9911796707
TMI Blog2021 (5) TMI 609X X X X Extracts X X X X X X X X Extracts X X X X ..... ii. That pursuant to issuance of the said work orders, the applicant carried out the work as per the specifications of the work orders. iii. That during the course of the carrying out the work, the applicant kept raising Running Account Bills, which were prepared after the certification and verification of the quantity of the work at the site by the Corporate Debtor as well as the Rajasthan Vidyut Utpadan Nigam Ltd. and it was upon such certification and verification that the Running Account bills were passed by the Rajasthan Vidyut Utpadan Nigam Ltd. iv. That the corporate debtor only released ad hoc payment despite certification of the Running Account Bills. Thereafter, the work was completed and the Thermal Power Plant at Chhabra, Rajasthan was commissioned in the year 2015. v. That despite completion of the work, commission of the plant and after the lapse of the contractual one year period of defect liability and the raising of the Final Bill, the Corporate Debtor despite demands failed to make payment of the Bills, against which certain ad hoc payments were released. vi. That the Corporate Debtor admitted the liability for payment of the amount as claimed, as TDS on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... illion for which Indure is to be duly compensated. It was pointed out in all the said letters and emails that Indure will take remedial measures as per the Contract. The claims of Indure against Zillion are in excess of 25 crores. iv. That the slow progress at site is evident from the running bills submitted by Zillion, which shows that as on February 2011 (original completion period of the Unit 4) Zillion could only complete approximately 30% of the total work awarded to them. There were further deficiencies in providing services due to which the progress of work was slow and hampered several times. v. That as per clause 13 of the work order, Zillion was under obligation to submit steel reconciliation statement, which was admittedly not submitted till date despite several requests and reminders. As per the accounts maintained by Indure, Zillion has been issued 22,495 tonnes of steel out of which, Indure reserves its right of recovery of approximately 200 MT of steel amounting to more than one crore rupees. vi. That as per the contractual provisions, the final bills and payments were processed by Indure at its Head Office by their Authorised Representatives after taking into ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... educted and deposited on receipt of an invoice. Deposit of TDS does not amount to admission of the invoice. The final TDS is adjusted either at the end of the financial year or at the time of finally closing a contract. xiv. That none of the statements & ledgers filed by the Petitioner match, inter se. The said ledgers and statements are frivolous and created only for the purpose of the present litigation. xv. That it is further submitted that contrary to the provisions of the Code and the Rules formulated thereunder, there has been no effective service of the demand notice on the Respondent. The Respondent has not been served with the demand notice dated 16 November 2017. The Petitioner despite having the email addresses of the Directors of the Respondent failed to serve the said demand notice on the email addresses of the Directors contrary to the provisions the Code. xvi. That the reference of the disputes under the Contracts by the Respondent to be settled in accordance with the dispute resolution mechanism was much prior in point of time than the purported demand notice dated 16.11.2017. In view of the same at the outset, the present petition is liable to be dismissed as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts rejoinder and has asserted the following contentions: i. That the respondent has not given any reply in terms of the provisions of section 8(2) of the Code to the Demand Notice dated 16.11.2017 issued by the applicant. The respondent had replied to the previous notice dated 13.09.2017 vide its reply dated 23.09.2017 which was also not in terms of the provisions of Section 8(2) of the Code. The respondent did not point out to the existence of a dispute and or record of the pendency of the suit or arbitration proceedings. Further, the work required to be executed under the contract was done successfully on 30.06.2014 and the Completion Certificate was issued on 16.04.2015 by the Rajasthan Vidyut Utpadan Nigam Ltd. (Govt. of Rajasthan), the end user for which the work was being carried out and thereafter, the respondent company never ever invoked the arbitration right from the date of commissioning of the Thermal Power Plant and till the lapse of the defect- liability period. ii. That the mala fide and default was deliberate and intended as borne out from the fact that the TDS for the amount in default was booked on 04.03.2016 after issuance of the End User Certificate dated 16 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... receipt for dispatch of the Demand Notice dated 16.11.2017 shows its weight as 2900 grams (2.9 Kg) and Form 4 discloses the total number of pages of the entire Demand Notice as 548 pages. vii. That the Respondent/Corporate Debtor has failed to file any ledgers or statement of accounts or even the site measurement that the amount claimed or debt in default is not the correct figure or that the same is not made out. The Respondent/Corporate Debtor has not filed any balance sheet, Auditors Report or Directors' report for the relevant period from 2014 onwards to show that they have a booked claim for an amount of Rs. 25 crore as against the applicant. viii. That the contract/work order dated 17.08.2009 was initially awarded for only Unit 3, Stage I, Phase 2 of the Chhabra Thermal Power Plant and as per clause 3A thereof, subsequent awarding of the work for the Unit 4 was based on the performance of the applicant. Needless to say, the applicant was awarded the work for the Unit 4 based on its performance. Now, it does not lie in the mouth of the respondent to say that the applicant did not perform or execute the work satisfactorily. ix. That the applicant had successfully carr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ner/Operational Creditor has filed its written submissions and submitted the following: i. The Bar of Section 11 IBC 2016 is not applicable to the present case as Section 11(b) of IBC 2016 provides that this application is maintainable. That on the date of filing of the application, the applicant was not undergoing CIRP. ii. The requirements for an order of admission U/S 9 (5) of the Code have been duly met as under: 1) The application is complete (Sec 9(5)(a)]: The application does not suffer from any formal or technical defect. 