2022 (1) TMI 711 - Tri - Insolvency and Bankruptcy

Release of retention money as per the Contract Agreement - Section 60(5) of Insolvency and Bankruptcy Code, 2016 Read with Rule 11 and 13 of the National Company Law Tribunal Rules, 2016 - HELD THAT - It is clear from the arguments made by the counsel for the Applicant that the contract that assigned to the Corporate Debtor was executed and certificate was issued to that effect with regard to defect liability period extended up to 30.06.2022. The counsel for the Applicant draws the attention of the Tribunal to the notification dated 03.06.2020 wherein it is notified that retention money from the period 3 months but paid to 6 months, may not be deducted from the raised bills. In view of the said notification the application is allowed and Applicant would be entitled for the refund of retention money. The Respondent No. 2 shall release the retention money of ₹ 2,62,74,514/- forthwith. Petition disposed off.

Summary

Issues: Application under Section 60(5) of Insolvency and Bankruptcy Code seeking release of retention money as per Contract Agreement.

1. Facts of the Case: The Respondent No. 2, a Corporate Debtor, is engaged in construction contracts for various projects. The Applicant entered into a contract for road construction in Chhattisgarh but faced payment issues due to the Liquidator's actions.

2. Retention Money and Payment Terms: The completion of work entitles the subcontractor to submit bills for payment. Retention money, usually 6% of the bill, is withheld to ensure defect-free completion. The Chhattisgarh PWD Department released some retention money to the Respondent No. 2.

3. Legal Arguments: The Respondents argued that the Applicant is not entitled to the retention money as it was withheld under contractual arrangements. The Amended Agreement specified the retention terms and defect liability period extending until 30.06.2022.

4. Escrow Arrangement Proposal: The Applicant proposed an escrow arrangement for releasing the balance retention amount upon obtaining the necessary certificate but did not accept the Liquidator's request.

5. Judgment: The Tribunal considered the contract execution and the defect liability period extension. Referring to a notification prohibiting retention money deduction beyond 3 months, the Tribunal ruled in favor of the Applicant, directing the release of the retention money of INR 2,62,74,514 by the Respondent No. 2.

6. Disposition: The Tribunal allowed the application, entitling the Applicant to the refund of retention money as per the Contract Agreement, and ordered the Respondent No. 2 to release the specified amount promptly. The application was disposed of accordingly.