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TMI Blog2021 (5) TMI 609X X X X Extracts X X X X X X X X Extracts X X X X ..... ply to that demand notice but after appearance, the Corporate Debtor has filed the reply and annexed the emails exchanged between the parties. There are several emails exchanged between the parties regarding the termination of contract letter dated 20.11.2014 and dispute being raised regarding the quality of the work and the violation of the terms and conditions of the contract by the Corporate Debtor, which compelled the Corporate Debtor to cancel the contract - petitioner has failed to produce any document to show that in the light of the email exchanged between the parties, the termination of contract was recalled. The documents placed by the Corporate Debtor on record have established that there was a pre-existing dispute between 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 for Arbitration - 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 - Also, the deduction of TDS amounts to acknowledgement of debt. Time Limitati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lant 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 the said amount was deducted and deposited to the credit of the applicant from time to time, though the payment against which the said TDS was booked was never released. vii. That on non-receipt of any payment from the Corporate Debtor, the applicant issued a demand notice dt. 13.09.2017 u/s. 8 of the Code for the defaulted amount of ₹ 8,34,18,876/- along with accumulated interest till August, 2017 of ₹ 2,41,38,406/- and future interest from September, 2017 onwards @ 18% per annum, which debt is admitted as the TDS has been booked on the same and deposited to the credit of the Applicant. viii. That the Corporate Debtor replied to the notice on 23.09.2017 without giving any record of any dispute on the debt in the form of pending suit, arbitration or any other proceedings. ix. That on 13.11.2017, the applicant file ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er 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 account all recoveries as stipulated in the Contract. Just receipt and verification of quantity of invoices at Indure site office do not confirm to the outstanding dues payable to any vendor. In fact admittedly, the final invoices have never been verified or approved by the Indure till date. vii. In this case, after final checking and reconciliation of the accounts and as per the terms of the contract, it was found that the following recoveries are to be made from Zillion: a. Liquidated damages, b. Amount to be recovered on account of reconciliation of steel, c. Overcharging for contract not being executed as per the supplementary orders, d. Overhead charges, e. Idling and prolongation: charges incurred by Indure due to inordinate delay by Zillion, f. Loss of profit, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 being not maintainable. xvii. That in respect of the first demand notice dated 13.09.2017, to which the Respondent duly responded on 23.09.2017, it was clearly mentioned by the Respondent in its reply that Zillion has not provided comprehensive invoices and the ones annexed to the purported demand notice are mere cover notes of the said invoices. All the documents as mandatory as per the Code, which form part of the invoices have not been provided.. xviii. That as per Section 9 (3)(c) of the IBC, 2016, the operational creditor has to submit a copy of the Certificate from the financial institutions maintaining accounts of the operational creditor confirming that there is a payment of an unpaid operational debt by the Corporate Debtor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 16.04.2015. In acknowledgement and admission of their liability to pay the defaulted amount, the respondent has booked TDS on the debt amount and has not paid the same. The respondent had been irregular in the payment of the amount and nonpayment of the complete amount of debt has resulted in default. iii. That in evidence of the fact that no dispute was in existence as from the date of commissioning of the Thermal Power Plant on 30.06.2014 and till the completion of the work and issuance of the End user Completion certificate on 16.04.2015, the respondent did not encash the performance Bank Guarantee of ₹ 75,00,000/- as against their alleged claim of crores of rupees and even not until issuance of the first demand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .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 carried out the work under the contract and even the subsequent work under the contract and completed the same to the satisfaction of the actual user or principal i.e. Rajasthan Vidyut Utpadan Nigam Ltd. Thereafter, with permission of the respondent demobilized the site completely as the work was successfully performed. Such demobilization of the site could not have been permitted if the work was not completed or if there existed any dispute. Only payment due and payable to the applicant were remaining. x. That the letters and e-mails referred to in para 6 of the objections/reply of the respondent do not raise any dispute but pertains to pointing out of issues during the time when the work unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 been a specific objection in para 13 of the objections regarding there not having ever received Invoice No. 62A and 24A but there is no invoice no. 62A or 24A, it is only topological error at one or two places. 4) Demand Notice not served on E-mail ID of directors: Not mandatorily required under IBC, 2016. The demand notice was served at the registered office on 18.11.2017. 