2) There is no payment of the unpaid debt [Sec 9(5)(a)]: Objection regarding Bank Certificate not being as per provisions of the Code is not tenable in view of the Mobilox case. A Bank certificate is not mandatory. The bank certificate certify that the payment mentioned therein is the only one received from Corporate Debtor. The Corporate Debtor does not claim that it has paid any amount, which is stated to be in default. 3) Invoice or notice of payment received by Corporate Debtor [Sec 9(5)(c)]: Objection regarding non-receipt of actual invoices along with Demand Notice or Demand Notice per se is ex facie false otherwise there would not have bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 00 MT steel: Clause 13 of the work order provides for allowable irrecoverable wastage of steel of 1% of total work handled. Work handled as per Corporate Debtor was 22,495 MT, thus allowable irrecoverable wastage was 224MT and quantity reconciled jointly. Thus, as per contract it is no dispute or claim. d. Recoveries as per para 12 of objections: No quantification/raising of a liquidated claim for damages made till date in respect of the so called heads on which recovery sought. No invocation of arbitration clause or initiation of recovery proceeding still date. e. Fraudulent encashment of Bank guarantee after receipt of notice petition: As per Annual Report of the Principal - Rajasthan Rajya Vidyut Utpadan Nigam Ltd., Unit 3 and 4 stood completed on 19.12.2013 and 30.12.2014 respectively apart from painting and defect liability period after which payments were to be released. Completion certificate was issued on 16.04.2015. The Bank Guarantee was fraudulently encashed on 18.12.2017 after 2 years & after receipt of notice of petition on 14.12.2017 (Affidavit of service of petition) as returnable date of hearing was on 19.12.17 when appearance was entered on behalf of Corporate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eing granted by the Respondent. The works were admittedly not completed till 20.11.2014, when the termination notice was issued by the Respondent. iv. It is submitted that the Respondents had been proactively writing to the Applicant to fulfill their end of contract so as to proceed with the work orders, which were delayed numerous times due to no fault of the Respondents. In this regard several default, breach and risk and cost notices were issued by the Respondent to the Applicant. v. Furthermore, the disputes between the parties have also been referred under the dispute resolution mechanism to the Engineer for the Project vide communication dated 23.09.2017. vi. In view of the above facts, the following disputes arises in the present petition prior to the issuance of the demand notice: a. Whether the works were completed on time or not b. Whether the Applicant is liable to pay the liquidated damages to the Respondent. c. Whether the Applicant is liable to pay risk and cost claims of the Respondent. d. Whether the Applicant is liable to pay other claims of the Respondent. e. Whether Bank Guarantee was wrongly invoked by the Respondent. f. Whether there was any d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n view of the same as well the right to sue arises in favour of the Petitioner to recover its dues. The present petition having been filed in December 2017 is barred by limitation. xiv. It is submitted that in terms of the Hon'ble Supreme Court's judgment in BK Educational Services Private Limited v. Parag Gupta and Associates, provisions of the Limitation Act, 1963 are applicable to applications filed by financial and operational creditors under Sections 7 and 9 of the Code. Therefore, in the light of the Apex Court's judgment, the limitation period for filing any such application is 3 years from the date of cause of action. Further reliance is placed upon ONGC Vs. Reliance Energy Ltd. Arbitration Petition No. 905 of 2010, BOM HC. xv. It is submitted that the applicant is relying on TDS certificates as evidence for acceptance of dues on the part of the Respondent yet the same cannot be relied upon to adjudicate complex dues arising out of an engineering work order, rather the true reflector/prima facie evidence for existence of dues shall be audited balance sheets. xvi. In the present matter, the Applicant has conveniently missed out on filing its audited balance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amounts to admission of the claim of the petitioner by the Corporate Debtor. (c). The Application is within time, because the final bill was raised on 11.04.2016. (d). No dispute is pending before the arbitrator. 11. The Corporate Debtor/Respondent claims that:- (a). Since the contract was terminated on 10.11.2014 and the present application is filed in December, 2017, the present application is barred by limitation. (b). Deduction of TDS does not amount to acknowledgement of debt. (c) The emails exchanged between the parties show that the Operational Creditor had failed to perform the work as per the agreement and several warnings were given to the Operational Creditor between 02.06.2010 and 10.11.2014 through various emails and that has not been denied by the Operational Creditor, (d). The dispute can be raised even by filing the reply. Whereas the contention of the Operational Creditor is that exchange of all the emails was before submission of the final bill. 12. Now, in the light of aforesaid facts, we consider the submissions of the parties. In the course of hearing, the petitioner has raised that the Corporate Debtor had not filed any reply in response to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le Supreme