2023 (1) TMI 745 - AT - Insolvency and Bankruptcy

Initiation of CIRP - Operational Debt or not - amount claimed by SDMC in connection with Toll Tax and ECC Agreement - existence of pre-existing dispute between SDMC and the contractor MEP Infrastructure or not - Classification of debt that is claimed to be in default and payable to SDMC - HELD THAT - An operational debt is a claim in respect of provisions of goods or services and the claim must bear some connection with the provision of goods or services without specifying who is the supplier or receiver. Thus the supplier in the present case of services is MEP Infrastructure and the receiver is SDMC but in accordance with the clearly held position in the case of Consolidated Construction Consortium Ltd. 2022 (2) TMI 254 - SUPREME COURT the debt owed by MEP Infrastructure to SDMC falls in the definition of operational debt under the IBC and hence the debt owed by MEP Infrastructure to SDMC is an operational debt as defined in section 5(21) of the IBC. Whether the dispute is a pre-existing dispute or not? - HELD THAT - The termination of the Toll Tax Agreement is also provided in clause 17 in case of default and it is provided in the agreement that even after termination of the agreement the rights and obligations of any of the parties that arise before termination are protected - it is clear that from the total amount claimed by MEP Infrastructure a major amount was disallowed by the Commissioner SDMC and as a result MEP Infrastructure filed writ petition being WP 2241/2020 before the Hon ble High Court of Delhi seeking the quashing of order dated 30.1.2020 of Commissioner SDMC on addition to certain other reliefs. Thus ot becomes amply clear that there were disputes raised by the contractor MEP Infrastructure which were actively considered by the High Level Committee and Commissioner SDMC and many disputes remained unresolved as the further litigation pursued by the contractor shows. The claims put forward by MEP Infrastructure their consideration by High Level Committee of SDMC then by Commissioner SDMC upon order of Hon ble Delhi High Court were in the nature of disputes between SDMC and the contractor and these disputes were subsequently carried to the Hon ble Delhi High Court for resolution. Though the debt claimed by SDMC is an operational debt there are clearly pre-existing disputes raised by MEP Infrastructure regarding which litigations/dispute resolution mechanism have been pursued by both the parties in Hon ble High Court and the internal forum of SDMC and the existence of these disputes has been brought to the notice of the operational creditor SDMC by MEP Infrastructure through its reply to demand notice under section 8. In such a situation the section 9 application which is clearly impacted by such pre-existing dispute has correctly been disallowed by the Adjudicating Authority. Finding no error in the Impugned Order we refuse to interfere with it. Appeal rejected.

Summary

Issues Involved:
1. Whether the amount claimed by SDMC in connection with the Toll Tax and ECC Agreement is an 'operational debt' as defined in section 5(21) of the IBC?
2. Whether a 'pre-existing dispute' is present between SDMC and the contractor MEP Infrastructure, which would lead to rejection of the application filed under section 9 by SDMC?

Detailed Analysis:

Issue 1: Classification of Debt as 'Operational Debt'
The first issue revolves around whether the debt claimed by SDMC qualifies as an 'operational debt' under section 5(21) of the IBC. SDMC argued that it is an operational creditor because the debt owed by MEP Infrastructure is related to the provision of services under the Toll Tax and ECC Collection Agreement. The agreement mandated MEP Infrastructure to remit a fixed amount annually to SDMC, irrespective of the actual toll and ECC collected.

The Tribunal referred to the Supreme Court's judgment in Consolidated Construction Consortium Ltd. vs. Hitro Energy Solutions Private Limited, which clarified that an operational debt must bear some nexus with the provision of goods or services, without specifying who is to be the supplier or receiver. In this case, MEP Infrastructure is the supplier of toll collection services, and SDMC is the receiver. Thus, the debt owed by MEP Infrastructure to SDMC falls within the definition of 'operational debt' under the IBC.

Issue 2: Existence of 'Pre-Existing Dispute'
The second issue examines whether there was a 'pre-existing dispute' between SDMC and MEP Infrastructure that would preclude the admission of the section 9 application. MEP Infrastructure contended that there were numerous disputes regarding the terms of the Toll Tax Agreement and the amounts payable, which had been raised and were under litigation before various forums, including the High Court of Delhi.

The Tribunal noted that MEP Infrastructure had raised several claims for monetary reliefs due to various factors affecting toll collection, such as transport strikes, air pollution, and diversion of traffic. These claims were considered by a High-Level Committee and the Commissioner of SDMC, who allowed some claims but disallowed others. Dissatisfied with the disallowed claims, MEP Infrastructure pursued litigation, including writ petitions and LPAs, before the High Court of Delhi.

The Tribunal observed that these disputes were not merely hypothetical or illusory but went to the core of the Toll Tax Agreement and the payments to be made. The existence of these disputes was acknowledged by the High Court, which had issued interim orders addressing the payment obligations under the agreement. The Tribunal also referred to the Supreme Court's judgment in Rajratan Babulal Agarwal vs. Solartex India Pvt. Ltd., which emphasized that the existence of a dispute is sufficient to reject a section 9 application.

Given the detailed history of disputes and ongoing litigation, the Tribunal concluded that there was a 'pre-existing dispute' between SDMC and MEP Infrastructure. Therefore, the section 9 application was correctly disallowed by the Adjudicating Authority.

Conclusion:
The Tribunal held that while the debt claimed by SDMC qualifies as an 'operational debt,' the existence of 'pre-existing disputes' between SDMC and MEP Infrastructure warranted the rejection of the section 9 application. The appeal was dismissed, and the Impugned Order was upheld.