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TMI Blog2022 (7) TMI 1278X X X X Extracts X X X X X X X X Extracts X X X X ..... ) For the Appellant : Pawan Bhushan For the Respondents : Padmaja Kaul , Yugank Goel and Vikas Maini ORDER P. S. N. Prasad , Member ( J ) 1. This is an application filed by the Applicant M/s. K.S. Venkataraman and Co. Pvt. Ltd. seeking to initiate Corporate Insolvency Resolution Process ( CIRP ) under Section 9 of the Insolvency and Bankruptcy Code 2016 ( the Code') of the Respondent SAK Buildtech Pvt. Ltd. for the alleged default on the part of the Respondent in clearing the debt of Rs. 28,14,754 (Rupees Twenty-Eight Lakh Fourteen Thousand Seven Hundred and Fifty-Four), as alleged by the Applicant. This Application was filed on 13.04.2021. The details of transactions leading to the filing of this application as averred by the Applicant/Operational Creditor are as follows: i. That the Corporate Debtor had issued a notice inviting Tender on 14.07.2014 for Civil Works in Mercure Hotel at Site No. C.P. 8, Oragadam, Survey No. 23P, 24P, 25P, Kachipuram District, Sriperambudur Taluk, Chennai. The Operational Creditor participated and won the bid. The Corporate Debtor issued a Letter of Intent on 17.10.2014 and the Operational Creditor accepted the same. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to the Operational Creditor after a period of one year from the date of Virtual Competition. v. That the Corporate Debtor issued another Notice inviting Tender on 24.06.2016 for the External Development Works at the Mercure Hotel, Site No. C.P. 8, Orgadam, Survey No. 23P, 74P, 25P Kachipuram District, Sriperambudur Taluk, Chennai. The Operational Creditor participated and won the bid. vi. That the Corporate Debtor entered into an External Development Works Agreement (EDW Agreement) dated 29.09.2016 with the Operational Creditor. The following Retention Clause was a part of the Agreement: Schedule II Clause l.iii - A deduction shall be made against each of the RA Bill at the rate of 5% of the value certified by Project Manager (Retention Money) which amount shall be released as 1% cash retention to be released after one year from virtual completion and 4% against Bank Guarantee (2.5% valid till first 6 months and 1.5% valid for next 6 months). vii. That as per the EWD Agreement the Operational Creditor had raised RA Bills of Rs. 25,43,669 and as per the said agreement the Corporate Debtor was to retain 5% of the RA Bill amount raised. The Corporate Debtor ret ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r issued repeated reminders to the Corporate Debtor, however, these have been ignored by the Corporate Debtor. On 12.03.2019 the Operational Creditor issued a letter as a final reminder for the dues. However, this was also ignored by the Corporate Debtor. xviii. That the principal amount due from the Corporate Debtor is 16,43,685. xix. That the first default occurred on 14.05.2017 when the Agreement fell due. Although payments were made the Corporate Debtor failed to pay the outstanding amount. Despite repeated reminders regarding the payment of the outstanding dues there has been no response from the Corporate Debtor. xx. That constrained by the adamant attitude of the Corporate Debtor, the Operational Creditor issued a Demand Notice under S. 8 of Insolvency and Bankruptcy Code, 2016 on 23.10.2019 by speed post and courier to the registered office of the Corporate Debtor and further by way of email to the registered email address of the Corporate Debtor, but the Operational Creditor did not receive any reply from the Corporate Debtor to the said demand notice within 10 days. xxi. That the said behavior of the Corporate Debtor is extremely unethical and wrongful ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on'ble National Company Law Appellant Tribunal (Hon'ble NCLAT) vide its judgment dated 25 October, 2021, passed in Company Appeal AT) (Ins.) No. 813 of 2021, titled as Jumbo Papers Products Vs. Hanaraj Agrofresh Private Limited, wherein it was held that the threshold limit, as enhanced by the MCA wide the Notification, will be applicable to all applications filed under sections 7 or 9 of the Code on or after 24 March, 2020, even if the debt in default relates to a period earlier than 24 March, 2020. 5. The Corporate Debtor argued that there is pre-existing dispute prior to the issuance of the demand notice under Section 8 of the Insolvency and Bankruptcy Code, 2016, and that it has suffered losses due to deficiency in services by the operational creditor and that thereby the Corporate Debtor has a counterclaim claim of INR 19.95 crores against the Operational Creditor. The Corporate Debtor mentions that issues regarding non-delivery or delay of supply were raised, however to no avail. Hence, the dispute. Further, the respondent company had to spend an additional cost of Rs. 68,45,000/- for renewal of its license, due to non-delivery of drawing. 6. The Corporate Debtor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ame date (5 February, 2018), thereby, again highlighting the aforesaid flooring issue and requested the Company to address the same immediately. The Corporate Debtor argues that the aforesaid issues remained unresolved. 