Shyam Metalics And Energy Ltd vs Rathi Steel And Power Ltd

[Arising out of Order dated 20.12.2018 passed by National Company Law Tribunal, New Delhi Bench in CP No.(IB)-1326(ND)/2018]

IN THE MATTER OF: Before NCLT Before NCLAT

Shyam Metalics and Operational Creditor/ Appellant Energy Limited Applicant Formerly Shyam Dri Power Limited "Trinity Tower", 83, Topsia Road, 7th Floor, Kolkata - 700046

Versus

Rathi Steel and Corporate Debtor/ Respondent Power Limited, Non-Applicant Formerly known as Rathi Udyog Limited Chauhan Market, Madanpur Khadar, Near Local Shopping Complex, Pocket - D & E, Sarita Vihar, New Delhi - 110076

For Appellant: Shri Abhijeet Sinha, Shri Aditya Shukla, Ms. Pratiksha Sharma, Shri Ankit Acharya and Shri Saiket Sarkar, Advocates

For Respondent: Shri Tanmay Mehta and Shri Subhash Chawla, Advocates 2

JUDGEMENT

A.I.S. Cheema, J. :

1. Appellant - Shyam Metalics and Energy Limited (Operational

Creditor) filed CP No.(IB)-1326(ND)/2018 before the Adjudicating

Authority (National Company Law Tribunal, New Delhi Bench) against the

Respondent - Rathi Steel and Power Limited (Corporate Debtor) under

Section 9 of the Insolvency and Bankruptcy Code, 2016 (IBC - in short)

claiming outstanding debt in default of Rs.1,12,63,389/- which

Application was rejected by the Adjudicating Authority on 20.12.2018

referring to the arbitration proceedings and also observing that the

Appellant had not satisfied the Adjudicating Authority on the ground of

limitation as there was no proof of payments made within three years of

filing of the Petition.

2. It appears that the Corporate Debtor had placed three purchase

orders with the Operational Creditor in 2012 and 2013 for supply of Ferro

Chrome Lumps and Medium Carbon Silico Manganesse. Appellant claimed

that it had supplied the said material but in spite of raising the invoices,

payments have not been made. Various cheques issued in 2013 by the

Respondent had been dishonoured.

3. The Appellant issued a Notice under Section 8 of IBC on 19th March,

2018 (Annexure - A3 - Page 40) and the Respondent disputed the demand

and default by Reply dated 9th April, 2018 (Annexure - A4 - Page 54)

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claiming that it had made the payments and also claimed that the material

supplied was defective/ of inferior quality and caused huge losses for

which the Respondent had initiated arbitration proceedings. It is stated

that the Appellant - Operational Creditor issued another Notice under

Section 8 of IBC (Page 119) for the same claim. In this Notice (at Page -

130), the Appellant specifically mentioned that it was withdrawing its

earlier Notice dated 19th March, 2018 in Form - 3 without prejudice to its

rights and contentions.

4. On the basis of such subsequent Notice dated 13th June, 2018, the

Appellant filed Petition under Section 9 (Annexure - A5 - Page 56) and in

Form - 5 Part V relating to "Particulars of operational debt (documents,

records and evidence of default)", the Appellant relied on its Bank

Statement and the two purchase orders dated 30.07.2012 and one

purchase Order dated 16.02.2013 to claim that Rs.1,12,63,389/- was due

from the Corporate Debtor and was in default. In the Form, the Appellant

also claimed that there had been ad hoc payments to the Appellant till

October, 2015.

5. The Respondent has claimed that there was pre-existing dispute and

that the raw material supplied by the Appellant was found to be not

meeting the ordered specifications and was substandard leading to loss of

the Respondent - Corporate Debtor due to which, it appointed one Mr. P.K.

Sinha as sole Arbitrator. Reference has been made to Notice dated

15.05.2017 (Page - 267) issued by Advocate of Respondent relating to

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appointment of the sole Arbitrator. In the record, there is an Order dated

17.05.2017 of said sole Arbitrator - P.K. Sinha (Page 429) along with

photocopy of postal receipt dated 17.05.2017 and tracking report to show

that the Order of the sole Arbitrator was served on the Appellant. The

Appellant has filed Additional Affidavit (Diary No.13565) claiming that in

the envelope sent by PK Sinha no such order was received but that the

envelope contained copies of some Public Notice issued by Central Ground

Water Authority. The Appellant wants to rely on the inward register to

support itself.

6. We find that we need not enter into the dispute as to what document

was sent by the said Arbitrator, as even without entering into that aspect

of the matter, it is apparent and clearly on record that the Section 9

proceeding relied on by the Appellant was based on Notice dated 13th June,

2018, before which admittedly the Respondent (in response to earlier

Notice under Section 8 which was admittedly withdrawn by the Appellant)

had sent Reply dated 9th April, 2018 raising disputes regarding the quality

and that it had already moved for arbitration. Clearly, there was

pre-existing dispute before the Section 8 Notice relied on by the Appellant

was sent.

7. Apart from the above, we find substance in the observations of the

Adjudicating Authority where, while declining to admit the Application

under Section 9, the Adjudicating Authority observed that the Appellant -

Operational Creditor had not been able to satisfy the Adjudicating

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Authority on the grounds of limitation as no proof of payments made by

the Corporate Debtor to the Operational Creditor within three years of filing

the Petition, had been filed. We have already referred to copy of the

Application which was filed under Section 9 before the Adjudicating

Authority and it appears that merely making vague statement of "time to

time" "ah-hoc payment" without evidence of payment actually by Corporate

Debtor or without showing written acknowledgement so as to save

limitation, will not help. Apparently orders were placed in 2012 and 2013

and even the cheques dated April, 2013 had admittedly bounced. Section

8 Notice was issued only in 2018.

8. We do not find any reason to interfere with the Impugned Order

rejecting the Section 9 Application.

The Appeal is dismissed. No Orders as to costs.

[Justice S.J. Mukhopadhaya] Chairperson

[Justice A.I.S. Cheema] Member (Judicial)

[Kanthi Narahari] Member (Technical) 29th August, 2019 /rs/sk

Company Appeal (AT) (Ins) No.130 of 2019