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TMI Blog2021 (10) TMI 595X X X X Extracts X X X X X X X X Extracts X X X X ..... or any local authority; - it is clear to the Bench that Petitioner is not providing any goods or services to the Respondent and to that extent is not covered under the definition of Operational Debt u/s 5(21). The Bench is also of the view that the word recoverable from any person from whom such sum is due as an arrear of tax under this Act introduces deeming fiction that the dues can be recovered as an arrear of tax to take benefit of the machinery under the DMC Act. However, this does not make a contractual due which is the case in the instant matter, as a due converted into a tax. The distinction remains between (a) dues which are recoverable as arrears of tax, and (b) dues which are tax, arising under the statute. The Bench is of the view that, what is covered under Section 5(21) is the dues which are arising under the statute and not dues which are recoverable as arrears of tax. Pre-existing disputes or not - HELD THAT:- The Bench notes that there are pre-existing ongoing disputes between the Petitioner and the Respondent pending before the Hon'ble High Court at Delhi in which there are several interim orders are currently under operation. There are multiple pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rporation themselves do not have the manpower to collect Toll tax and monitor the huge daily cash collection of almost ₹ 3,00,00,000/- per day from 124 toll points around Delhi, the said work is given on a lumpsum contract to third parties. After following the due tender process, the Corporate Debtor was awarded the contract on 28.09.2017 for a period of 5 years since it was the highest bidder at ₹ 1,206 crores per annum. Accordingly, it was agreed that the Corporate Debtor will pay the lumpsum amount of ₹ 1,206 crores in 52 equal weekly instalments amounting to ₹ 23.19 crores (approx.) per week irrespective of the actual traffic or actual toll collection. 7. However, the Corporate Debtor started making defaults and made delayed remittances to the Petitioner from the beginning itself, for which penalties were imposed on the Corporate Debtor from time to time as per Clause 12.1A(b) of the duly signed and agreed contracts. 8. Thereafter several intimations of outstanding pending payment/penalty amount were issued by the Petitioner to Corporate Debtor vide letters dated 03.11.2017, 08.11.2017, 04.12.2017, 26.04.2018, 18.05.2018, 05.06.2018, 22.06.2018, 29 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6.03.2020 not paid. Payment of ₹ 38 crores due on 16.03.2020 not paid. PDC worth ₹ 312 crores not given. 20.03.2020 Directions in LPA No. 139/2020 - to immediately comply with order dated 02.03.2020 before next date i.e. 24.03.2020 (Not complied order stood vacated) 20.04.2020 Application filed by MEP in W. P. No. 2241 of 2020 (C. M. No. 10326/2020). Directions: MEP to pay actual Toll collected to SDMC till handling over not complied. Not even a penny deposited. 12.06.2020 Order dated 12.06.2020 in W. P. 2241 of 2020: (i) Deposit ₹ 77 crores within 10 working days (ii) Deposit actual Toll collected less 15% (iii) Deposit the PDCs within two weeks Not complied. Instead, Review filed. Dismissed on 24.06.2020. Again, not complied. 26.06.2020 Order in LPA No. 165/167 of 2020: Comply with the order dated 12.06.2020 no compliance. Instead, Application for recall of order 26.06.2020 rejected. Only part amount deposited. PDC not given. Actual toll collection not deposited. 28. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Petitioner and others. 12. It is most pertinent to highlight here that what transpired through the above spate of litigations was most exclusively relating to circumstances arising post COVID-19, more particularly the issue of force majeure which has been acknowledged in the interim order of the Ld. Single Judge. However, all the liabilities of the Corporate Debtor under the Agreement, arising pre COVID-19, stand as it is. There is no dispute in respect of such pre COVID -19 amounts which have become due at different points in time before 25.03.2020 and the Corporate Debtor continues to be in default of such payments without demur. 13. The Petitioner mentions that the Petitioner as well as the Corporate Debtor challenged the interim order dated 12.06.2020 in LPA No. 165 of 2020 and LPA No. 167 of 2020 before the Division Bench of Hon ble High Court. The Ld. Division Bench, upholding the said order of the Ld. Single Judge, permitted the LPA No. 165 of 2020 to continue operating the 124 toll points with the sole intention to avoid public inconvenience. However, the LPA No. 165 of 2020 in complete disregard to its obligations, was still remitting meagre amount of ₹ 2.75 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 788,45,20,136/-. The Corporate Debtor in its reply and in Interlocutory Application No. 1670 of 2021 raised the following contentions: a. This Bench lacks jurisdiction to decide the present petition. This petition is filed by the Petitioner as if it is an operational creditor. Bare perusal of the facts and documents executed between the parties clearly demonstrate that the present petition is not for an operational debt as the Petitioner is not an operational creditor. b. The Petitioner has failed to demonstrate that the claim made in the present petition is an operational debt. Section 5(20) of the Code, defines an operational creditor to mean a person to whom an operational debt is owed and includes any person to whom such debt has been legally assigned or transferred. In turn, Section 5(21) defines an operational debt to mean 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 payable to the Central government, any State Government or any local authority. Therefore, an operational debt is essentially a claim in respect of the following: i. