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TMI Blog2021 (3) TMI 684X X X X Extracts X X X X X X X X Extracts X X X X ..... called the 'Adjudicating Authority') in C.P. (IB) No. 1499/KB/2019. The Corporate Debtor M/s. Pearson Drums & Barrels Pvt. Ltd. is the Respondent in this appeal. 2. The Appellant has filed the appeal on the ground that the Adjudicating Authority has gone beyond the mandate of Section 9 of the IBC in passing the Impugned Order. He has further claimed that unpaid operational debt has been fully paid off in accordance with the full and final settlement and no invoice or notice for payment of any debt was given by the Operational Creditor thereafter, before filing the application under Section 9 of IBC. 3. The facts of the case as presented and argued by both the parties are that the Respondent-Corporate Debtor and the Appellant-Operational Creditor were engaged in business transactions in which the Corporate Debtor failed to pay an amount of Rs. 8,82,11,723/- to the Operational Creditor which was due and payable. Consequently, the Operational Creditor filed Company Petition No. CP(IB) No.513/KB/2017 under Section 9 of the IBC for an operational debt of Rs. 8,82,11,723/- as on 9.8.2017, which includes principal debt of Rs. 4,75,28,807/- and interest @ 21% per annum. The Adjudicating ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Operational Creditor, which was followed by a demand notice dated 27.06.2019 under IBC for payment of Operational Debt. Subsequently, the Operational Creditor filed a fresh application under Section 9 of the IBC seeking initiation of CIRP against the Operational Debtor for non-payment of total due of Rs. 9,41,85,391/- in accordance with the terms of the Settlement. 6. The second application under Section 9 of the IBC was dismissed by the Adjudicating Authority by holding that it was not the forum where parties could seek implementation of the Settlement Agreement and that too after the Appellant had accepted a major portion of the amount due. The Adjudicating Authority also held that the amount prayed for by Operational Creditor as operational debt would lead to unlawful enrichment in case the application is accepted and that the Operational Creditor could take resort to other legal remedies available for enforcement of the Settlement Agreement if he so chooses. 7. The Respondent filed reply upon which a rejoinder was filed by the Appellant. Written submissions were filed by both the parties and in compliance of the order dated 19.1.2021 of this Tribunal, the respondent also pl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovides that "No failure on the part of the appellant to exercise and any delay in exercising, any right remedy in respect of any provision of this Settlement Agreement shall operate or be termed as waiver of such right or remedy", shall work in his favor. He has also claimed that since no violation or novation of any of the terms of the Settlement Agreement has taken place, which according to clause 13 of the Settlement Agreement had to be made in writing, Section 62 of the Contract Act shall also not be applicable in the present case. He has cited the judgments of the Hon'ble Supreme Court of India in the case of Prithvichand Sablok v/s. S.Y. Shinde 1993 3 271 (paras 6 and 7) and Sunil Mehra v. Rajinder S. Gulati (2008) 1 Bom CR 359 (paras 8, 11 and 13) where, inter alia, a similar default clause has been held to be valid and enforceable and not to be in the nature of a penalty. 10. The Learned Counsel for the Respondent, in support of his case, has claimed that some post dated cheques (PDCs) were returned to the Respondent by the Appellant on mutual agreement, and when it appeared that the Appellant was attempting to take wrongful advantage of the terms of the Settlement Agreem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Kolkata Bench or in the appeal/rejoinder before this Hon'ble Tribunal. He has also pointed to the gap in the Chart submitted by the Appellant showing default in payments wherein the column relating to the date of cheque deposit has been left blank, and since the PDCs were deposited in the bank for realization after delay, the late/delayed payments cannot be attributed to the Respondent-Corporate Debtor. 11. To find out whether delay in payment of instalments constituted default under the terms of the Settlement Agreement leading to triggering of the revival of the old application or filing of a fresh application under Section 9 of the IBC, we turn our attention to the issue whether such a triggering should indeed have taken place. Focusing on the issue whether time is of essence in the Settlement Agreement, we peruse Clause 6 of the Settlement Agreement which provides the timeline according to which the Respondent was to make payments in 37 instalments totaling Rs. 3.70 crores as full and final settlement, starting from January 15, 2018 and thereafter on the 21st of each month from February, 2018 till January, 2021. It is clear from the chart submitted by the Appellant showing the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 3.70 crores has been paid into the account of the Operational Creditor by January 2021, a statement that has not been contested by the Corporate Debtor. 13. All this gives us sufficient reason to accept the contention of the Respondent that time was not of essence in the Settlement Agreement. Hence any consequence upon default due to delay in payments cannot fall on the Respondent. From the observation of facts presented above, we come to this inference that a fresh application under Section 9 of IBC cannot be triggered in accordance with Clause 11 of the Settlement Agreement. 14. We find that the reliance placed by the Respondent on the judgments in the cases of General Manager, Northern Railway and Anr. Vs. Sarvesh Chopra (Civil Appeal 1791 of 2002) and State of Andhra Pradesh vs. M/s. Associated Engineering Enterprises, Hyderabad (AIR 1990 AP 294) support the contention that once the Respondent accepts payment without retaining any right under the terms of settlement and without any demur, time does not remain to be an essence in the Settlement Agreement. 15. Since the Appellant accepted delayed payments of certain instalments without raising a demur or objection, his condu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 9 of the IBC. 18. Both the parties have alluded to Section 55 of the Indian Contract Act, 1872 in support of their respective contentions. It is useful to reproduce Section 55 of the Indian Contract Act, 1872:- Effect of failure to perform at fixed time, in contract in which time is essential - When a party to a contract promises to do a certain thing at or before a specified time, or certain things at or before specified times, and fails to do any such thing at or before the specified time, the contract, or so much of it as has not been performed, becomes voidable at the option of the promisee, if the intention of the parties was that time should be of the essence of the contract. Effect of such failure when time is not essential.--If it was not the intention of the parties that time should be of the essence of the contract, the contract does not become voidable by the failure to do such thing at or before the specified time; but the promisee is entitled to compensation from the promisor for any loss occasioned to him by such failure. Effect of acceptance of performance at time other than that agreed upon.-- If, in case of a contract voidable on account of the promiso ..... X X X X Extracts X X X X X X X X Extracts X X X X
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