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TMI Blog2019 (8) TMI 874X X X X Extracts X X X X X X X X Extracts X X X X ..... djudicated. This is the first reason for not considering the liquidated damages as operational debt - Liquidated damages are provided in certain legal contracts as an estimate of otherwise intangible or hard-to-define losses to one of the parties. As against that, the meaning of Operational Debt is a claim in respect of goods supplied, or services rendered as defined in section 5(21) of the Code. Therefore, it can be concluded that the impugned claim of damages, neither ascertainable nor crystallised, hence out of the ambits of the Operational Debt. This petition stands outside the scope of the Code and Section 9 thereof - appeal dismissed on maintainability. - CP No. 1356/IBC/NCLT/MB/MAH/2017 - - - Dated:- 8-5-2019 - Mr M. K. Shrawat, Member (J) For The Petitioner : Advocate Sakil Ansari a/w Advocate Pratap Nimbalkar For The Respondent : Adv Ishita Advani i/b Desai Diwanji ORDER 1. This is a Petition filed under section 9 of Insolvency Bankruptcy Code, 2016 (hereinafter as Code ) read with Rule 6 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ject due to which it failed to commence supply of power to the Operational Creditor by SCOD. 6. The Corporate Debtor defaulted in complying with the terms and conditions of the Agreement, alleged by the Operational Creditor. B. Submissions by the Operational Creditor 7. The Operational Creditors submits that a Letter dated 04.10.2011 was issued to the Corporate Debtor to pay the liquidated damages @ ₹ 3000/- per day per MW to the Operational Creditor as per clause 4.3 of the Agreement. However, the letter was not replied to by the Corporate Debtor. 8. A Final Notice dated 17.11.2011 was issued to the Corporate Debtor to pay the amount of ₹ 6,59,19,000/-. This letter also was not replied by the Corporate Debtor. Nor any payment has been paid for the outstanding amount. Consequently, the Operational Creditor filed a Petition No. 1202 of 2012 on 06.03.2012 under Section 86 (1)(f) of Electricity Act, 2003 before the Gujarat Electricity Regulatory Commission for Adjudication on the liability of the amount payable i.e. ₹ 6,59,19,000/- towards liquidated damages with interest @15% per annum. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 14. Thereafter, on 31.05.2017, the Operational Creditor issued Demand Notice u/s 8 of the Code R/w Rule 5 demanding the amount due. The Corporate Debtor on 10.06.2017 replied to the Demand Notice seeking another 2 years for payment of the Operational Debt , however, not cleared the debt till date. 15. The Operational Creditor has produced on record the affidavit as per Section 9(3)(b) of the Code stating that no notice of dispute has been received from the Corporate Debtor. A copy of the certificate from Chartered Accountant firm has been produced on record stating that they have verified the Bank Books Bank Statements of the Operational Creditor and no payment of the relevant unpaid operational debt is received by the Operational Creditor. 16. It is argued that in view of the judgement of Hon ble NCLAT in the case of Annapurna Infrastructure Pvt. Ltd. v. M/s Soril Infra Resources Ltd., [Company Appeal (AT) (Insolvency) No. 32 of 2017], Order dated 29.08.2017, the Appellate authority held that NCLT can be moved for enforcement of an arbitral award. It said in Para 33: .... For the reasons aforesaid, while w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Government dues 22. It is submitted that the claim in hand purports to be in respect of losses in form of liquidated damages . This is not a claim for providing goods or services. The meaning of damages is clear from the decision of the Bombay High Court in the case of Iron Hardware (India) Co. V. Shamlal [ILR 1954 BOM 739], Order dated 14.01.1954, wherein it was observed that damages are compensation which a court of law gives to a party for the injury which he has sustained . Therefore, the present claim is out of the ambit of the provisions of the code. 23. The Corporate Debtor s next contention is that whether the NCLT is an executor / administrative court or not, is not the question in hand. Dealing with the judgement of Hon ble NCLAT in the case of Annapurna Infrastructure Pvt. Ltd. v. M/s Soril Infra Resources Ltd., the Corporate Debtor argues that though the Hon ble NCLAT has held that pendency of execution is not a bar to file insolvency proceedings and hence execution of an award can be done in NCLT. This is a settled law. But the question remains that this case was pertaining to lease rentals however the present case is not at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s a claim for unliquidated damages. Now the law is well settled that a claim for unliquidated damages does not give rise to a debt until the liability is adjudicated and damages assessed by a decree or order of a Court or other adjudicatory authority. When there is a breach of contract, the party who commits the breach does not eo instanti incur any pecuniary obligation, nor does the party complaining of the breach becomes entitled to a debt due from the other party . The only right which the party aggrieved by the breach of the contract has is the right to sue for damages. That is not in actionable claim and this position is made amply clear by the amendment in s. 6(e) of the Transfer of Property Act, which provides that a mere right to sue for damages cannot be transferred. 28. Further, in the case of E-City Media Pvt. Ltd. V. Sadhrta Retail Ltd., [CP 367/2009] the Hon ble Bombay High Court held that: If the clause in the present case is regarded as being a clause which stipulates the payment of a named sum by way of liquidated damages a debt will become crystallized only upon an adjudication of damages in a suit. Prior to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le claim, until and unless adjudicated. This is the first reason for not considering the liquidated damages as operational debt . 31. Liquidated damages are provided in certain legal contracts as an estimate of otherwise intangible or hard-to-define losses to one of the parties. As against that, the meaning of Operational Debt is a claim in respect of goods supplied, or services rendered as defined in section 5(21) of the Code. Therefore, it can be concluded that the impugned claim of damages, neither ascertainable nor crystallised, hence out of the ambits of the Operational Debt. This is the second reason for rejection. 32. In addition to the reasoning assigned in above paragraph, it is an admitted fact that the Petitioner had neither supplied any goods nor rendered any service to the other side, hence, there was no relationship of creditor on one hand and the debtor on the other hand as defined under section 5(21) of the Code. The contract was for the performance of Power Purchase Agreement wherein the Corporate Debtor had to set up a project before the Scheduled Commercial operation date which was 06.06.2011. The Corporate Debtor failed to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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