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TMI Blog2023 (1) TMI 745X X X X Extracts X X X X X X X X Extracts X X X X ..... finition of operational debt under the IBC and hence the debt owed by MEP Infrastructure to SDMC is an operational debt as defined in section 5(21) of the IBC. Whether the dispute is a pre-existing dispute or not? - HELD THAT:- The termination of the Toll Tax Agreement is also provided in clause 17 in case of default and it is provided in the agreement that even after termination of the agreement, the rights and obligations of any of the parties that arise before termination are protected - it is clear that from the total amount claimed by MEP Infrastructure, a major amount was disallowed by the Commissioner, SDMC, and as a result MEP Infrastructure filed writ petition being WP 2241/2020 before the Hon ble High Court of Delhi seeking the quashing of order dated 30.1.2020 of Commissioner, SDMC on addition to certain other reliefs. Thus ot becomes amply clear that there were disputes raised by the contractor MEP Infrastructure which were actively considered by the High Level Committee and Commissioner, SDMC and many disputes remained unresolved as the further litigation pursued by the contractor shows. The claims put forward by MEP Infrastructure, their consideration by High Level Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ECC') at border points from specified vehicles entering Delhi. The Appellant has further stated that by virtue of clause 12.1(A)(a) of the said Toll Tax Agreement, the MEP Infrastructure was required to remit an amount of Rs. 23,12,87,671 on weekly basis to the SDMC, which was the proportionate weekly remittance amount out of the total payment of Rs.1206 crores per annum, payable for a period of 5 years by the contractor MEP Infrastructure in accordance with the said Toll Tax Agreement. 3. The Appellant has further stated that during the contract period, MEP Infrastructure repeatedly made delayed remittances to SDMC and consequently the SDMC imposed penalty agreed as per the Toll Tax Agreement, and MEP Infrastructure never disputed the imposition of penalty and deposited Rs. 3,63,07,683/- as penalty amount imposed on account of delayed remittance of ECC as per clause 12.1(B)(c) of the said Toll Tax Agreement. The Appellant has added that when the Respondent MEP Infrastructure failed to make regular payments and to deposit penalty amounts, multiple demand notices and intimations with respect to the outstanding pending payments and penalty amounts were issued by the SDMC to the MEP ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Rs.7,56,80,748 was issued by SDMC. He has added that, in the meanwhile the claims of the Respondent were dealt with by the Commissioner, SDMC through an order dated 30.1.2020, where after the Respondent filed another writ petition being WP(C) No. 2241/2020 on 2.3.2020 before Hon'ble High Court of Delhi seeking quashing of the order dated 30.1.2020 passed by the Commissioner, SDMC, wherein the Learned Single Judge vide order dated 2.3.2020 directed the Respondent to comply with the order dated 26.11.2019 made in WP(C) No. 12483/2019. The Appellant has added that a termination notice dated 16.3.2020 was issued to the Respondent and another Notice Inviting Tender (NIT) was issued on 16.3.2020 to ensure that tender process for appointment of a new contractor is completed within the time given for termination so that Toll Tax collection from 1.4.2020 from entry points of Delhi can be handed over to the new successful bidder in seamless manner. 7. The Appellant has further stated that the Respondent challenged the orders passed in WP No. 2241/2020 and interim order dated 26.11.2019 in WP No.12483/2019 vide two separate Letter Patent Appeals (in short 'LPAs') and also, inter alia, ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llenges in Toll Tax and ECC Collection the revenue had gone down drastically and, therefore, the Respondent prayed for reassessment of toll tax revenue in view of changed conditions and circumstances. 11. The Appellant has further stated that despite certain interim orders passed by the Hon'ble High Court of Delhi for payment of amounts on weekly basis in writ petitions (WP No. 12483/2019 and WP No. 2241/2020), MEP Infrastructure has failed to comply with the said orders and filed various applications and LPAs to keep the matter pending in judicial process. He has added that upon failure of the Respondent MEP Infrastructure to make overdue payments, the SDMC sent a demand notice dated 12.1.2021 under section 8 of the IBC asking for a payment of Rs.788,45,20,136 to be made as operational debt with respect to Toll Tax, ECC collection amount and penal interest on the said debt. The Appellant has stated that in its reply dated 22.1.2021 to the section 8 notice, MEP Infrastructure has denied its liability to make the demanded payment, and subsequently SDMC filed application under section 9 of the IBC before the Adjudicating Authority regarding the operational debt owed to it by MEP Inf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . She has argued that the operational creditor SDMC is a local authority and the amount being paid by the users as Toll Tax and collected by the Respondent is Toll Tax amount and therefore the amount due and payable to SDMC is an "operational debt" as per the definition of operational debt in the IBC. 14. The Learned Senior Counsel for Appellant has explained that Bye-law 4(2) of the Delhi Municipal Corporation (Toll Tax) Bye Laws, 2007 gives power to the Commissioner of SDMC to allot the work of collection of Toll Tax to one or more private agencies by way of auction process and on such terms and conditions as may be decided by the Corporation. She has referred to clause (e) of 'Exhibit A - Terms and Conditions' of the Toll Tax Agreement to emphasise that the contractor had agreed and confirmed that it shall not be entitled to any compensation, rebate or reduction in toll collection contract fee on account of change or