12. On 3rd March, 2018, the Corporate Debtor addressed an email to the Operational Creditor again apprising it regarding the flooring issue. In response, the Operational Creditor addressed an email dated 13 March, 2018, informing the Corporate Debtor that a representative of the Operational Creditor would be visiting the site on 15 March, 2018 to inspect the flooring issue. 13. The Corporate Debtor argues that pursuant to the aforesaid visit, the Applicant addressed an email dated 19 March, 2018, thereby malafidely stating that the floor polishing issues as highlighted by the Corporate Debtor, were allegedly not due to any fault of the Applicant and attempted to blame the Company for the same. The Operational Creditor also stated that the said issues could be resolved by re-polishing the floor with proper technique at INR 25 per sq ft plus CIST. The Corporate Debtor argues that such correspondence itself shows that there was a dispute between the parties with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 21 May, 2018 to the Corporate Debtor and again arbitrarily stated that it would be willing to polish the floor stone if the Corporate Debtor paid the alleged balance outstanding amounts. 19. Acceding to the repeated demands of the Operational Creditor and believing its assurances to be true, the Corporate Debtor argues that it made another payment of an amount of INR 5,00,000- (Indian Rupees Five Lakh Only) to the Applicant on 20 August, 2018. 20. Thereafter, on 31 August, 2018, the Corporate Debtor addressed another email to the Operational Creditor, wherein Corporate Debtor referred to its email dated 29 March, 2018 and clearly informed that the balance payment of INR 16,43,685/- (Indian Rupees Sixteen Lakh Forty-Three Thousand Six Hundred and Eighty-Five Only) would be released to the Operational Creditor only once the remaining work with respect to the polishing of the floor stone was completed by the Applicant. 21. That the Operational Creditor failed to finish the polishing work of the floor stone, the Corporate Debtor again mailed the Operational Creditor on 12 November, 2018, thereby, inter alia, reiterating its earlier request for completion of the work. The Corp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same, is baseless. Further, the Corporate Debtor argues that even if interest was payable such a claim would at best be only maintainable in a civil court/arbitration and not before this Hon'ble Tribunal. 25. The Corporate Debtor argues that an application for CIRP is not proceedings for recovery of dues of creditors. The objective of the Code is reorganisation and resolution of a corporate debtor. The Corporate Debtor laid reliance on the judgement of the Hon'ble Supreme Court in the matter titled as M/s. Reliance Asset Reconstruction Company Limited v. M/s. Hotel Pooja International Private Limited, wherein the Hon'ble Court has held as held by this Court in Mobilox Innovations (P) Lad v. Kirusa Software (P) Ltd., the IBC is not intended to be a substitute to a recovery forum. Reliance was further placed on Transmission Corpn. of AP. Ltd. v. Equipment Conductors Cables Ltd. case, wherein this Court followed its earlier judgment in Mobilox Innovations (P) Ltd. and observed, In a recent judgment of this Court in Mobilox Innovations (P) Lad. v. Kirusa Software (P) Ltd., this Court has categorically laid down that IBC is not intended to be substitute to a rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regarding the dispute. In the present case, there is neither a suit, nor arbitration proceedings and there is an express email acknowledging and agreeing to the outstanding amount payable. Further, the Operational Creditor argued that no notice of dispute has been raised by the Corporate Debtor despite receiving the notice under Section 8 on 30.07.2019. 30. The Operation Creditor placed reliance on the judgement of Mobilox Innovations (P) Ltd. v. Kirusa Software (P) Ltd., (2018) 1 SCC 35 in which the Hon'ble Supreme Court of India held that, 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)(ii)(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... 31. The Operational Creditor argues that the Corporate Debtor did not send any notice of Dispute to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion increases the minimum. threshold of a default, enhanced the minimum amount of default from INR 1,00,000/- to INR 1,00,00,000/- with effect from 24 March 2020 and the Application was filed on 13 April, 2021, i.e. after a period of approximately two (2) years from the date of issuance of the Demand Notice and after a period of more than one (1) year from the Notification, it was not maintainable as the alleged amount of default is only to the tune of INR 28,14,754/-, which is evidently much lower than the threshold amount of INR 1,00,00,000/-, as per the Notification. 36. We have gone through the documents filed by the Operational Creditor and heard the arguments made by the counsel of the Operational Creditor. 37. In the light of the above said facts and after giving careful consideration to the entire matter, hearing the arguments of the learned counsel for the Operational Creditor and upon appreciation of the documents placed on record to substantiate the claims, this Adjudicating Authority is of the view that there is a pre-existing dispute. As per the records shown by the Corporate Debtor, the work of the Operational Creditor has not been satisfactory despite repeate ..... X X X X Extracts X X X X X X X X Extracts X X X X
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