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TMI Blog2022 (2) TMI 1233X X X X Extracts X X X X X X X X Extracts X X X X ..... 18.05.2017 for supply of 405 Multitier Racks for Heavy Duty Shelving (MT HDS) for Rs.1,43,94,240/- for the project Indian Oil Corporation Limited (IOCL), Haldia and Work Order No. SEE/BJ/WO-021/2017-18 dated 18.05.2017 for installation of 405 Multitier Heavy Duty Shelving amounting to Rs.8,05,000/- for the project IOCL, Haldia. 2.1.1. Similarly, Purchase Order No. SEE/BJ/039/2017-18 dated 01.06.2017 for supply of 223 Multitier Heavy Duty Shelving (MT HDS) for the project IOCL, Bongaigaon for a sum of Rs.83,40,030/- and Work Order No. SEE/BJ/WO-038/2017-18 dated 01.06.2017 for installation of 1 Multitier Heavy Duty Shelving (MT HDS) for Rs.4,60,000/- was also issued by the Respondent to the Petitioner. 2.2. The Petitioner submits that the payment terms as stated in the Terms and Conditions of the Purchase Orders have not been complied with by the Respondent. The payments were to be released by the Respondent to the Petitioner as contained in the Terms and Conditions of the Purchase and Work Orders for both the locations. 2.3. The Petitioner submits that they have delivered the required materials from time to time to the Respondent under the Purchase Orders to both the locations a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the Purchase and Work Orders pertaining to IOCL, Haldia site and with respect to the Purchase and Work Orders dated 18.05.2017 pertaining to Haldia site. In the said letter IOCL informed the Petitioner inter alia, that they were aware that due to severe fund crunch of the Corporate Debtor (Satec), they had not made the Petitioner's payments and due to which IOC's project progress was suffering. IOCL vide the said Comfort letter undertook to release payment directly to the Petitioner against the material and installation of complete racking system. IOCL further stated in the said letter that it would make the payment to the tune of Rs.42,41,947.64 against completion of the erection of the racking system and that the balance Rs.63,62,921.47 would be released after completion of the job in totality with 1st preference to the Petitioner with due certification by the Corporate Debtor (Satec) and acceptance of the PMC i.e. M/s. Engineers India Limited. 2.9. The Petitioner further submits that a meeting was held on 27.10.2018 at the Project Office of the IOCL between IOCL, EIL and the Petitioner wherein inter alia, discussed : (a) The Petitioner had agreed to carry out the work at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 9(1) of the Insolvency and Bankruptcy Code, 2016 can only be initiated in respect of an operational debt. In the instant case, the claims of the Applicant are raised on the basis of the Purchase Orders and Work Orders which stood extinguished owing to the fresh arrangement entered into between the Petitioner and the Indian Oil Corporation Ltd ("IOCL"). The Petitioner admittedly agreed to accept the amounts payable by the Respondent to the Petitioner, directly from IOCL. Such an arrangement was recorded by IOCL and was accepted by the Petitioner. The Petitioner after accepting the fresh terms of payment offered by IOCL, agreed to complete the work at the project sites without the involvement of the Respondent. Moreover, the Petitioner sought fresh work orders directly from IOCL for completion of the work. The Respondent submits that by virtue of the said arrangement, the Respondent was no longer involved and the relationship between the Petitioner and the Respondent ceased to exist. The Respondent further claims that there are no outstanding amounts that are due and payable by the Respondent to the Petitioner as the entire contract including the Respondent's liability and obl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itioner. 3.6. The Respondent further submits that, subsequently certain meetings were held between the parties whereby the Petitioner was willing to directly execute the work for IOCL and accept payments from IOCL without the Respondent's intervention. As the Respondent did not have any objection to the Applicant directly executing the work and receiving payments from IOCL, various mail communications along with meeting was held between the Petitioner, IOCL and EIL on 09.01.2018 whereby the Petitioner was dealing directly with IOCL/EIL for payment and further execution of pending work from Petitioner's side. IOCL also agreed to make payment to the Petitioner from the amounts payable to the Respondent on completion of the work by the Petitioner. The Respondent also issued a confirmation letter dated 10.01.2018 recording the same. Thereafter, the Respondent closed the ledger account of the Petitioner in its books as no payments were due and payable by the Respondent to the Petitioner. 