5) No notice of dispute has been received (Sec 9(5)(d)): No dispute made out ex facie in the Reply Notice dated 23.09.2017 or objections to petition dated January, 2018. There are sham and moonshine objections namely: a. Not completed within time as stipulated in contracts and time barred cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Debtor. The work was duly completed and Bank Guarantee encashed during pendency of petition and when interim relief to restrain encashment had been prayed for in the instant petition. No arbitration clause invoked and no exact quantification of claim made nor raised till date from alleged date of dispute i.e. 20.11.2014. f. Deposit of TDS: The Corporate Debtor has deposited TDS on amount claimed to be due by applicant, which affirms that there is no dispute. The TDS still stands deposited to the credit of the applicant but amount of invoices not paid. Last TDS was booked and deposited on 23.07.2016. No reversal of entries till date or initiati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect 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 delay in release of payments by the Respondent. g. Whether time was the essence of the Contract vii. It is a settled law that existence of dispute does not require exchange of legal notices amongst the parties rather only official communication with regard to the failure to execute a contract shall amount to existence of prior dispute. [Reliance is placed upon Sandvik Asia Pvt. Ltd. Vs. Indure Pvt. Ltd. Company Appeal (AT) (Insolvency) No. 737 of 2019] viii. It is submitted that depositing of TDS does not amount to accepting any liability as asserted by the Applicant under the Code and any s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 sheets which are likely to reflect dues owed to the respondent and in absence of the same this Tribunal cannot effectively adjudicate upon the application. That the alleged amount due to the Applicant cannot be corroborated by mere ledger amongst the parties. [Shailesh Sangani Vs. Joel Cardoso Company Appeal (AT) (Insolvency) No. 616 of 2018) 7. We have heard the Ld. Counsels for the petitioner as well as the respondent and perused the averments made in the application, reply, rejoinder and written submissions filed on behalf of the respective parties. 8. Ld. Couns ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies 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 second demand notice. Therefore, in terms of Section 8(2) of the IBC, the Corporate Debtor cannot raise any dispute at this stage. 13. The contention of the Petitioner's counsel is that since no dispute has been raised within 10 days from the receipt of the demand notice, therefore, it is no dispute. 14. At this juncture, we would like to refer to the recent judgment of the Hon'ble NCLAT in the Company Appeal (AT) (Insolvency) No. 548/2020, where the similar question was raised. The relevant portion of the dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovided 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 dated 18.11.2019 held in paragraph-11 as under: 11. Having gone through the matter and on considering record, there remains hardly any doubt that the earlier correspondence shows that between the parties there were disputes regarding installation of the project as well as functioning of the same. Although the project had been commissioned for which Completion Certificate had been issued, still if disputes had arisen between the parties regarding the installation and functioning of the project, the O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ellant/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 to have considered the materials placed before it. 25. We are of the considered view that the learned Adjudicating Authority should have considered the substantial material placed before it in its correct perspective and law laid down by the Hon'ble Supreme Court in this regard, before passing the Impugned Order dated 04.06.2020 thus committed error. 26. It is re-iterated that the Code is a beneficial legislation intended to put the Corporate Debtor on its feet and it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 recall of the termination of contract letter. Therefore, the contention of the petitioner's counsel that the said letter was never communicated to the petitioner is contrary to the emails exchanged between the parties. 19. Further contention of the petitioner is that the matter was never referred to the arbitrator, whereas in the course of hearing and in the written submissions in para 5, the respondent has mentioned that the dispute between the parties have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 27.03.2008 wherein the Hon'ble Bombay High Court held that the issuance of TDS certificate does not amount to an acknowledgement of defendant within the meaning of Section 25 of the Indian Evidence Act . 28. In the light of the above submission, we perused the decision and we notice that the Hon'ble Bombay High Court in para 8 of decision held that: 8... The issuance of TDS certificates does not amount to an acknowledge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, therefore, the last cause of action arose on that day and that the petition is filed in the month of December, 2017. Therefore, the present application is barred by limitation. 33. In the light of that submissions, we notice that in Part-IV column-II, the applicant has mentioned several dates of default and according to that, the first date of default is 30.01.2010 and the last date of default is 27.04.2017, whereas ..... X X X X Extracts X X X X X X X X Extracts X X X X
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