Sansing Limited vs Apl Metals Limited

[Arising out of order dated 15.10.2019 in CP (IB) No. 954/KB/2018 passed by the Adjudicating Authority (National Company Law Tribunal, Kolkata Bench, Kolkata)]

IN THE MATTER OF:

SANSING LIMITED Registered Office at: Room 1707, 17th Floor, Tai Yau Building, 181 Johnston Road, Wan Chai, Hong Kong. ...... Appellant. (Operational Creditor)

Versus

APL METALS LIMITED Registered Office at: 18/1A, Hindustan Road, Kolkata-700029, West Bengal. ....... Respondent. (Original Corporate Debtor)

Present: For Appellant: Ms. Nandini Sharma, Advocate.

For Respondent:- Mr. Krishnaraj Thakkar, Mr. Sounak Sengupta, Ms. Susmita Mahala and Ms. Mandeep Kaur, Advocates. 2

JUDGMENT

(14th September, 2022)

Justice Anant Bijay Singh;

The Appellant preferred this Appeal under Section 61 of the Insolvency and

Bankruptcy Code, 2016 (for short IBC) being aggrieved and dissatisfied by the

order dated 15.10.2019 passed by the Ld. Adjudicating Authority (National

Company Law Tribunal, Kolkata Bench, Kolkata) in CP (IB) No. 954/KB/2018

whereby the Appellant who is the Operational Creditor filed Application under

Section 9 of the IBC against the Respondent-Corporate Debtor to start Corporate

Insolvency Resolution Process (for short CIRP) of the Corporate Debtor as the

Corporate Debtor committed default in paying the operation debt of Rs.

6,46,466.00 USD (equivalent to Rs. 4,39,72,617/- approximately), the

Adjudicating Authority holding that the dispute appears to be bona fide and

hence, this application is not maintainable under Section 9 of the IBC.

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

i) Pursuant to arrangement between the Appellant/Operational creditor and

the Respondent/Corporate Debtor, the appellant had supplied varied quantities

of Lead Scrap Radio and other associated materials/equipment to the

Respondent in 2011-12. The terms and conditions of such supply was that

payment of the goods so supplied was to be made within 45 days of the receipt

of the said goods. The goods were supplied by the Appellant in tranches in

accordance with the arrangement between the parties and the same were

received by the Respondent without any dispute or demur and the same had

been utilized and/or consumed by the Appellant in the usual course of business.

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Simultaneously with the supply of each trance, the Appellant used to raise its

invoice and payments have been made by the Respondents from time to time.

The Appellant raised eight Invoices during 2011-12 for supply of goods to the

Respondent (Annexure A/2 to A/9 at page 66 to 73 of the Appeal Paper Book.)

ii) Further case is that the Respondent vide its email dated 06.09.2012

(Annexure A/10) admitted severe financial crunches including loses caused due

to the drop, in retail prices and also the increase in value of dollar and thus, the

Respondent could not clear the payments. In the said email, the Respondent set

out a repayment schedule pursuant to which they themselves committed to pay

off the entire outstanding dues as at that point of time from September 2012 till

May 2013.

iii) The Respondent did not adhere to the payment schedule that was

suggested by them vide their email dated 6th September 2012. They made certain

paltry payments and the last of such payment was made on 05.01.2013 for a

sum of USD 1,08,745.26 to the Operational Creditor. After adjustment of the

said payment, a sum of USD 6,46,466.00 was still due and outstanding on

account of the invoices raised for such supplies. Thereafter, the Advocates of the

Appellant vide their letter 22.02.2013 (Annexure A/11) called upon the

Respondent to make payment of the balance sum of USD 646,466.60 on the

scheduled dates that had been agreed between the parties and as recorded in

the emails exchanged between the parties.

Company Appeal (AT) (Insolvency) No. 1274 of 2019 4

iv) The Advocates of the Appellant once again vide their letter dated

14.06.2013 (Annexure A/12) called upon the Respondent/Corporate Debtor to

make the payment of the balance outstanding debts of USD 646,466.00. The

Respondent vide its email dated 22.04.2014 confirmed the discussions on the

settlement of the dispute and also informed the Advocates of the Appellant that

they are awaiting Restructuring Proposal from their Bankers which is in final

stages and as soon as they receive the Restructuring from their bankers, the

Respondent will be able to confirm the dates of payment of the outstanding dues.