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be considered as part payment to revive the period of limitation. It is admitted by the Petitioner in its own demand notice that the default occurred in 2017. Having failed to take any steps within the period of limitation prescribed, there is default on the part of the Petitioner. There is no acknowledgement of any outstanding amount on the part of Respondent and in fact, the Respondent has in series of correspondence contended that it is not liable to pay any amounts. Further, it was also contended by the Respondent in its correspondence with the Petitioner that in fact it is entitled to recover substantial amounts from the Petitioner and any payment made by the Respondent under protest or under the orders of the Court cannot be considered as an acknowledgement of debt. f. There is no default on the part of the respondent herein. In fact, there is a breach of contract and default on the part of the Petitioner, which is a subject matter of dispute. In view of the above, the petition deserves to be dismissed. g. The Petitioner in the present petition is guilty of a gross misrepresentation of facts as it has sought to portray to this Bench that its claim in the captione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng with the grounds on which the captioned petition ought to be dismissed, the Respondent would like to place on record the facts and events that transpired between the parties herein, which are pertinent for adjudication of the present petition. m. The parties to the present petition had entered into a Toll Collection Agreement dated 28.09.2017. while the Respondent s role under the contract was collect toll, it was also entitled to collect certain penalties. Needless to state, the Respondent by then was one of the foremost till-booth operators and infrastructure developers in the country. Even today, the Respondent continue to successfully manage the iconic Bandra- Worli Sea/Link in Mumbai. However, only a few months into contract with the Petitioner, several glitches arose which curtailed the amount of toll that the Respondent would have collected. n. The Respondent submitted that from December, 2017 till date, on multiple occasions, the Respondent has raised various claims for the losses suffered by it as a result of the dereliction of obligations on part of the Petitioner. The Respondent also has raised claims to the tune of ₹ 48,38,05,67,569/- by their lette ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orporation can recover any sum due to the DMC on any account under DMC Act or any byelaw thereunder as an arrear of tax. d. The aforesaid provision read with Section 156 of the DMC gives the power to the Commissioner to recover such sums in the nature of arrears of tax. The same understanding has been very categorically laid out in the Agreement dated 28.09.2017 between the Petitioner and the Respondent. e. The sums dues from Respondent to the Petitioner are payment of dues arising under the DMC Act and payable to SDMC. Accordingly, the claims of the Petitioner are very well operational debt under IBC. f. The claims arising out of toll and penalty relating thereto are only considered, even then the said claims are much above the threshold limit of rupees one crore. g. The various writ petitions and LPAs filed by Respondent are nothing but a moonshine to save itself from CIRP. In this line of litigations raised by Respondent, the LPA No. 145/2021 before the Division bench of Hon ble High Court in nothing but another frivolous litigation. The frivolity of it is highlighted by the fact that the respondent itself doesn t find any way merit in the matter and has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing employment; or c. A debt arising under any statute and payable to Government/ Local Authority. 24. The claim is based on an Agreement where the Petitioner has appointed the Respondent as a Contractor to collect toll tax from commercial vehicles. This is evident from Clause 1 of the Agreement which reads as under: - 1. Subject to and in accordance with the provisions of this and the applicable laws and relying upon the representations and warranties of the Contractor to fulfil the obligations contained hereunder, the SDMC hereby appoints the Contractor to provide Toll ECC collection Service. (emphasis supplied) 25. Therefore, it is clear to the Bench that Petitioner is not providing any goods or services to the Respondent and to that extent is not covered under the definition of Operational Debt u/s 5(21). 26. That the Petitioner is not providing any service to the Respondent is also made clear by several Judgments of Hon'ble NCLAT. In this regard the Respondent has referred to the Hon'ble NCLAT Judgment of 20.08.2020 in the matter of Andal Bonumulla v/s Tomato Trading LLP ; 12. Now, we have considered the arguments in regard to se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ner claims that the debt falls under the ambit of operational debt in respect of payment of dues arising under any law for the time being in force and payable to Central Government or any State Government or any Local Authority. The Petitioner mentions that just because the Operational Creditor and Corporate Debtor had entered into a contract, does not render the dues as a due not arising out of a law. 30. It is the claim of the Petitioner that in the instant matter the contract is an outcome of a specialised