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TMI Blog2021 (3) TMI 207X X X X Extracts X X X X X X X X Extracts X X X X ..... fault means non- payment of debt, but in order to trigger section 9 of the IBC an operational creditor is required to establish a default for non-payment of operational debt as defined in section 5(21) of the IBC, which 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 if a person fails to establish that then they cannot initiate CIRP under section 9 of the IBC. Now it is the settled principle of law that the National Company Law Tribunal is not recovery court rather when a default of either financial debt or operational debt occurred in that case financial creditor or operational creditor may file an application for initiating corporate insolvency resolution process under section 7 or section 9 respectively. The settlement agreement on the basis of which the present application is filed by the applicant does not come under the definition of operational debt - As default of instalment of settlement agreement does not come within the definition of operational debt, hence, we are not inclined to admit the application rather we are of the view the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n accordance with terms of the MSA. Invoices were raised by the operational creditor for the same from time to time. But despite the operational creditor supplying the copper cathodes to the corporate debtor, the corporate debtor failed to make payment to the corporate debtor in accordance with the terms of the MSA. (iv) Further, the operational creditor and the corporate debtor entered into the settlement agreement on November 20, 2018 and under the settlement agreement, the corporate debtor agreed to pay the admitted liability of ₹ 63,81,63,368 which was due and payable as on August 31, 2018 together with interest at 10.9 per cent. per annum compounded monthly, to the operational creditor pursuant to the payment schedule set out therein. The entire outstanding amount was to be paid by the corporate debtor to the operational creditor by April 30, 2019. (v) Further, after August 31, 2018 and till December 10, 2018 a net amount of ₹ 12,30,59,615 was paid to the operational creditor by the corporate debtor towards the outstanding amounts due and payable to the operational creditor. (vi) Further, pursuant to further discussions between the operational creditor and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in respect of the reply to the demand notice dated October 12, 2019 sent by the corporate debtor to the operational creditor : (a) The events in relation to the purported loss on account of non- supply of copper cathodes arose in 2016-17. However, no debit note was raised by the corporate debtor in respect of the same. Thereafter, on account of delay in lifting stock by the corporate debtor, the operational creditor had raised a debit note on the corporate debtor for the interest charges towards such delay by the corporate debtor. The same was communicated to the corporate debtor vide e-mail dated February 21, 2017 by supplying the relevant balance ledger from April 1, 2016 to February 20, 2017. The amounts in the debit note were subsequently adjusted along with other amounts mutually owed between the parties following discussions between the parties. This adjustment was agreed to by the corporate debtor. (b) The operational creditor has taken into account the payment of ₹ 12,30,59,615 made by the corporate debtor as also adjustments on various counts such as price fixation, debit and credit notes issued and the amount of ₹ 4,575 crores retained and applied by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... crores is due and payable by it to the operational creditor. From the same, it is clear that the corporate debtor has no intention to pay the amounts due and payable to the operational creditor and is attempting to evade its liability to pay such amounts in its reply to the demand notice. 5. The corporate debtor in its reply dated January 29, 2020 contended that : (i) Clause 2.1.6 of the master sale agreement dated January 27, 2016 stipulates that the exposure of the operational creditor to the corporate debtor on any day shall not exceed the INR equivalent to USD 7.5 million (the maximum exposure amount ) which was to be determined as per the conversion rate on that date. As such, under the abovementioned clause the corporate debtor had a limit of USD 7.5 million which was subject to change in terms of clause 2.1.7 of the master sale agreement. In the present petition, it is the case of the operational creditor that the date of default is May 15, 2019 and amounts were due on the said date. It may be mentioned that on May 15, 2019 the master sales agreement read with the contract for supply of material dated April 25, 2019 was operational and as such the corporate debtor was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of contract for supply for material of copper cathode to be made in the year 2019, the operational creditor coerced the corporate debtor to enter into a one-sided settlement agreement in its favour without taking into account the disputes and issues raised by the corporate debtor. (iv) The corporate debtor and the operational creditor agreed to reduce the outstanding liability of ₹ 63,81,63,368 as on August 31, 2018 to ₹ 52,50,00,000 by November 30, 2018 and only