Simplex Infrastructures Ltd vs Nitesh Estates Ltd

[Arising out of Order dated 29.05.2019 passed by National Company Law Tribunal, Bengaluru Bench, Bengaluru in Company Petition (IB) No.02/BB/2018 and I.A. No.72 of 2018]

IN THE MATTER OF: Before NCLT Before NCLAT Simplex Infrastructures Operational Creditor Appellant Limited Simplex House, No.27, Shakespeare Sarani, Kolkata - 700 017 Represented by its Authorized Signatory Mr. K.L. Baid

Vs.

Nitesh Estates Limited Corporate Debtor Respondent Nitesh Timesquare, 7th Floor, No.8, M.G. Road, Bengaluru - 560 001, Represented by its Managing Director Mr. Nitesh Shetty

For Appellant: Mr. Sanjeev Sen, Sr. Advocate with Mr. Samrat Sengupta, Mr. Dabayan Ghosh, Mr. Sayan Roy and Mr. S.C. Das, Advocates

For Respondent: Ms. Haripriya Padmana Bhan, Mr. Abir Phukan, Mr. Vaishali Goyal, Mr. Vishal Sinha and Mr. Ashkrit Tiwari, Advocates 2

JUDGEMENT

(23rd June, 2020) A.I.S. Cheema, J. :

1. The Appellant - original Operational Creditor has filed this Appeal

against rejection of its Application filed under Section 9 of Insolvency and

Bankruptcy Code, 2016 (IBC - in short). The Appellant Company had

filed the Application having CP (IB) No.02/BB/2018 before the National

Company Law Tribunal, Bengaluru Bench (Adjudicating Authority)

against the Respondent - Corporate Debtor. The Application was heard

and rejected.

2. In short, the case of the Appellant is that the Appellant had entered

into a Contract Agreement (Annexure A-4 - Page 80) as Contractor with

the Respondent - Corporate Debtor being "Employer" for construction of

Ritz Carlton Hotel in Bangalore for Respondent and the Agreement was

executed on 19th March, 2008. The Appellant claims that the work of the

construction of the hotel was completed in 2012 and the hotel is

functional since 2013. The Appellant claims that the Final Payment

Certificate (Annexure A-6 Pages 90-91) was delivered on 31st October,

2014 and in spite of reminders, the balance due amount of

Rs.6,03,55,646/- has not been paid. Demand Notice under Section 8 of

IBC dated 28th September, 2017 (Annexure A-8 - Page 94) was sent. The

Corporate Debtor sent Reply dated 28th October, 2017 (Annexure A-9 -

Page 97) but did not raise any dispute as such. The subsidiary of

Respondent, namely Nitesh Residency Hotels Private Limited (NRHPL)

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however sent a response dated 2nd December, 2017 (Annexure A-10 -

Page 98) although the Notice under Section 8 of IBC was not sent to

NRHPL. Appellant then filed Application under Section 9 of IBC

(Annexure A-11 - Page 100) on 22.12.2017. Appellant claims that the

Adjudicating Authority has wrongly dismissed the Application and thus,

the Appeal.

3. The Adjudicating Authority after hearing the parties and

considering the case put up by the Respondent - Corporate Debtor,

found that there was existence of dispute with regard to the debt and

default and that the claim was also barred by latches and limitation.

4. It would be appropriate now to refer to some more details with

regard to the case of the Appellant. The Appellant claims that the tender

for the construction was floated by the Respondent - Corporate Debtor

(Nitesh Estates Limited [NEL - in short]). The Appellant submitted the

bids in response to such tender. A Letter of Intent (LOI) however was

issued on 29th January, 2008 by NRHPL. NRHPL is stated to be associate

company of Respondent which was formed to oversee the construction of

the hotels. The Appellant claims that formal Letter of Acceptance (LOA)

dated 19th March, 2008 (Page - 118) was executed between the

Respondent and the Appellant. It is claimed that in such letter, the

"employer" is shown to be the Respondent and not NRHPL. The Appellant

claims that the Letter of Intent got subsumed in the Letter of Acceptance.

The Appellant claims that in the Conditions of Contract (General

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Conditions (Page - 241 @ 287) Clause 14.7, the Appellant was entitled to

receive payment within 56 days from the date of receipt of Final Payment

Certificate. Appellant claims on 19th March, 2008, the formal contract

was also executed between the Appellant and the Respondent. Copy of

contract is referred to as Annexure A-4 (Pages 80 - 82). Appellant is

accepting that payments were made from time to time by the Respondent

as well as NRHPL. The Advocate for Appellant referred to Supplementary

Agreement dated 8th February, 2010 to say that parties agreed that

certain works will be omitted from the scope of work. The Final Payment

Certificate (Annexure A-6) was issued by NRHPL on 31st October, 2014.

Vice President of the Respondent - Corporate Debtor issued appreciation

letter regarding performance of the Appellant. (The letter has no date).