Court clearly held that the dispute must exist before the receipt of the Demand Notice or Invoices as the case may be. Further, in the matter of "Innovative Industries Ltd. Vs. ICICI Bank and Anr." - (2018)1 SCC 407, in paragraph 29 held which reads as under: "29. The scheme of Section 7 stands in contrast with the scheme under Section 8 where an operational creditor is, on the occurrence of a default, to first deliver a demand notice of the unpaid debt to the operational debtor in the manner provided in Section 8(1) of the Code. Under Section 8(2), the corporate debtor can, within a period of 10 days of receipt of the demand notice or copy of the invoice mentioned in sub-section (1), bring to the notice of the operational creditor the existence of a dispute or the record of the pendency of a suit or arbitration proceedings, which is pre-existing - i.e. before such notice or invoice was received by the corporate debtor. The moment there is existence of such a dispute, the operational creditor gets out of the clutches of the Code." 21. Further, this Bench in the matter of "Vinod Mittal Vs. Rays Power Exports & Anr." in Company Appeal (AT) (Insolvency) No. 851 of 2019 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Code. CONCLUSION: 22. Having gone through the records and the law laid down by the Hon'ble Supreme Court and the precedents of this Tribunal, we are of the considered view that the correspondences i.e., e-mail/letters show that there is existence of disputes prior to issuance of Demand Notice. 23. Exchange of e-mails/correspondences, as referred above, clearly establishes that there is a pre-existing dispute between the parties regarding completion of the work and the Appellant/Corporate Debtor continuously made complaints regarding non-completion of work and deficiency in services, thereby loss caused to the Appellant/Corporate Debtor. 24. Therefore, it is quite clear that there is pre-existing of dispute regarding completion of the work and the learned Adjudicating Authority ought not to have admitted the Application under Section 9 of IBC filed by the Respondent/Operational Creditor. Even in the Reply filed by the Appellant/Corporate Debtor before the learned Adjudicating Authority pursuant to Section 9 Application, it is quite clear that there was sufficient material produced before the learned Adjudicating Authority and the learned Adjudicating Authority ought ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... read with clause no. 39 of GCC. It was also mentioned in that letter that the balance work shall be executed at the operational creditor's risk and the cost and excess payment in executing the balance work shall be recovered from the securities available to the Corporate Debtor under the contract. It was also mentioned that the damages will also be recovered from the Operational Creditor. 17. At this juncture, we would also like to refer to the contention of the petitioner's counsel who submitted that the letter dated 20.11.2014 was never received by the petitioner. In para 11 of the rejoinder, the petitioner has stated that "Strangely, after their so called alleged letter of termination dated 20.11.2014, the respondent never carried out the execution of the work under the contract either itself or through any other sub contractor or agency" but nowhere in the rejoinder, the petitioner has mentioned that the termination letter was not received by him. 18. We would also like to refer to the emails exchanged between the parties (from Page 14 to 22 of Written Submissions filed on 27.03.2021 by the Corporate Debtor) which show that the petitioner had sent several emails for r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the parties regarding the quality of the goods as well as the amount of debt and the matter had already been referred as per Clause 39.00 of the agreement (Page 57 of the Written Submissions filed on 27.03.2021) for Arbitration. Hence, we are of the considered view that there is pre-existing dispute prior to the issuance of second demand notice. 26. In view of decision referred (Supra), even no reply to the demand notice was sent in terms of Section 8(2) of the IBC, 2016, the Corporate Debtor can raise a dispute by filing the reply and that has been done by the Corporate Debtor. So, under such circumstances, we have no option but to reject the contention of the Operational Creditor that the Corporate Debtor has not raised the dispute in pursuance of Section 8(2) of the IBC, 2016 therefore, the reply cannot be taken into consideration. 27. So far as the second contention of the Operational Creditor that the deduction of TDS amounts to the acknowledgement of debt is concerned, at this juncture, we would like to refer to the contention of the respondent's counsel, who has placed reliance upon the decision in the matter of SP Brothers Vs. Biren Ramesh Kadakia reported as decided ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax at source." The Judgement dated 27th November, 2012 in Bigdot Advertising & Communications Pvt. Ltd. v. Union of India [CS(OS) No. 226/2000] was dealing with the question of the person who is liable once the TDS certificate is issued. It is not a precedent on the proposition that if a TDS certificate is issued, it amounts to admission of liability. In light of this, though the deduction of TDS by itself cannot be sufficient to impose liability, but on a totality of facts it is clear that the defendant is liable. 30. So for the reasons discussed above, we are of the considered view that in view of the decisions referred (supra), the contention of the petitioner that deduction of TDS amounts to acknowledgement of debt is not liable to be accepted. 31. Hence, we have no option but to reject this contention of the applicant that deduction of TDS amounts to acknowledgement of debt. 32. So far as the point of limitation is concerned, the contention of the petitioner is that since the final bill was raised on 11.04.2016, the limitation shall run from that day, whereas the contention of the respondent is that contract of the Operational Creditor had been terminated on 20.11.2014, th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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