in the event the corporate debtor and the operational creditor fail to enter into a further contract for supply of material for 2019 by December 21, 2018 then the corporate debtor is liable to reduce the outstanding amount to zero balance by April 30, 2019. (v) Further, the said amount also includes accounts of third parties such as Lykos India P. Ltd., the amount outstanding to which in the settlement agreement was shown as approximately ₹ 19.24 crores. As such, on the date of entering into the settlement agreement, the corporate debtor was well within its limit of the maximum exposure amount of INR equivalent of USD 7.5 million as in the settlement agreement also the provisional outstanding amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent agreement and continued to breach the said master sale agreement in the following manner : (a) Payment on the part of the corporate debtor is dependent on supply of materials by the operational creditor. (b) On many occasions, there were quality issues with the material supplied by the operational creditor and the corporate debtor had flagged the said issues to the operational creditor. (c) The operational creditor failed and/or refused to supply and deliver copper cathodes to the corporate debtor upon requisition being placed by the corporate debtor on the basis of workable letter of credit on several occasions as a result of which the production of the corporate debtor at its manufacturing unit got affected adversely and the corporate debtor suffered huge loss and damage to that effect. (d) Vide e-mail dated November 24, 2018 TDT Copper Ltd., informed Trafigura that GST amount of ₹ 5 crores (approximately) is subsumed in the agreed amount of ₹ 63.81 crores which is yet to be passed to TDT by Trafigura and whatever interest calculated and shown in the agreed amount requires revisit and rectification by either deducting GST payable to it from total agree ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ount Annexure-4 424,547,927.00 JW material processed and returned invoiced with GST. Annexure-5 397,814,714.00 JW material received Amount receivable by TDT 249,518,655.41 (xii) Under the demand notice dated September 24, 2019 the operational creditor has demanded a sum of ₹ 64,13,59,330 (approximately) whereas under the present petition under section 9, the amount claimed is ₹ 59,72,40,162. (xiii) The operational creditor has also filed a commercial civil suit bearing Commercial Civil Suit No. 2 of 2020 against TDT Infra Ltd., seeking a money decree of the same alleged outstanding dues, which the operational creditor has claimed to be due and payable by the corporate debtor in the instant proceeding. 6. The facts of rejoinder filed by the operational creditor in short is that : (i) The disputes raised by the corporate debtor have been either raised for the first time after the issuance of the demand notice, or are disputes which were resolved between the parties at the time ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... operational creditor after the execution of the settlement agreement. (ix) The parties did not enter into a fresh contract for the supply of materials for 2019 by the cut-off date stipulated in clause 5(c) of the settlement agreement, i. e., December 21, 2018 as claimed by the corporate debtor. (x) The corporate debtor was required to reduce the entire outstanding amount to zero by April 30, 2019 (subsequently extended to May 15, 2019). 7. We have heard learned counsel appearing for the petitioner and perused the averments made in the application and the documents enclosed with the same. 8. Learned counsel for the petitioner submitted that earlier the petitioner had rendered service and in lieu of that the petitioner was entitled to get the defaulted amount but, in the meantime, there was a settlement between the parties and a settlement agreement dated November 20, 2018 was executed between the parties and which is extended till May 15, 2019. He further submitted that as per the settlement agreement when the corporate debtor fails to pay the amount then the petitioner sent a demand notice under section 8(1) of the IBC which was duly delivered upon the corporate debtor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as become due and payable and is not paid by the debtor or the corporate debtor, as the case may be ; and debt is defined under section 3(11) of the IBC and same is quoted below : 'debt' means a liability or obligation in respect of a claim which is due from any person and includes a financial debt and operational debt. When we shall read all three definition together then it can be said that definition of debt as defined under the IBC does not mean the operational debt only rather it includes financial debt as well as liability or obligation in respect of a claim which is due from any person and default means non- payment of debt, but in order to trigger section 9 of the IBC an operational creditor is required to establish a default for non-payment of operational debt as defined in section 5(21) of the IBC, which 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 if a person fails to establish that then they cannot initiate CIRP under section 9 of the IBC. 11. Now it is the settled principle of law that the National Company Law T ..... X X X X Extracts X X X X X X X X Extracts X X X X
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