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TMI Blog2019 (4) TMI 252X X X X Extracts X X X X X X X X Extracts X X X X ..... or The Petitioner : Mr Amir Arsiwala, Adv., Mr Rohit Sharma, PCS For The Respondent : Mr Rashid Boatwalla, Adv., Ms Prerana Wagh, Adv. ORDER Per V. P. Singh, Member (Judicial) 1. It is a Company Petition filed u/s 9 of Insolvency Bankruptcy Code, 2016 (IBC) to initiate Corporate Insolvency Resolution Process by Operational Creditor, namely Surya Alloy Industries Limited against Corporate Debtor, namely Larsen and Toubro Limited stating that the Corporate Debtor failed to make payment of ₹ 92,94,802.52/- inclusive of the principal amount of ₹ 68,83,187.20/- and interest of ₹ 24,11,615.32 as interest @18% up to 7.2.2018 towards the supply of elastic rail clips. 2. The Operational Creditor has annexed purchase order no. EA427PO5000007 dated 29.10.2015 issued by the Corporate Debtor against which Elastic Rail Clips were supplied. The Operational Creditor has also annexed invoices issued by it, consignment notes and MRN registration receipts. The following communications were exchanged between the parties: (a) 1.12.2017 The Operational Creditor sent a demand notice under IBC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (b) 13.1.2018 After that, the Operational Creditor sent a demand notice under IBC on 13.1.2018 calling upon payment of unpaid operational debt. (c) 18.1.2018 The Corporate Debtor through its advocates replied on 18.1.2018 denying the liability to pay. (d) 22.1.2018 The Corporate Debtor sent a reply dated 22.1.2018 stating, inter-alia, the Corporate Debtor had requested the Operational Creditor to resolve the quality issues in the material and submit Performance Bank Guarantee to enable the Corporate Debtor to release the withheld payment. The reply also states that without prejudice to the Corporate Debtor's right, it is releasing a sum of ₹ 34,66,214/-and in order to release further payment, valid Performance Bank Guarantee is required. (e) 24.1.2018 The Corporate Debtor through its advocates sent another reply dated 24.1.2018 stating that discussions are ongoing between the representatives of the parties for mutual beneficial resolution. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Therefore, it is incorrect for the Operational Creditor to state on Affidavit that there is no dispute with regard to the unpaid operational debt. b) The Corporate Debtor has annexed lab report showing quality defects in the material supplied. c) The Operational Creditor through its letter dated 12.2.2018 informed the Corporate Debtor about the filing of the proceedings before this Tribunal. The Corporate Debtor replied vide letter dated 16.2.2018 reiterating the quality defects in the goods supplied and indicating the willingness to pay the lawful dues subject to rectification or removal of the quality deficiencies as well as an extension of the Performance Bank Guarantee. d) The Corporate Debtor received communication from Bombay Stock Exchange Ltd. (BSE) Enclosing a complaint dated 31.8.2018 lodged by the Operational Creditor with BSE portraying a false and warped picture of the affairs of the Corporate Debtor in respect of buy back of shares offered by the Corporate Debtor and alleged default in the payment of dues to the Operational Creditor for supplies made. The Operational Creditor in its letter to BSE suppressed that the dispute between the parties is sub-judice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a deduction of 10% of the total material value which was agreeable to the Operational Creditor. Concerning the extension of the performance bank guarantee, it is stated that the Operational Creditor never neglected the renewal of the bank guarantee no. 05731LG011715 dated 6.11.2015 for ₹ 55,28,297/-, which expired on 7.11.2016, and was submitted to the Corporate Debtor. It is stated that the Corporate Debtor was within its rights to enforce the bank guarantee. However, given non-payment without any reason, the Operational Creditor chose not to do any further business with the Corporate Debtor and hence the bank guarantee was not renewed after the expiry of the validity. It is also stated that the Performance Bank Guarantee can only be claimed or required to be furnished in respect of orders executed and where the contract is not enforced in entirety by either of the party, to the extent already executed. There is no contractual obligation on the Operational Creditor to renew the bank guarantee as the Corporate Debtor breached the contract by not making payment of outstanding dues. Also, renewal of the same does not constitute an existence of a dispute. c) The quality issu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder to enable the Corporate Debtor to release the withheld payment. This reply further states that the Corporate Debtor without prejudice to its rights under the terms of the purchase order is releasing ₹ 34,66,214/- against two invoices. The reply also states that in order to release pending invoices, the Corporate Debtor requires Performance Bank Guarantee. The third reply dated 24.1.2018 by the Advocates of the Corporate Debtor states that the representatives of the parties are in discussion for a mutually beneficial resolution. The Operational Creditor informed the Corporate Debtor about filling of the present petition before this Tribunal vide letter dated 12.2.2018. The Corporate Debtor replied vide letter dated 16.2.2018 reiterating the quality defects in the goods supplied and indicating the willingness to pay the lawful dues. The Corporate Debtor has filed a reply, inter-alia, stating that disputes exist amongst parties before the issuance of the demand notice. The Corporate Debtor has relied on the emails dated 27.9.2016 and 30.11.2016 sent by the Corporate Debtor to the Operational Creditor stating that the MRN has not been cleared because of the quality issues wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n shows that the aforesaid debt is due and payable and has not yet been paid? and (iii) Whether there is existence of a dispute between the parties or the record of the pendency of a suit or arbitration proceeding filed before the receipt of the demand notice of the unpaid operational debt in relation to such dispute? If any one of the aforesaid conditions is lacking, the application would have to be rejected. Apart from the above, the adjudicating authority must follow the mandate of Section 9, as outlined above, and in particular the mandate of Section 9(5) of the Act, and admit or reject the application, as the case may be, depending upon the factors mentioned in Section 9(5) of the Act. (Para 34). 15. The Corporate Debtor vide emails dated 27.9.2016 and 30.11.2016 informed the Operational Creditor about quality issues with respect to the Elastic Rail Clips. The Operational Creditor sent the demand notice on 13.1.2018. Therefore, before the issuance of demand notice, the Corporate Debtor raised a dispute regarding quality. 16. Given Section 8 (2)(a) and the judgments of Hon ble Supreme Court in Mobilox Innovations (P) Ltd. (supra) and further in K. Kishan (s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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