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TMI Blog2020 (8) TMI 492X X X X Extracts X X X X X X X X Extracts X X X X ..... be released after completion of the work and issuance of the Completion Certificate. The Respondent No. 1 being a Corporate Debtor is due and payable retention money which is part of the main Bill thereby the Operational Creditor is well within the definition of Section 5(20) IBC - In the present case, the Demand Notice dated 01.03.2018 was received by the Corporate Debtor on 09.03.2018. However, they fail to bring to the notice of the Operational Creditor with regard to existence of dispute in their reply or even shown existence of dispute prior to the issuance of Demand Notice. The Respondent No. 1 had not raised any dispute which is existing prior to the issuance of Demand Notice. Further Section 3(2) of IBC define default. As per said Section, the default means non-payment of debt when whole or any part or instalment of the amount of debt has become due and payable and is not paid by the Debtor or Corporate Debtor as the case may be. The debt has been defined in Section 3(11) means a liability or obligation in respect of a claim which is due from any person and includes a Financial Debt and Operational Debt - In view of the definition of debt and default, the retention m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ational Creditor i.e., Respondent No. 2 herein was awarded a work on 19.11.2011 by the Respondent No. 1-Corporte Debtor for civil work of construction of Ginjar Hotel at Plot No. 15, Industrial Area, Phase No. 1, Chandigarh. As per the Work Order dated 19.08.2011 (at page 55), the payment terms have been mentioned, in Clause-4 of the Payment Terms, the Retention Money of 5% would be retained from every Running Account Bill and the release of Retention Money as per clause 8 i.e., terms of payment of tender document mentioned therein (page 61). It is the case of the Respondent No. 2- Operational Creditor that the Corporate Debtor, in terms of Work Order, 5% of the amount of every Running Bill was retained as Retention Money which was to be released after completion of Defects Liability Period of one year from the date of award of Completion Certificate and issue of Defect Liability Certificate to be issued by the Corporate Debtor to the Operational Creditor. The claim of the Operational Creditor Respondent No. 2 herein is that the Corporate Debtor retained the Retention Money and had not paid the same even after Defects Liability Period i.e., one-year period commenced from 31.03.201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting Authority i.e., beyond three years and hence the claim is time barred. v) There is pre-existence of dispute. In support of the grounds, leaned Counsel for the Appellant relied upon the judgment which will be discussed in later part of this judgement. 7. On the other hand, learned Counsel for the Respondent- Operational Creditor submitted that the cause of action for release of retention money commenced on 21.07.2015 and the Application was filed before the Adjudicating Authority on 27th April, 2018 was within a period of three years and contended that it is within the period of limitation. It is submitted that the retention money is towards the services rendered by the Operational Creditor to the Corporate Debtor since as per the payment terms 5% of the amount to be retained and the same shall be paid after completion of the work. Hence 5% of the amount is part of the main payment and it cannot be treated as separate money. It is also submitted that the entire construction work was completed to the satisfaction of the Corporate Debtor on 21.03.2014 which is evident from the fact that the Corporate Debtor, after being satisfied of the work done by the Operational Cre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing from the date on which the Employer shall have issued a Certificate of Completion comprising the whole work. The retention money shall be released after all failures viz, defect, imperfections, shrinkages are cured/rectified to the satisfaction of the Employer. 11. Further, the Corporate Debtor i.e., Respondent No. 1 issued Virtual Completion Certificate dated 04.04.2014 (at page 105 of the Paper Book), which is reproduced herein: Hind Inns Hotels Regd. Office: 15, Industrial Area-1, Chandigarh Date: April, 4th, 2014 VIRTUAL COMPLETION CERTIFICATE. M/s CTC Projects Pvt. Ltd. Sub: Issue of Virtual Completion certificate towards SITC of Civil Wroks of Our Hotel Project at Hind Inns Hotels Ltd. Dear Sir, This has in reference to our Work Order Dated-Aug, 19th, 2011 The above said work is certified to be virtually completed as on March, 31st, 2014 subject to the rectification of defects if any, as pointed out by engineering/operations Department. The defect Liability period for the subject work shall commence on March, 31st 2014 and will cover the entire period of