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TMI Blog2021 (2) TMI 875X X X X Extracts X X X X X X X X Extracts X X X X ..... over is done. The reliance on clause 46 of the work order is also blatantly Wrong as same comes into effect only at the final stage of testing, commissioning and handing over. It in denied that the Operational Creditor did not supply materials of the approved make and that defective materials were supplied. It is nothing more than an unsubstantiated contention taken after receiving the entire amount from the principal contractor. In respect of the definition of dispute , the law is now very much settled by several courts, most importantly the decision of the Hon ble Supreme Court in Mobilox (supra) in which it is clearly observed that the Adjudicating Authority is to examine at the stage of admission whether there is a plausible contention which requires further investigation and on assertion of fact a dispute is supported by evidence. The expression used in Section 8(2) of the Insolvency Bankruptcy Code existence of a dispute, if any is very significant, because the Legislature is deemed not to waste its words or to say anything in vain, hence every word is significant - A view has also been expressed that the definition of dispute as per Section 5 of Insolvency Bankr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d (hereinafter referred to as Corporate Debtor/Respondent ). 2. The Corporate Debtor is a private limited Company incorporated on 15.07.2019 under the Companies Act, 2013, with the Registrar of Companies (RoC), Ernakulam, Kerala. Its CIN is U45309KL2019PTC058816. Its registered office is at Building No. XVII/180, Marymatha Square, Arakuzha Road, Muvattupuzha, Ernakulam, Kerala-686661. Therefore, this Bench has jurisdiction to deal with this application. 3. The present application has been filed before this Tribunal on the ground that the Corporate Debtor failed to make payment of a sum of ₹ 2,26,30,208 (Rupees Two Crore Twenty-Six Lakhs Thirty Thousand Two Hundred and Eight only) as principal and ₹ 4,07,093 (Rupees Four Lakhs Seven Thousand and Ninety-Three only) as interest, from the date of default. Case of the Operational Creditor: 4. The Corporate Debtor is a construction company, registered with ROC, Kerala. The Corporate Debtor, which was originally incorporated as a partnership firm by name Marymatha Construction Private Limited, obtained the contract for the construction of the Goa Shipyard office building at Vasco da Gama, Goa. 5. The Operat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6.10.2018 is ₹ 5,79,653. 9. Similarly, the Operational Creditor raised a total of 7 interim bills for the Electrification work totalling ₹ 1,26,38,127/-. Out of this amount, after reducing the interim amounts received (₹ 1,07,73,241/-) and also deducting the TDS (₹ 2,14,205/-) and retention amount (₹ 10,71,028/-), the outstanding amount is ₹ 5,79,653/. The working of computation of default at page 209 of Operational Creditors Application shows how the amounts have been adjusted. It is the last bill dated 30.09.2019 that is pending. The total principal outstanding is therefore ₹ 2,26,30,208 (₹ 2,20,50,555 (HVAC) ₹ 5,79,653 (Electrification). Nominal interest of ₹ 4,07,093/- calculated as the rate of 8% per annum (banking rate on deposits) has also been claimed as per the Interest Act, 1978. The Operational Creditor, being a MSME is also entitled to interest on amounts under Section 16 of the MSME Act, 2006. 10. Meanwhile, the Corporate Debtor on 28.08.2019 issued a letter stating that Marymatha Construction Company a partnership firm is converted into a private Limited Company and registered under the Companies Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Debtor: 14, The Corporate Debtor has filed a reply to the application on 07.02.2020, denying all allegations. In brief, the Corporate Debtor s defence are as follows: Firstly, the payment terms as agreed between the parties are: - (a) Electrical work: 80% of the BOQ rate for the supply of equipment's excluding circuit wiring and point wiring (for circuit and point wiring 60%) within one month of the bill submission. Corporate Debtor has to furnish a bank guarantee for the balance 10% (difference in value between 70% and 80%) of BOQ rate for the corresponding materials supplied which will be valid for 6 months . (b) In respect of HVAC work the payment shall be done against 80% of the BOQ rate for the supply of equipment within one month of the submission of bill. However, they should furnish a bank guarantee for the balance 10% difference in value between 70% and 80%) of BOQ rate for the corresponding materials supplied which will be valid for 6 months . 15. Secondly, supply of equipment/material is complete only when the Corporate Debtor approve the detailed technical specification of the item supplied by the Operational Creditor. It is also required to sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rity Deposit can be released only on successful completion of the work and on completion of DLP. But as per the terms of the work order, no amount is due to the Operational Creditor from Corporate Debtor with respect to HVAC work. The invoices raised by Operational Creditor is not in tune with the terms of the work order. As per the terms of the work order Corporate Debtor is bound to release only 70% of the cost of the material upon satisfactory supply of materials. The chart below will give a clear picture of the amount which Corporate Debtor ought to have paid to the Operational Creditor and the amount actually paid and the excess amount held by the Operational Creditor. 