legislation, that is, Delhi Municipal Corporation Act (DMC Act). To buttress its claim, the Petitioner mentions that under Section 455 of the DMC Act, the Petitioner has power to recover any sum due to the DMC on any account under the DMC Act or any bye-law thereunder as an arrear of tax. 31. The Petitioner mentions that the claim amount is a debt due under a statute. This, it mentions, is on the basis of Section 455 of DMC act which reads as under: - 455. Mode of recovery of certain dues In any case not expressly provided for in this Act or any byelaw made thereunder any due to the Corporation on account of any charge, costs expenses, fees, rates or rent or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ants relying on the judgment of the Supreme Court in the case of Central Bank of India v. State of Kerala and Ors. MANU/SC/0306/2009: (2009) 4 SCC 94 submits that the Supreme Court in this judgment has considered the entire law on the subject and has held that to a property in relation to which provisions of Section 529A of the Companies Act operates, Section 38(c) of the Bombay Sales-tax Act does not operate. The learned Counsel relying on the judgment of the Constitution Bench of the Supreme Court in the case of Builders Supply Corporation v. Union of India MANU/SC/0156/1964: (1965) 2SCR 289 submits that the provisions of the land revenue Code which provide for recovery of the dues of the State Government as arrears of land revenue does not elevate the dues to the level of dues of land revenue. The learned Counsel therefore submitted that the learned single Judge has misread the provisions of the Companies Act and the Bombay sales-tax Act. 10. Perusal of the above quoted provision shows that the Maharashtra Land Revenue Code makes a clear distinction between the sum which is recoverable as a land revenue and sum which is recoverable as arears of land revenue. What creates ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reated is for the limited purpose of enforcement as a decree. The fiction is not intended to make it a decree for all purposes under all statutes, whether State or Central. 36. The Bench notes that in the above Judgment Hon'ble Supreme Court has observed that the legal fiction is not intended to convert an Award into a Decree for all purposes under all statutes - whether State or Central. In this case, the deeming fiction is restricted to the DMC Act and cannot be extended to cover another Act. In light of the above the Bench is of the view that the operational debt claim is not covered as a debt in respect of payment of dues arising under any law for the time being in force . 37. The Bench therefore is of the considered view based on the above that the claim of the Petitioner as operational debt does not meet the criteria as set out in Section 5(21) of IBC i.e. the claim of the SDMC does not fall in either if the following; a. Claim in respect of goods and services; b. Debt in respect of dues arising under any law in force and payable to the Government or any local authority. 38. The Bench notes that there are pre-existing ongoing disputes between the Peti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing further investigation which is not a patently feeble legal argument or an assertion of facts unsupported by evidence. The defence is not spurious, mere bluster, plainly frivolous or vexatious. A dispute does truly exist in fact between the parties, which may or may not ultimately succeed, and the Appellate Tribunal was wholly incorrect in characterizing the defence as vague, got-up and motivated to evade liability. 40. Similarly, the Bench would refer to another Judgment of the Hon'ble Supreme Court in the matter of Kay Bouvet Engineering Ltd. V. Overseas Infrastructure Alliance (India) Private Limited dated 10.08.2021 in which the apex Court held as under: - 17. It is thus clear that once the Operational Creditor has filed an application which is otherwise complete, the adjudicating authority has to reject the application under Section 9(5)(ii)(d) of IBC, if a notice has been received by Operational Creditor or if there is a record of dispute in the information utility. What is required is that the notice by the Corporate Debtor must bring to the notice of Operational Creditor the existence of a dispute or the fact that a suit or arbitration proceedings ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 42. In this extant case, the Bench notes on 09.04.2021 Single Judge of the Delhi High Court had dismissed a Writ Petition of the South Delhi Municipal Corporation on the ground of maintainability without going into the merits. The Single Judge in its finding had mentioned that the parties would have to resolve the disputes in appropriate Civil proceedings; 107. As noticed herein above, Respondent Corporation is alleged to have acted purely within the four corners of the Contract Agreement and sought to exercise its rights under the Contract Agreement to enforce the obligations imposed upon the petitioner. Petitioner has the remedy of enforcing its rights under the Contract Agreement in terms of the contract act before an appropriate Civil Forum. This court in exercise of powers under Article 226 of the Constitution of India would not go into a purely contractual dispute .. 110. Parties would have to resolve their disputes and enforce their respective rights in accordance with the Contract Act in appropriate civil proceedings before the appropriate Court. 43. Further on record there are several letters addressed to the Petitioner on issues such as (1) leakages o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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