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TMI Blog2021 (10) TMI 338X X X X Extracts X X X X X X X X Extracts X X X X ..... est of 'Existence of a Dispute', without going into the merits of the case, we are of the view that in this matter, there is a plausible contention which requires further investigation, which is not a patently feeble legal argument or an assertion of fact unsupported by evidence. In the instant case, the Clause Work Description' 'depicts that the Appellant/'Operational Creditor' is responsible for the transit and the handling of all notified commodities'. Apart from the Indemnity Clause VIII of the 'Agreement and Custody and Indemnity Bond', signed by both the parties, which provides for the Service Provider to cover all losses/damages and compensate the CRWC for the same, the communication on record dated 01.11.2012, 10.12.2012, 18.01.2013, show that there was an ongoing dispute regarding shortage of 335MT of boiled rice. A Joint Meeting was held which was attended by the Appellant, the 'Corporate Debtor' and FCI - Settlement Agreement evidences that through storage losses upto 0.5% was regularized, 'Transit Losses' (T/L) of ₹ 81,56,519/- was shared on a 50:50 ratio by FCI CRWC, both being Central Government Organizati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d huge shortages on account of storage of stock at RWC, Hatia and to recover such huge losses they have also withheld payment of about 42 lakhs. As per tender clause VIII and custody and indemnity bond executed between the two, the petitioner is solely responsible for the losses suffered by CRWC on account of handling and storage of stocks at RWC, Hatia. It is also evident from the indemnity bond that the petitioner will be solely responsible for the safe custody and protection of the said goods materials at their risk till the same are duly delivered/dispatched to various customers or as may be directed by the CRWC from time to time or any time and shall indemnify CRWC against any loss, damage or deterioration suffered by CRWC or shortages whatsoever in respect of the goods from time to time under the said agreement while the same remain in custody of the petitioner. Further it is stated that any loss or damage or deterioration or shortage occur or refund becomes due and receivable by CRWC, the petitioner undertake to compensate or pay or refund the amount forthwith on demand, CRWC shall be entitled to recover from petitioner for compensation for such loss or damage deterioration. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rea/premises neat and clean at all times for which no extra remuneration would be payable. The tenderers in their own interest must get themselves fully acquainted with the area of operations and nature of work involved before submission of tenders. Tenderers are required to quote rates for all items of works described in the Appendix-IV-A, IV-B IV-C. In case, the rates are not quoted for all items of works, such tenders shall be liable to be rejected. If there is variation between the rates quoted in words and in figures, only the lower of the tow rates quoted either in figures or in words shall be construed as correct and valid. Incomplete and conditional tenders are liable to be rejected.............. .............................................................................. VIII. Liability of Service Provider for losses etc., suffered by CRWC: a) The Service Provider shall be liable for all cause, damages, demurrages, wharfages, forfeiture of wagon registration fees, charges and expenses suffered or incurred by the CRWC due to the Service Provider's negligence and unworkman like performance of any Service under this contract or breach of any terms the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dy and protection of the said goods materials at our risk till the same are duly delivered/dispatched to your various customers OR as may be directed by you from time to time or any time and shall Indemnify you against any loss, damage, or deterioration suffered by you or shortages whatsoever in respect of said goods from time to time under said Agreement while the same remain in our custody. We further agree that the said goods shall at all time be open to inspection by any person authorized by you. The 'Corporate Debtor' and FCI entered into an arrangement of storage of goods of FCI at RWC, Hatia whereby the 'Corporate Debtor' made it clear that it was not responsible for the 'storage losses' and 'transit losses' and such liability would be of FCI only, which can be seen from the letters dated 18.01.2010, and the Minutes of the Meeting dated 18-19.05.2010. Learned Counsel contended that the 'Corporate Debtor' was not made liable for the losses there is no question of the 'Operational Creditor' being made liable for the same. The goods of FCI were never stored in the custody or supervision of the 'Operational Credi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ucted the amount from the outstanding dues for the fault in the work which was not done by the Appellant at all. Hence, it is strenuously argued that the 'Corporate Debtor' had raised patently feeble argument unsupported by any shred of evidence. 4. Submissions on behalf of Learned Counsel appearing for the Respondent:- The Learned Counsel for the Respondent strenuously contended that there was a storage loss to the tune of 443 MT to the FCI stocks during 01.12.2011-27.11.2012 on account of handling and storage of RWC, Hatia. Vide letter dated 01.11.2012, the 'Corporate Debtor' informed the 'Operational Creditor' of a huge shortage detected at RWC, Hatia and that FCI withheld the payment of the 'Corporate Debtor' of about ₹ 42,00,000/- and that the 'Operational Creditor' is solely responsible for the losses suffered by the 'Corporate Debtor' on account of handling and storage of stock. The same was also communicated on 01.12.2012. The 'Operational Creditor' had admitted the fact of pending issues with FCI and that there was a storage loss to the tune of 443 MT and a Joint Meeting was also held among ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oading/loading of food grains, fertilizers, cement, salt, sugar, etc. or any other notified commodities from/into Railway Wagons/Trucks etc. stacking them inside the RWC godowns/platform/ground, bagging/re-bagging, weighment, standardization, cleaning, salvaging of the stocks and transporting from/to RWC, to/from various storage godowns. As per the Agreement, the liability of Service Provider for losses suffered by 'Corporate Debtor' is covered under Clause VIII(a) reproduced above. The sum and substance of this liability is that the Service Provider is liable for all damages suffered or incurred by CRWC due to the Service Provider 'negligence and own workman like performance' and any service under this contract or breach. The said Clause does not specify any activity related to storage of goods. 6. Now we address ourselves to the Indemnity Clause based on which the Adjudicating Authority has come to an opinion that the 'Operational Creditor' was responsible for all the losses of storage. For ready reference, the relevant Indemnity Clause is reproduced as hereunder:- Custody and Indemnity Bond for Service Provider Contract at RWC, Hatia (RANCHI). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9;Corporate Debtor' received the Demand Notice but did not reply to the same. It is the case of the Appellant that this aspect of 'transit loss' was never raised by the 'Corporate Debtor'. A perusal of the Settlement Agreement entered into between the FCI and the 'Corporate Debtor' dated 13.08.2014 shows that the storage loss between February 2011 till March 2012 was less than 0.5% and hence, was regularized. It was the 'transit loss' which was not waived. 12. The Hon'ble Supreme Court in para 51 of 'Mobilox Innovation Pvt. Ltd.' (Supra) has observed as follows:- 51. 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 adjudicati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a company would be well within its rights to state that it is challenging the Arbitral Award passed against it, and the mere factum of challenge would be sufficient to state that it disputes the Award. Such a case would clearly come within para 38 of Mobilox Innovations (supra), being a case of a pre-existing ongoing dispute between the parties. The Code cannot be used in terrorem to extract this sum of money of Rs. two lakhs even though it may not be finally payable as adjudication proceedings in respect thereto are still pending. We repeat that the object of the Code, at least insofar as operational creditors are concerned, is to put the insolvency process against a corporate debtor only in clear cases where a real dispute between the parties as to the debt owed does not exist. ............................................................................... 23. We are also of the view that the Appellate Tribunal, when it relied upon Form V Part 5 of the 2016 Rules to state that the operational debt would, therefore, be said to have been proved, missed the vital Sub-clause (iii) in para 34 of Mobilox Innovations (supra). Even if it be clear that there be a record of an ..... X X X X Extracts X X X X X X X X Extracts X X X X
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