18. They further submitted that no amount is due to Operational Creditor by MIPL in connection with HVAC work. An amount of ₹ 43,67,137/- is excessively paid to Operational Creditor and the same is liable to be returned. In addition to the above sum, an amount of ₹ 47,32,177/- is liable to be recovered from VKBS for supply of defective materials/equipments. 19. The Corporate Debtor also submitted that the Operational Creditor mentioned about 7 invoices in respect of Electrical work and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 53,50,852. It appears from the record that the time period for completion for work was for a period of 11 months i.e. from 01.01.2019 to 30.11.2019. The Corporate Debtor also admit that the work order was provided to the Operational Creditor. On 07.09.2019 Corporate Debtor sent an e- mail stating that: - QUALITY ISSUES IN 1F AND DELAY IN ELECTRICAL WORKS This is to inform you that 1F electrical works which was started in 14 Mar 2019 hasn t been completed till date. Your team had started work in 2F on 6 May 2019 and 3F on 05 Jun 2019 but only 10% works is completed in 2F and 3F. This shows the utter failure of your execution team at site and' office in mobilizing workforce and tack of proper planning. Quality of work is the worst as you can see in the attached photographs. No proper supervision is done by your execution team as your subcontractor is working at his own will. We had already informed your execution team several times to monitor the works done at site. The same was earlier conveyed to Mr. Jihendra, Mr. Rajesh Dubey and Mr. Vivek Singh several times during their visits at site and through mails. But your execution team is showing no interest in completi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , walls and partition) electrical and HVAC work inside the building i.e. Basement to Sixth floor on or b. Testing and commissioning of the HVAC work by 15.02.2020 and electrical work by 20.02.2019 c. External services related to electrical works will be completed by 15.01.2020 Plant room pedestals in terrace floor to be finished by Marymatha on 30.11.2019. Marymatha needs to provide temporary doors at all floors for AHU rooms, electrical rooms, server r0oms etc after the panel errection by 30.11.2019 Internal and External works like cabling, street lights, bollard lights, street pole, earthing works, and Lightening arrestor etc. to be studied in detail by VKBS and a micro level programme should be submitted to Marymatha after discussion with site engineers and further approval from Mr. CP Rajesh on or before 27-11-2019 VKBS has requested to de scope labour portion of external cabling works (300sqm) - from their scope of work as supply portion was already descoped earlier which will be discussed with the directors of Marymatha and decision will be taken later. VKBS has committed to increase their labour strength as per the attached schedu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmunications and correspondences between the parties produced would show that there is a pre-existing dispute between the parties, much prior to the demand notice, regarding the quality of the work done, which is not being solved. It is also evident that the Operational Creditor also failed to fulfil the commitment made in the minutes of the meeting. 29. In this connection, para No.40 of the decision of the Hon ble Supreme Court in Mobilox Innovations Private Limited v. Kirusa Software Private Limited, [Civil Appeal No.9405 of 2017 dated 21.09.2017] can be referred to which reads: It is clear, therefore, that once the operational creditor has filed an application, which is otherwise complete, the adjudicating authority must reject the application under Section 9(5)(2)(d) if notice of dispute has been received by the operational creditor or there is a record of dispute in the information utility. It is clear that such notice must bring to the notice of the operational creditor the existence of a dispute or the fact that a suit or arbitration proceeding relating to a dispute is pending between the parties. Therefore, all that the adjudicating authority is to see at this s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... patently feeble legal argument or an assertion of fact unsupported by evidence. 31. Finally, a conclusion is hereby drawn that this is not a case where the impugned Debt and the alleged default was free from existence of plausible dispute or merely a feeble argument; but duly supported by corroborative evidences. Therefore, it cannot be proceeded under the Insolvency Code so as to commence CIRP by declaring the Debtor insolvent or bankrupt. It is worth to put on record that the scope and jurisdiction of this Tribunal is limited and also confined to the provisions of Insolvency Code while dealing with application filed under Section 9. Therefore, the impugned debt in question does not fall within those ambits. However, the claim under any other law, if permissible, can be pursued by the applicant as prescribed under that law. Any observation, legal or factual, shall not prejudice the rights of the applicant, if to be exercised under any other law. 32. With the aforesaid observations and considering the totality of the facts and circumstances of the case and the law applicable, this application does not survive for consideration under the Insolvency and Bankruptcy Code. Hence, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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