2020 (9) TMI 377 - AT - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its debt - existence of debt and dispute or not - Time Limitation - HELD THAT - 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 respectively assigned to them in the Conditions of Contract hereinafter referred to . 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. Time Limitation - HELD THAT - 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 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. Pre-existing dispute or not - HELD THAT - 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. Appeal dismissed.

Summary

Issues Involved:
1. Rejection of the Application under Section 9 of the Insolvency and Bankruptcy Code, 2016 (IBC).
2. Existence of a dispute regarding debt and default.
3. Determination of the employer between the Respondent and NRHPL.
4. Time-barred claim.
5. Validity of the Final Payment Certificate.

Issue-wise Detailed Analysis:

1. Rejection of the Application under Section 9 of the Insolvency and Bankruptcy Code, 2016 (IBC):
The Appellant, an original Operational Creditor, filed an appeal against the rejection of its Application under Section 9 of the IBC by the National Company Law Tribunal (NCLT), Bengaluru Bench. The NCLT rejected the Application, citing the existence of a dispute regarding the debt and default and the claim being barred by latches and limitation.

2. Existence of a Dispute Regarding Debt and Default:
The Adjudicating Authority found that there was a pre-existing dispute concerning the debt and default. The Respondent highlighted an email dated 21st January 2016, raising issues about the quality of work done by the Appellant. This email indicated various defects such as leakages and seepages, which were communicated to the Appellant. The Appellant was informed that despite continuous follow-up, there was no response. This evidence supported the existence of a real dispute about the quality of work, justifying the rejection of the Application under Section 9 of the IBC.

3. Determination of the Employer Between the Respondent and NRHPL:
The Appellant claimed that the Respondent (Nitesh Estates Limited) was the employer, whereas the Respondent argued that NRHPL (Nitesh Residency Hotels Private Limited) was the actual employer. Various documents, including the Contract Agreement dated 19th March 2008 and subsequent communications, indicated that NRHPL was involved in the project. The Appellant accepted payments from NRHPL and acknowledged NRHPL's role in issuing the Final Payment Certificate. The Adjudicating Authority concluded that determining the employer required a detailed examination of documents and conduct, which was beyond the scope of summary proceedings under Section 9 of the IBC.

4. Time-barred Claim:
The Appellant's claim was found to be time-barred. The project was completed in 2012, and the hotel was operational since 2013. The Final Payment Certificate was issued on 31st October 2014. The Application under Section 9 was filed on 22nd December 2017, which was beyond the limitation period. The Adjudicating Authority noted that the time for claiming the debt began to run from the completion of the project and the hotel's operational status, making the claim time-barred.

5. Validity of the Final Payment Certificate:
The Appellant relied on the Final Payment Certificate dated 31st October 2014 to claim unpaid dues. However, the Respondent disputed the validity of this certificate, arguing that it was merely a Reconciliation Statement prepared by an engineer and not a binding Final Payment Certificate. The Reconciliation Statement was signed by NRHPL and the Appellant but not by the Respondent. The Adjudicating Authority found that the document did not meet the requirements of a Final Payment Certificate as per the contract terms, further weakening the Appellant's claim.

Conclusion:
The appeal was rejected based on the existence of a pre-existing dispute, the time-barred nature of the claim, and the unresolved issue of the actual employer. The Adjudicating Authority's decision to reject the Application under Section 9 of the IBC was upheld, and the appeal was dismissed with no orders as to costs.