2021 (1) TMI 1173 - HC - Insolvency and Bankruptcy

Seeking direction to first respondent to pay a sum of ₹ 168,85,00,000 being the sum admitted as payable to the petitioner - bills raised for the electricity supplied on a monthly basis to the first respondent - unilateral and frivolous deductions or not - demand notice under section 8(1) of the Insolvency and Bankruptcy Code, 2016, read with rule 5 of the Insolvency and Bankruptcy Rules, 2016 - HELD THAT - It is not in dispute that the petitioner is a Power Generating Company and is in the business of supplying power to the first respondent and a major portion of the income depends on the clearance of the payments from the first respondent. From the year 2016, the first respondent had stopped making payments to the petitioner, hence, the petitioner approached the National Company Law Tribunal to start corporate insolvency resolution process against the first respondent, however, the National Company Law Tribunal dismissed the petition. The payments made by the first respondent after May 24, 2018 itself would establish that they treated the petitioner-company as a separate entity and not along with the other two companies. The first respondent having partly complied with the memorandum of settlement dated May 24, 2018 now they cannot take a different stand and contend that since the other two companies are liable to pay the amounts to the first respondent, the petitioner-company is not entitled to claim the amount as per the memorandum of settlement dated May 24, 2018. After deducting the sum of ₹ 135,00,00,000 paid by the first respondent to the petitioner from the total sum of ₹ 208,85,00,000 the balance payable by the first respondent is ₹ 73,85,00,000. Therefore, the first respondent is liable to pay the balance sum of ₹ 73,85,00,000 to the petitioner - the first respondent is directed to pay the balance sum of ₹ 73,85,00,000 to the petitioner within a period of eight weeks from the date of receipt of a copy of this order. The writ petition is partly allowed.

Issues Involved:

1. Non-payment of dues by the first respondent.
2. Frivolous deductions by the first respondent.
3. Initiation of corporate insolvency resolution process.
4. Settlement agreement and its compliance.
5. Withdrawal of pending proceedings by the petitioner.
6. Treatment of petitioner and its group companies as one entity.
7. Payment of balance amount by the first respondent.

Issue-wise Detailed Analysis:

1. Non-payment of dues by the first respondent:
The petitioner, Arkay Energy (Rameswarm) Ltd., supplied electricity to the first respondent under various tenders but faced delayed payments. Despite certifying the bills, the first respondent did not clear the amounts, resulting in a payable sum of ?251,29,31,781, including principal, interest, and compensation.

2. Frivolous deductions by the first respondent:
The petitioner alleged that the first respondent made frivolous deductions to stall payments. A writ petition was filed, and the court directed the respondent not to deny the payment of ?48,00,00,000. Despite the order, the first respondent did not release the amount, leading to contempt petitions.

3. Initiation of corporate insolvency resolution process:
Due to non-payments, the petitioner issued a demand notice under the Insolvency and Bankruptcy Code, 2016, but received no reply. The petitioner approached the National Company Law Tribunal (NCLT) for initiating the corporate insolvency resolution process, which was dismissed. An appeal was filed before the National Company Law Appellate Tribunal (NCLAT), where a settlement was reached, and the petitioner withdrew the appeal.

4. Settlement agreement and its compliance:
The settlement agreement dated May 24, 2018, recorded by the NCLAT on May 29, 2018, required the first respondent to release ?208,85,00,000 to the petitioner, with an initial payment of ?40,00,00,000. The petitioner claimed the balance payable was ?168,85,00,000. The first respondent paid additional sums totaling ?95,00,00,000 but argued that payments to the petitioner should consider dues from its group companies.

5. Withdrawal of pending proceedings by the petitioner:
The petitioner was required to withdraw all pending proceedings as per the settlement. The petitioner withdrew several cases and listed them in an affidavit. The court found that the petitioner had complied with the terms of the settlement regarding withdrawal of cases.

6. Treatment of petitioner and its group companies as one entity:
The first respondent contended that the petitioner and its group companies should be treated as one entity and that dues from the group companies should be reconciled. However, the court noted that the first respondent had made payments to the petitioner separately, indicating that they treated the petitioner as a separate entity.

7. Payment of balance amount by the first respondent:
The court calculated the balance payable by the first respondent as ?73,85,00,000 after deducting the payments already made. The first respondent was directed to pay this amount to the petitioner within eight weeks.

Conclusion:
The court directed the first respondent to pay the balance sum of ?73,85,00,000 to the petitioner within eight weeks, partly allowing the writ petition. No costs were awarded, and the connected miscellaneous petition was closed.

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