One year up to April, 1st 2015. We ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Water accumulation is observed in -1 marking first basement. Please get the slope redone, so that water could flow towards the drain line or towards-2 basement through ramp area. Attached photo for your reference. Ward regards, 14. Vide E-mail dated 14.07.2015 (page-118), the Operational creditor categorically replied to the above e-mail by specifically stating as under: Dear Sir, We would like to submit that we have completed and handed over your property in September, 2013. We have completed the above work as per the site instructions/details of drawings issued from time to time. Earlier we have attended on your problems and rectified to your satisfaction. We have also completed our Defect Liability Period successfully in March, 2015. As on today, this is to be treated as maintenance issue and shall be taken care by the owner itself. .. 15. In our view the e-mail of the Corporate Debtor dated 13.07.2015 was rightly replied by the Operational Creditor and stated that the issue which was raised by the Corporate Debtor in their e-mail dated 13.07.2015(Page-119) is only a maintenance issue and shall be taken care by the owner itself. Further the Cor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce Section 5(21) of IBC is reproduced. 5(21) operational debt means a claim in respect of the provision of goods or services including employment or a debt in respect of the payment of dues arising under any law for the time being in force and payable to the Central Government, any State Government or any local authority; 18. The stand of the learned Counsel for the Appellant is that the Respondent No. 2 herein does not fall within the definition of Operational Creditor as defined in Section 5(2) of IBC. For the beneficial reference the said Section is reproduced herein: 5(20) operational creditor means a person to whom an operational debt is owed and includes any person to whom such debt has been legally assigned or transferred 19. We are of the view that the Respondent No. 1 being a Corporate Debtor is due and payable retention money which is part of the main Bill thereby the Operational Creditor is well within the definition of Section 5(20) IBC. 20. As per Section 8(1) IBC, an Operational Creditor may, on the occurrence of a default deliver a Demand Notice of unpaid operational debt copy of an invoice demanding payment of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se cases where in the facts of the case, Section 5 of the Limitation may be filed to condone the delay in filing such Application. Learned Counsel for the Appellant relied upon above decision contending that the right to accrue to the Respondent No. 2 occurred on 01.04.2015 and if the limitation of three years is taken, the Application under Section 9 IBC was to be filed on or before 01.04.2018. However, Respondent No. 2 filed Application under Section 9 on 27.04.2018 which is barred by limitation. Further learned Counsel for the Appellant relied upon judgment of the Hon ble Supreme Court in the matter of Jignesh Shah and Another Vs. Union of India and Another reported in 2019 SCC Online SC 1254 at paragraph-12, the Hon ble Supreme Court also held at paragraph 12 as under: .. 12. .. On the facts of this case, it is clear that the winding petition was filed beyond three years in August 2012, which is when, even according to IL FS, default in repayment had occurred, it is barred by time. .. 26. The Hon ble Supreme in the very same paragraph held: .. with the introduction of Section 238 A into the Code, the provision of Limitation Act applies to Applicat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the right to recover the retention money is accrued to the Operational Creditor on 01.04.2013. However, the debt due from 27.07.2015 i.e., when Ginjar Hotel sent an e-mail to the Operational Creditor. Therefore, we are of the view that the Application filed by the Respondent No. 2 herein is not time barred. Therefore, the judgment relied upon by the learned Counsel for the Appellant will not be of any assistance. 28. Learned Counsel for the Respondent also relied upon judgment of this Tribunal in the matter of Sudhir Sales Services Ltd. Vs. D-Art Furniture Systems Pvt Ltd. Company Appeal (AT)(Insolvency) No. 327 of 2018. In paragraphs 25 it is held- In Innoventive Industries Ltd.(Supra) , the Hon ble Supreme Court held that pre-existing dispute is the dispute raised before demand notice or invoices was received by the Corporate Debtor . Any subsequent dispute raised while replying to the demand notice under Section 8(1) cannot be taken into consideration to hold that there is a pre-existing dispute. Further, at paragraph-26, this Hon ble Tribunal held: In Mobilox Innovations Pvt. Ltd.(Supra) , the Hon ble Supreme Court held that a dispute truly exists i ..... 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