3.7. The Respondent also argues that a fresh arrangement was entered into between IOCL and the Petitioner as IOCL undertook to release payments directly to the Petitioner against the supply of materia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tioner also sought to collect payments directly from IOCL for these goods and services. As such, it is clear from the correspondence and the Petitioner's own conduct that the entire contract stood novated in favour of IOCL and the Petitioner was estopped from seeking any payments from the Respondent. 5. The Respondent submits that the Respondent was originally appointed as a contractor by Indian Oil Corporation Ltd ("IOCL") for its project sites at Haldia and Bongaigaon. Two key terms of the original work orders were: (a) Clause 4 - 100% payment was due only against completion of the work. (b) Clause 8 - Inspection was to be done by Contractee's representative (i.e. Respondent's representative) along with client's representative (i.e., IOCL's representative). 5.1. The Respondent submits that in 2017, certain disputes arose between the Respondent and Petitioner relating to the work and payments and these were resolved with all the three parties, i.e., the Petitioner, Respondent and IOCL mutually agreeing that the Petitioner would directly provide goods and services to IOCL and IOCL would directly make payments to the Petitioner. This new arrangement is recorded in IOCL's lette ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch of the material was to be given as per the work order and as far as the payment for installation is concerned, it had to be at both the places, after 100% successful installation. However, being a composite project with independent performance monitoring by Engineers India Limited (EIL), the outcome or success is dependent on the successful completion to be approved by EIL/ IOCL. The Petitioner states that upon completion of delivery and installation, the Petitioner had raised a total of 34 invoices upon Satec for a total value including tax of Rs.2.46 crores out of which the balance outstanding is about Rs.2.34 crores. The Petitioner mentions that the date of default is 24th August 2017. As per the work order submitted by the Petitioner in his Petition, the clause 4 and clause 8 reads as under:- "4. PAYMENT TERMS 100% against completion of work. 5 to 7 [........] 8. INSPECTION: "...The stage wise and final inspection shall be carried out by Contractee representative as well as the client of Contractee. Before doing the inspection Contractor's internal inspection/report at each stage shall be made available to the Contractee's Inspector." Findings regarding IOCL's Bon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rectly to IOCL and demanded payment from IOCL. In this regard the Bench would refer to a letter dated October 22, 2018 by the Petitioner where the Petitioner has directly submitted the Incoming Material Inspection Report (IMIR) copies of invoices to IOCL and has also submitted its NEFT form mandate to IOCL for direct release of payment by bank transfer. The Bench here would like to reproduce the letter which is as under:- "Ref: SC/SSG/Satec/IOCL/Haldia/2018-19/2210 Date: 22nd October 2018 To, M/s India Oil Corporation Limited, Haldia Refinery, PO- Haldia Oil Refinery Dist.- Purba Midnapore, West Bengal Kind Attn: Mr. Manas Sarkar-RCM (EIL, IOCL Haldia) Sub: Request to release payment towards supply & Installation of racking system Ref: 1. Comfort Letter Ref No : HR/PJ/BS-VI/SATEC/GODREJ Dated 23-01-2018 2. Purchase Order No: SES/BJ/020/2017-18 Dated 18-05-2018 3. Work Order No: SES/BJ/WO - 021/2017-18 Dated 18-05-2018 4. Our Letter Ref: SC/SSG/Satec/IOCL/ Haldia/2018-19/1608 Dated 16-08-18 5. Our Letter Ref: SC/SSG/Satec/IOCL/ Haldia/2018-19/0809 Dated 08-09-18 6. Our Letter Ref: SC/SSG/Satec/IOCL/ Haldia/2018-19/1409 Dated 14-09-18 Dear Sir, This ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er as the same has not been certified for safe use". The Petitioner ends the letter by saying that "Hope u find this in order and would ensure that the safety alert being raised is taken seriously and necessary correctives are undertaken without any further delay." The Bench notes that instead of rectifying the defective work, the Petitioner abandoned the Haldia project and did not carry out any work on the project. 15. The Bench also notes that both the work orders required 100% completion of the work as a pre-condition for payment. Admittedly, the project has not been completed and that is the reason that the Petitioner cannot claim the payment for such defective and incomplete work. The Bench also notes that demand notice was issued by the Petitioner on 23.10.2019. However, there are genuine pre-existing disputes much prior to the issuance of the demand notice. It is well settled that an applicant u/s 9 of the IBC is required to be dismissed if genuine dispute exists between the parties. In recent Judgment of Hon'ble Supreme Court in Kay Bouvet Engineering Ltd vs. Overseas Infrastructure Alliance (India) Private Limited [2021 SCC OnLine SC 570], the Hon'ble Supreme Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X
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