavit), HEL's

email to Appellant on 24.06.2015 (at page 60 of the Reply Affidavit), HEL's

email to Appellant on 27.06.2015 (at page 59 of the Reply Affidavit), HEL's

email to Appellant on 18.08.2015 (at page 63 of the Reply Affidavit), Minutes

of Meeting dated 17.08.2015 (at page 61 of the Reply Affidavit), HEL's email

to Appellant on 26.08.2015 (at page 63 of the Reply Affidavit), Project review

meeting on 09.11.2016, HEL's email to Appellant on 06.06.2017 (at page 78

of the Reply Affidavit) and also further emails and rightly come to the

conclusion that the pre-existing dispute between the parties.

20. It is further submitted that the issuance of a Work Completion

Certificate by it did not imply waiver of any right to compensation and/or

liquidated damages payable by the Appellant and naver implied acquiescence

to any delay or any other breach of contract by the Appellant during execution

of the same.

21. It is further submitted that admittedly there was an inordinate delay of

3 years and 1 month on part of the Appellant to complete the project which is

made evident by the Work Completion Certificate (at page 146 of the Appeal

Paper Book).

Company Appeal (AT) (Insolvency) No. 439 of 2020 12

22. It is further submitted that the Respondent relying on the judgment of

the Hon'ble Supreme Court in the case of Innoventive Industries Limited

Vs. ICICI Bank & Anr. reported in 2018 (1) SCC 407 relied on paragraph

29 and also on the judgment of the Hon'ble Supreme Court in the case of

Mobilox Innovations Private Limited Vs. Lirusa Software Private Limited

reported in 2018 (1) SCC 353 relied on paragraph 33 in both the judgments

the Hon'ble Supreme Court have held that the existence of multiple pre-

existing disputes duly notified by it to the Appellant / Operational Creditor

via written correspondence much prior to receipt of the statutory demand

notice under Section 8 of the IBC, rather the Application 9 of the IBC filed by

the Appellant liable to the rejected.

23. It is further submitted that the Respondent further relied on the

judgment passed by this Appellate Tribunal in the case of "Vinod Mittal Vs.

Rays Power Experts Private Limited & Ors. in Company Appeal (AT)

(Insolvency) No. 851 of 2019" this Appellate Tribunal had held that issuance

of a Completion Certificate in its favour ipso facto bars the Corporate Debtor

from raising any dispute regarding quality of services, while holding that there

were pre-existing disputes with both installation as well as operation of the

pertinent project.

24. It is further submitted that in the instant case there is delay of more

than 3 years from scheduled date of completion under the contract, so

issuance of completion certificate will not prohibit them from raising the

dispute, this fact has also been taken note by the Ld. Adjudicating Authority.

Company Appeal (AT) (Insolvency) No. 439 of 2020 13

25. It is further submitted that the pre-existing dispute between the parties

evident from the emails much prior to issuance of statutory notice under

Section 8 of the IBC. The Ld. Adjudicating Authority through the impugned

order rightly rejected the Application under Section 9 of the IBC filed by the

Appellant/Operation Creditor. Therefore, no merit in the instant Appeal. The

Appeal is fit to be dismissed.

FINDINGS

26. After hearing the parties and having gone through the pleadings made

on behalf of the parties, we are of the considered view that the following facts

are admitted in the instant Appeal.

 The Respondent has issued two Letters of Award dated 25.11.2014 for

supply of Complete LP Piping System Packages (First Part) 3 x 150 MW

TPP and also contract for "Service of Complete LP Piping System

Packages (First Part) for 3 x 150 MW TPP IPC (H) L Haldia Project". There

were two Letters of Award (i) one for Supply Portion and another (ii)

Service Portion (Annexure - VI at page 112 to 132 of the Appeal Paper

Book).

 The value of the contract towards "Service Portion" was for a sum of Rs.

4,77,54,300/- and Rs. 20,97,47,000/- towards "Supply Portion" on

account of supply of (i) Pipes (ii) Pipe Fittings and (iii) Plates etc.

 The Appellant has successfully completed their part of the Job to the

entire satisfaction of the Respondent as early as February, 2018. The

Respondent issued a Work Completion Certificate dated 28.02.2019

Company Appeal (AT) (Insolvency) No. 439 of 2020 14

certifying that the work has been completed in May, 2018 (Annexure

VIII at page 146 to 153 of the Appeal Paper Book).

 The Appellant / Operational Creditor has sent a notice dated

04.06.2019 under Section 8 of the IBC to the Respondent / Corporate

Debtor (Annexure- XXII at page 194 to 208 of the Appeal Paper Book),

thereafter, Application under Section 9 of the IBC was filed before the

Ld. Adjudicating Authority.

 From the perusal of the record and argument advanced on behalf of the

Respondent and the emails corresponded between the parties are much

prior to receipt of the statutory notice issued under Section 8 of the IBC

which is evident from Reply Affidavit filed by the Respondent. The email

dated 27.03.2015 sent by the Respondent (at page 52 of the Reply

Affidavit), HEL's email to Appellant on 30.03.2015 (at page 53 of the

Reply Affidavit), HEL's email to Appellant on 06.04.2015 (at page 54 of

the Reply Affidavit), HEL's email to Appellant on 30.04.2015 (at page 56

of the Reply Affidavit), HEL's email to Appellant on 24.06.2015 (at page

60 of the Reply Affidavit), HEL's email to Appellant on 27.06.2015 (at

page 59 of the Reply Affidavit), HEL's email to Appellant on 18.08.2015

(at page 63 of the Reply Affidavit), Minutes of Meeting dated 17.08.2015

(at page 61 of the Reply Affidavit), HEL's email to Appellant on

26.08.2015 (at page 63 of the Reply Affidavit), Project review meeting

on 09.11.2016, HEL's email to Appellant on 06.06.2017 (at page 78 of

the Reply Affidavit). The Respondent have raised disputes much prior

to sending of the notice under Section 8 of the IBC.

Company Appeal (AT) (Insolvency) No. 439 of 2020 15

 The Appellant neither denied these facts nor doubted these emails

corresponded between the parties. These facts show that there was pre-

existing dispute between the parties.

 The Ld. Adjudicating Authority has rightly taken note of these emails

and come to the conclusion that there is pre-existing dispute between

the parties and rejected the Application under Section 9 of the IBC filed

by the Appellant herein.

ORDER

27. Taking all these facts and circumstances of the case, we have no other

occasion to interfere in the impugned order. The impugned order dated

10.02.2020 passed by the Ld. Adjudicating Authority (National Company Law

Tribunal), Kolkata Bench, Kolkata, in C.P. (IB) No. 987/KB/2019 is hereby

affirmed. There is no merit in the Appeal. The Appeal is hereby dismissed. No

order as to costs.

28. Registry to upload the Judgment on the website of this Appellate

Tribunal and send the copy of this Judgment to the Ld. Adjudicating Authority

(National Company Law Tribunal), Kolkata Bench, Kolkata, forthwith.

[Justice Anant Bijay Singh] Member (Judicial)

[Ms. Shreesha Merla] Member (Technical)

New Delhi 18th January, 2022 R. Nath.

Company Appeal (AT) (Insolvency) No. 439 of 2020