5. It is further the case of the Appellant that Final Payment Certificate

(which is claimed by Respondent as Reconciliation Statement) was issued

by Quantity Surveyor appointed by Respondent. The document is

referred as Annexure - A-6 (Pages 90 - 91). Appellant claims that

considering such Final Payment Certificate, the Appellant sent letter

(Page - 822) on 29th November, 2014 asking for release of

Rs.6,03,55,646/- as unpaid dues. (Record shows that on 29th November,

2014, such letter was sent to "NRHPL" and not Respondent, for release

of balance Rs.6,03,55,646/-. The document is at Page - 822 of the

Appeal seeking payment from NRHPL.) Appellant claims that series of

letters were sent thereafter to the Respondent for payment and

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ultimately, notice under Section 8 was sent to Respondent. The Notice is

at Annexure - A-8. Appellant claims that the Respondent sent Reply

(Annexure A-9) merely stating that the issues raised by the Appellant

need to be discussed and discussion was required for arriving at a

mutual settlement amicable to both sides. Thus, according to the

Appellant, no dispute as such was raised and the Application should

have been admitted. Reference is made also to the Response sent by

NRHPL on 2nd December, 2017 (Annexure A-10) and the disputes raised

by NRHPL. According to the Appellant, the employer was Respondent and

thus, NRHPL was not relevant and case put up with regard to NRHPL

should have been ignored. Appellant claims that the Application under

Section 9 of IBC was filed on 22.12.2017 and on same date, the

Appellant had also invoked arbitration proceedings. The arbitration

proceeding was initiated against Respondent and NRHPL, both.

6. The case put up by the Respondent before the Adjudicating

Authority and before us in Reply (Diary No.14723) and the arguments

raised may now be referred. The Corporate Debtor claims that the fact

that the date on which Application under Section 9 was filed, on same

date arbitration proceedings were also initiated by Appellant, itself shows

that there is existence of dispute which Arbitrator needs to decide.

Respondent claims that the dispute is regarding quality of work done by

the Appellant which was raised since 2014 and which has been

highlighted in 2016. Reference is made to the document at Page - 58 of

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the Reply which is e-mail dated 21st January, 2016 sent to the Appellant

raising various issues regarding the quality of works. The Respondent

claims that Appellant is not Operational Creditor of the Respondent and

no service was offered by Appellant to the Respondent and that the

services were given to NRHPL which owns and is running Ritz Carlton

Hotel at Bangalore. The liability to pay under the contract is that of

NRHPL. This can be seen from the documents of contract as well as

conduct of parties. NRHPL is necessary party and tripartite arbitration

will be proper adjudication. Respondent also claims that the debt is time

barred. It is also stated that the document referred to by the Appellant as

Final Payment Certificate is not actually Final Payment Certificate but it

is only a Reconciliation Statement prepared by the Engineer to which

document, NRHPL was party and not the Respondent - Corporate Debtor.

For these and other reasons, the Respondent - Corporate Debtor claims

that the Appeal should be dismissed.

7. We have heard both the parties. We have gone through the record.

Various disputes are being raised with regard to who is the employer

whether the Respondent - NEL or its subsidiary - NRHPL. The parties are

referring to the various documents executed before the Contract

Agreement dated 19th March, 2008 was entered into as well as the

Contract Agreement (Page - 80) and documents executed subsequent to

such Agreement and making reference as to in which document, NEL -

Corporate Debtor is referred as employer and in which document, NRHPL

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is referred as employer. There is no dispute that for the works executed,

for various factors relating to execution of the contract, NRHPL

transacted with the Appellant. Appellant accepts that even payments

were made by NRHPL also. With such state of affairs, it cannot be

expected, considering the provisions of IBC and the nature of proceedings

which exist under Section 9 of IBC, that the Adjudicating Authority

should examine in details the various terms and to give a Judgement as

such as to who the "employer" actually was. Appellant itself is accepting

that NRHPL signed Letter of Intent; in Appendix of Tender "Employer" is

NRHPL; Substantial Completion Certificate and Taking Over Certificate

dated 07.04.2014 were issued by NRHPL. Admittedly, payments were

also made by NRHPL and even Taking Over Certificate was with NRHPL.

There are so many other documents also.

8. Various documents on record itself show that the defence of

Respondent on this count with regard to who is the employer requires a

tripartite adjudication, is not baseless. We have perused Annexure - A-4

(Page - 88). It is titled Contract Agreement dated 19th March, 2008. The

index (Annexure - A-4) claims that the Agreement is only of three pages

(Pages - 80 - 82). Clearly, there are other documents. The Appeal has

referred to only these pages from the Agreement, as the Contract. At Page

- 80, in the beginning of the Agreement, the title is "The employer and

the Contractor agree as follows:-" Then Serial No.1 states that "In this

Agreement words and expression shall have the same meanings as are

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respectively assigned to them in the Conditions of Contract hereinafter

referred to". Now if Page 127 of the Appeal is seen, the title is

"Document A Conditions of Contract 3 - Particular Conditions"

