2023 (9) TMI 239 - AT - Insolvency and Bankruptcy

Maintainability of section 9 application - NCLT rejected the application - Operational debit / creditor or not? - debt claimed is the debt owed for the supply of goods or rendering of services - breach of the Settlement Agreement - HELD THAT - In AHLUWALIA CONTRACTS (INDIA) LTD. VERSUS LOGIX INFRATECH PVT. LTD. 2022 (9) TMI 1500 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, PRINCIPAL BENCH, NEW DELHI , it was clearly held that Memorandum of Understanding entered between the parties was only with regard to mode and manner of payment and that too after final bill certificate which was duly signed by both the parties. It was held that Application under Section 9 ought not to have been rejected. Present is also a case where the operational debt arose out of contract awarded by the Corporate Debtor to the Operational Creditor, with regard to which RA Bill Nos.49 and 50 final bills were issued. Present is not a case that Corporate Debtor denied his liability to pay the bills rather during pendency of earlier Section 9 Application entered into settlement dated 16.12.2017 for payment of the amount. The above Judgment fully support the submissions of Appellant. The judgment of this Tribunal in AMRIT KUMAR AGRAWAL VERSUS TEMPO APPLIANCES PVT. LTD. 2020 (11) TMI 993 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI was a case where this Tribunal was examining the Application on the issue whether it is financial debt. In the said background, it was held that Settlement Agreement subsequently entered between the Financial Creditor and the Corporate Guarantor does not contain any element of financial debt, hence, its breach was not financial debt. The judgment of this Tribunal in Amrit Kumar Agrawal was entirely on different facts and circumstances and has no application in the present case - In the present case the nature of the operational debt was payment of RA Bills submitted by Operational Creditor and Settlement Agreement was entered for payment but payment having not been made in pursuance of the Settlement Agreement, liability of the Corporate Debtor to make the payment continues and Operational Creditor was well within its right to file Section 9 Application. The filing of claim in the CIRP of VentaRealtech Pvt. Ltd. has no effect on maintainability of Section 9 Application. In the CIRP what amount Operational Creditor i.e. Appellant is entitled or receives are different issues, any amount received by the Appellant in CIRP of VentaRealtech Pvt. Ltd. may be adjusted but that itself cannot be a ground to not proceed with Section 9 Application filed by the Operational Creditor - the Adjudicating Authority committed error in rejecting the Application of the Appellant on the ground that there is no operational debt. The issue is fully covered by judgment of this Tribunal in Ahluwalia Contracts (India) Limited vs. Logix Infratech Pvt. Ltd. . The impugned order of the Adjudicating Authority is unsustainable - appeal allowed.

Summary

Issues Involved:
1. Maintainability of Section 9 Application under the Insolvency and Bankruptcy Code (IBC).
2. Nature of the debt claimed by the Operational Creditor.
3. Impact of Settlement Agreement on the operational debt.
4. Relevance of previous judgments cited by both parties.

Summary:

1. Maintainability of Section 9 Application:
The Operational Creditor filed an appeal against the order dated 12.01.2023 by the Adjudicating Authority (NCLT, New Delhi Court III), which dismissed the Section 9 Application as not maintainable. The Adjudicating Authority held that the breach of a Settlement Agreement does not constitute an operational debt under Section 5(21) of the IBC.

2. Nature of the Debt:
The Operational Creditor raised RA Bills between 04.11.2011 and February 2016 for work done under a contract with the Corporate Debtor. Despite reminders, payment was not made, leading to a demand notice under Section 8 and a subsequent Section 9 Application. A Settlement Agreement dated 16.12.2017 was reached, but the Corporate Debtor failed to comply, resulting in a fresh Section 9 Application on 01.08.2019. The Adjudicating Authority dismissed this application, stating the debt arose from the breach of the Settlement Agreement, not from the supply of goods or services.

3. Impact of Settlement Agreement:
The Appellant argued that the debt was due based on RA Bills issued under the contract and that the Settlement Agreement was merely a mode of payment. The Tribunal in "Ahluwalia Contracts (India) Limited vs. Logix Infratech Pvt. Ltd." held that a Memorandum of Understanding regarding payment does not absolve the Corporate Debtor from its debt and default. The Tribunal found that the Adjudicating Authority erred in dismissing the Section 9 Application on technical grounds.

4. Relevance of Previous Judgments:
The Adjudicating Authority relied on "Amrit Kumar Agrawal vs. Tempo Appliances Pvt. Ltd.," which dealt with financial debt and was not applicable to the present case. The Tribunal distinguished this case, noting that the operational debt arose from certified RA Bills and the Settlement Agreement confirmed the debt. The Tribunal also addressed the Respondent's reliance on "Trafigura India Private Limited vs. TDT Copper Ltd.," stating that the facts were distinguishable as the operational debt in the present case arose from a construction contract.

Conclusion:
The Tribunal concluded that the filing of a claim in the CIRP of 'VentaRealtech Pvt. Ltd.' does not affect the maintainability of the Section 9 Application against the Corporate Debtor. The Tribunal allowed the appeal, setting aside the order dated 12.01.2023, and revived the Section 9 Application for further proceedings in accordance with the law.