In the said email, the Respondent once again requested the Appellant to bear

with them and also assured that they will clear up the outstanding (Annexure

A/13 at page 78 to 79 of the Appeal Paper Book).

v) Further case is that Despite the assurances and commitments, the

Respondent did not pay any amount whatsoever to the Appellant and as such,

the Advocate of the Appellant issued a notice dated 23.03.2015 (Annexure A/14)

under Sections 433 and 434 of the Companies Act, 1956. The Respondent did

not reply to the same. Thereafter, the Respondent vide its email dated

25.05.2015 (Annexure A/15) admitted its entire outstanding dues of USD

646,466.60 and agreed to pay the 50% of the outstanding dues of USD

646,466.60 in 6 monthly instalments starting from July 2015 and ending on

December 2015 as the Respondent was facing acute financial difficulties.

vi) Pursuant to negotiations between the parties at that point of time, a

Settlement Agreement dated 21.07.2015 was entered into between the Appellant

and Respondent with the consent of HSBC (Financer of Appellant)) and Euler

Company Appeal (AT) (Insolvency) No. 1274 of 2019 5

Hermes (Credit Insurance Cover Provider) wherein the Respondent explicitly

admitted its outstanding liability of USD 646,466.60 and further agreed to pay

50% of the entire outstanding dues i.e. USD 323283.00 in 6 monthly instalments

from July 2015 to December 2015. Pursuant to Settlement Agreement dated

21.07.2015, the Respondent addressed a letter dated 30.07.2015 to the

Allahabad Bank whereby it once again admitted the outstanding dues and

further admitted that the dues have been settled at 50% of the debts and directed

its bank to remit the first instalment of USD 55,000.00 to the Appellant.

However, no such payment was received by the Appellant.

vii) The Advocates of the Appellant were constrained to issue a notice dated

19.06.2017 (Annexure A/18) under Section 8 of the IBC at the registered office

of the Respondent and called upon the Respondent to make payment of the

outstanding sum USD 646,466.00 as the Respondent failed to adhere to terms

of Settlement Agreement and make payment to the Appellant in terms thereof.

The Respondent through Advocates addressed its reply dated 30.06.2017

(Annexure A/19) wherein no dispute was raised to the existence and/or the right

of the Appellant demand/recover the unpaid operational debt was raised. The

Appellant through its Advocates issued a rejoinder dated 12.07.2017 (Annexure

A/20) to the reply of the Respondent wherein all frivolous disputes raised on

30.06.2017.

viii) The Appellant being the Operational Creditor having an undisputed claim

against the Respondent/Corporate Debtor for a sum of USD 646,466.00 filed an

Application under Section 9 of the IBC against the Respondent before the

Company Appeal (AT) (Insolvency) No. 1274 of 2019 6

Adjudicating Authority and after hearing the parties the Adjudicating Authority

vide order dated 15.10.2019 dismissed the Application filed by the Appellant

under Section 9 of the IBC. Hence this Appeal.

3. The Ld. Counsel for the Appellant during the course of argument and in

his memo of Appeal along with written submissions submitted that the Appellant

who is the Operational Creditor is an entity registered and incorporated outside

India and made supply of lead scrap radio as per ISRI to the

Respondent/Corporate Debtor from time to time and is making a claim in respect

of the outstanding invoice for provisions of said goods for USD 6,46,466.60. The

Respondent has made payment to the Appellant of invoices other than the

outstanding invoices and has acknowledged the operational debt (USD

6,46,466.60) and has undertaken to make payment on multiple occasions and

even entered into Settlement Agreement dated 21.07.2015.

4. It is further submitted that as per Settlement Agreement dated 21.07.2015

(at page 85 to 88 of the Appeal) executed between the Appellant and Respondent

wherein clause 4 mentioned that the outstanding operational debt of USD

6,46,466.60 was acknowledged and also in clause 2, undertook to pay USD

3,23,383 in 6 instalments starting from July 2015 to December 2015. In the

Settlement Agreement in clause 4, the Respondent agreed that in case of default

with regard to payment schedule, the Appellant shall be entitled to recover the

total outstanding of USD 6,46,466.60 less the amount paid and also claim

interest @ 18% per annum till complete payment is received. In the Settlement

Agreement in clause 1, the Respondent agreed to make payment to the Appellant

Company Appeal (AT) (Insolvency) No. 1274 of 2019 7

and it was agreed that the Appellant has written consent of HSBC and Euler

Hermes, Insurance Company of HSBC.

5. It is further submitted that the Adjudicating Authority dismissed the

application filed by the Appellant under Section 9 on the ground that the

Corporate Debtor (Respondent herein) raised the dispute about the operational

debt and dispute appears to be bona fide, is erroneous in law, therefore, the

impugned order is fit to be set aside and the Appeal be allowed.