At page - 128, the item is shown as "Employer's name and address"

and against this, the name stated is that of "Nitesh Residency Hotels

Private Limited" which means, NRHPL is shown as the employer. Thus

reading first page of Annexure - A-4 which says that the Words and

Expression shall have the same meaning as assigned to them in the

Conditions of Contract, if in the Conditions of Contract, the employer is

referred as Nitesh Residency Hotels Private Limited, that would be the

definition. When definition clause says particular thing, for purpose of

interpretation, we would ignore the initial portion of Annexure - A-4,

where the Respondent - Nitesh Estates Limited is called the "employer". It

is apparent that the document itself says that the employer would be as

stated in the conditions of contract and document at Page - 128 says

that the employer is NRHPL. We have looked into this as learned Counsel

for Appellant wanted us to lift the corporate veil and see. The Respondent

is right in saying that it requires tripartite adjudication, considering

different documents and conduct of parties. This proceeding being

basically summary in nature, we would however leave the aspect to be

dealt with in proper forum. For above reasons (and reasons to follow), we

just find that the documents on record and the various dealings between

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the parties and NRHPL, the Appellant has not clearly established that

operational dues are sole responsibility of the Respondent.

9. Reconciliation Statement (Page - 90) which Appellant claims to be

"Final Payment Certificate", shows it is dated 31st October, 2014. We

have just referred that after this date of 31st October, 2014, the Appellant

itself had sent letter on 29th November, 2014 (Page - 822) to NRHPL

seeking payment of the balance amount as per Certificate. If the NRHPL

was not liable to pay, there was no reason for the Appellant to have made

such claim of amounts from NRHPL.

10. The learned Counsel for Respondent argued that all

communications regarding defects in works, were sent by NRHPL to the

Appellant. During execution of the Agreement, the Appellant

communicated only with NRHPL for grievances, discussion and

information. It is argued that even the taking over Certificate dated 7 th

April, 2014 was signed and handed over to the Appellant only by NRHPL.

The taking over Certificate was issued subject to completion of balance

works which included several defective works. The Reconciliation

Statement dated 31st October, 2014 (Page - 90) does not include Debit

Note dated 21st August, 2014. The other Debit Notes were also issued by

NRHPL. The Reconciliation Statement is not signed by the Respondent -

Corporate Debtor, it is argued.

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11. According to the Respondent, the Reconciliation Statement is not

"Final Payment Certificate" as required in the contract and Respondent is

disputing the validity of the same. It is claimed that it is only

recommendatory Statement of Reconciliation prepared by the Engineer. It

is argued, it is not binding on the Respondent or NRHPL. It is not counter

signed by the Corporate Debtor. The Final Payment Certificate as per

Clause 14.10 of General Conditions of Contract was to be preceded by a

Statement of Completion by the employer. No such Certificate has been

issued by NRHPL. NRHPL did not issue Final Statement of Completion

and was required to engage services of other party to complete the works.

12. We have gone through this document at Page - 90 (Annexure -

A-6). It has been prepared by Davis Langdon KPK (DLKPK) which is an

account company (Page - 809) as seen in their letter dated 28th June,

2014. This Company - DLKPK appears to have prepared this document

which has signatures of Appellant and NRHPL. The Respondent is

claiming that this is not Final Payment Certificate. The document also

states that it is only "DLKPK recommendation". Thus, question of

limitation also becomes relevant. Appellant claims that project was

completed in 2012 and the hotel was taken over in 2013. Take Over

Certificate is stated to be dated 07.04.2014 The Application under

Section 9 filed on 22.12.2017 would thus be clearly time barred with

regard to the debt claimed. If the project was completed in 2012, the

amounts payable must be said to have become due. When the works are

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completed and the hotel is also taken over and made functional, the time

had begun to run. Whether or not this or that formality was completed

would not stop the running of time.

13. The Adjudicating Authority has found that there was pre-existing

dispute. The Appellant is heavily relying on Annexure - A-6 which

Appellant claims to be Final Payment Certificate dated 31st October, 2014

for claiming its dues. The Notice under Section 8 (Page - 94) was sent on

28th September, 2017. The Respondent has pointed out an e-mail dated

21.01.2016 (Annexure - E - Page 58 of the Reply) which shows that the

Chief Engineer of Ritz Carlton Hotel had sent communication to the

Appellant with regard to the various leakages and seepages found in

various rooms and the damage caused to upholstery, paint, furniture,

etc. Various room numbers are pointed out which required various

treatments. This document clearly shows that the quality of work done

was disputed and the dispute was raised in 2016 itself and Appellant was

informed that in spite of continuously following up, there was no

response. It is quite apparent that there was pre-existing real dispute

regarding the quality of work done. When this is so, the Adjudicating

Authority is not required to go into further details and we find that the

Application under Section 9 was rightly rejected by the Adjudicating

Authority.

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There is no substance in the Appeal and the Appeal is thus

rejected.

No Orders as to costs.

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

[Kanthi Narahari] Member (Technical rs

Company Appeal (AT) (Ins) No.740 of 2019