6. The Ld. Counsel for the Respondent in his Reply Affidavit along with

written submissions submitted that the Ld. Adjudicating Authority has rightly

considered the letter dated 01.08.2012 (at page 155 of the Appeal) which is

written by HSBC regarding payment of USD 61,073.99 for settlement of Sansing

Limited's wherein it is mentioned that "the purpose of this letter is to remind you

that consequent upon the assignment of your payment in respect of invoices issued

by Supplier must be made to us directly at the below address. Payment to your

Supplier (the assignor) or to any other party will not discharge your indebtedness

in respect of such invoices".

7. It is further submitted that the 8 invoices which formed the basis of the

notice dated 19.06.2017 had been assigned to the Bank absolutely, therefore, the

Adjudicating Authority has rightly considered and came to the conclusion that

dispute exists between the parties and dismissed the application filed under

Section 9.

8. It is further submitted that the purported claim of the Appellant is highly

disputed due to various reasons viz. delayed shipments of goods, supply of

Company Appeal (AT) (Insolvency) No. 1274 of 2019 8

inferior quality of goods under Purchase Order dated 11.10.2021, change of price

of LME (London Metal Exchange), invalidated contract, etc. The said reasons the

aforesaid 8 invoices had been assigned to HSBC, who had financing arrangement

with the Appellant in the year 2012 and such finance was under credit insurance

cover from Euler Hermes in the year 2012. The Appellant deliberately concealed

the fact from the Ld. Adjudicating Authority that its alleged claim which is the

subject matter of this Appeal had already been settled by the said Euler Hermes,

the credit insurance provider. The Appellant had received the value of the said 8

invoices from HSBC on its assignment and HSBC has recovered the same from

the said Euler Hermes. The Appellant did not produce the same neither before

this Appellate Tribunal nor before the Adjudicating Authority purposefully. By an

email dated 06.09.2012 the Appellant confirmed the Respondent that with regard

to the payment of the said 8 invoices the Appellant needs to communicate with

HSBC because the same is not in the hands of the Appellant. However, by a letter

dated 30.11.2018, HSBC notified that the right to receive payment of the said 8

invoices had been assigned by the Appellant to HSBC.

9. It is further submitted that the IBC also recognizes assignment and

stipulates in sub-Section 20 of Section 5 of the IBC that operational creditor

includes a person to whom an operational debt is legally assigned or transferred.

Thus, in this case, on assignment, the operational creditor is HSBC and not the

appellant and only HSBC is entitled to institute proceedings under IBC. Based

on these submissions the instant Appeal is not maintainable and deserves to be

dismissed.

Company Appeal (AT) (Insolvency) No. 1274 of 2019 9

FINDINGS

10. After hearing the parties and going through the pleadings made on behalf

of the parties, we are of the considered opinion that Application filed under

Section 9 of the IBC has rightly been rejected by the Adjudicating Authority in

view of the Settlement Agreement dated 21.07.2015 arrived between the

Appellant - Sansing Limited with HSBC and Respondent - APL Metals Limited

(Annexure A/16 at page 85 to 88 of the Appeal) which has been quoted in the

impugned order, reads as follows:

"Thus, Sansing has taken written consent of HSBC Bank Euler

Hermes Insurance Company and all such persons (through

whom Sansing had entered for financing or otherwise

payments against the aforesaid invoices) for the full and final

settlement of all dues against the invoices in terms of this

agreement and shall be a sufficient discharge in favour of APL

of all liabilities against Sansing."

Further, the Adjudicating Authority has rightly come to the conclusion

that Corporate Debtor raised a bonafide dispute regarding the 'operational debt'

wherein the Appellant- Operational Creditor had assigned the debt to HSBC

Bank and HSBC Bank has not instituted this proceeding under Section 9 of the

IBC, therefore, taking in the above facts, the Application under section 9 is not

maintainable as the reasons assigned by the Adjudicating Authority is cogent

and require no interference. The impugned order dated 15.10.2019 passed by

the Adjudicating Authority (National Company Law Tribunal, Kolkata Bench,

Company Appeal (AT) (Insolvency) No. 1274 of 2019 10

Kolkata) in CP (IB) No. 954/KB/2018 is hereby affirmed. There is no merit in the

Appeal. The Appeal is hereby dismissed.

11. Registry to upload the Judgment on the website of this Appellate Tribunal

and send the copy of this Judgment to the Adjudicating Authority (National

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

[Justice Anant Bijay Singh] Member (Judicial)

[Ms. Shreesha Merla] Member (Technical)

New Delhi 14th September, 2022 R. Nath.

Company Appeal (AT) (Insolvency) No. 1274 of 2019