variation in traffic pattern, volume or intensity for any reason as per the Toll Tax Agreement and hence, MEP Infrastructure cannot now claim benefit of reduced toll tax collection due to decrease in traffic intensity and traffic flow. 15. The Ld. Senior Counsel f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he terms and conditions of the Toll Tax Agreement and not seek any rebate or concession in payment of the agreed amount even if there is decrease in traffic intensity or traffic flow. 17. The Learned Senior Counsel for Appellant has further argued that in case the Toll Tax Agreement does not provide any alternative dispute resolution mechanism, any contractual dispute has to be settled in terms of the Contract Act in a court of law of appropriate jurisdiction, which evidently the contractor has not done, and since it had agreed unreservedly to pay the agreed amount, it knows it cannot raise any dispute under the contract. She has relied on para 26 of the judgment of Hon'ble Supreme Court in the matter of Mobilox Innovations Private Limited vs. Kirusa Software Pvt. Ltd. [2017 SCC Online SC 1154] to argue that the dispute that is now being claimed by MEP Infrastructure is merely a spurious and moonshine dispute and therefore section 9 application ought to have been admitted after disregarding such an illusory dispute. 18. The Learned Senior Counsel for Appellant has lastly claimed that the Learned Adjudicating Authority has correctly noticed the order dated 9.4.2021 of Hon'ble Sing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order deals in detail about the grievance of the petitioner (MEP Infrastructure) regarding the issue of opening of Eastern Peripheral Expressway (in short 'EPE') for general traffic on 27.5.2018 when the issue was discussed and considered by the High Level Committee of SDMC when the matter of reduction in 30% of commercial traffic was also highlighted. He has claimed that the order by Hon'ble High Court of Delhi in WP (C) No. 12483/2019 clearly mentions that MEP Infrastructure has been submitting representations to SDMC with regard to the decline in revenue due to diversion of traffic from 1.6.2018, whereupon the High-Level Committee looked into the claims of MEP Infrastructure, and that a sum of Rs.18,98,54,798/- was approved as the justified claim of the Respondent by the High Level Committee. He has also pointed out that the Hon'ble High Court of Delhi had earlier looked into the dispute resolution clause and decided that this petition would be treated as representation of the petitioner to the Commissioner of SDMC regarding the dispute, who was asked to pass speaking order after giving due opportunity of hearing to the Respondent, and thus the dispute being a 'real' and 'genuin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i) Whether the amount claimed by SDMC in connection with Toll Tax and ECC Agreement is an 'operational debt' as defined in section 5(21) of the IBC? (ii) Whether a 'pre-existing dispute' is present between SDMC and the contractor MEP Infrastructure, which would lead to rejection of the application filed under section 9 by SDMC? 24. It is noted that the SDMC is authorised to levy Toll Tax in accordance with section 113(2)(g) of the DMC Act, 1957. Further the Commissioner, SDMC is authorised to allot the work of collection of Toll Tax on any of the zones/routes to one or more private agencies by way of auction process or otherwise in accordance with Bye-law 4 of the Delhi Municipal Corporation (Toll Tax) Bye Laws, 2007. Therefore, the SDMC, acting on behalf of SDMC, EDMC and NDMC, selected a contractor MEP Infrastructure for collection of toll tax and ECC through an open, transparent process and entered into an agreement called "Toll Tax and ECC Collection Agreement" dated 28.9.2017 with the contractor MEP Infrastructure. 25. A perusal of the recitals of the Toll Tax Agreement makes it clear that the collection of Toll Tax and Environment Compensation Charge (ECC) for vehicles pl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Hon'ble Apex Court in WP No 13029/85 titled M.C. Mehta vs. Union of India & Ors). She has referred to Bye-Law 4 of the Delhi Municipal Corporation (Toll Tax) Bye Laws, 2007, where the Commissioner of the Municipal Corporation is authorised to allot the work of collection of Toll Tax to one or more private agencies byway of auction which was exactly how the contractor was selected and an agreement entered into with it. 28. On the issue whether the said amounts due and payable are 'operational debt' or not, we note the judgment of Hon'ble Supreme Court in the matter of Consolidated Construction Consortium Ltd. (supra), wherein the Hon'ble Apex Court has observed as follows: "50.1 First, Section 5(21) defines "operational debt" as a "claim in respect of the provision of goods or services". The operative requirement is that the claim must bear some nexus with a provision of goods or services, without specifying who is to be the supplier or receiver. Such an interpretation is also supported by the observations in the BLRC Report, which specifies that operational debt is in relation to operational requirements of an entity." 29. Thus, it is clear that an 'operational debt' is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty to the Contractor to be heard, if the latter so desires, and to offer evidence in support of its appeal. The Commissioner, SDMC shall give his decision in writing within [30] days of receipt of Contractor's appeal which shall be acceptable to the Contractor." 32. The termination of the Toll Tax Agreement is also provided in clause 17 in case of default and it is provided in the agreement that even after termination of the agreement, the rights and obligations of any of the parties that arise before termination are protected. 33. We note from the pleadings of the Appellant, and which is not objected to by the Respondent, that the contractor MEP Infrastructure made delayed payments with respect to the weekly remittances as agreed to in the Toll Tax Agreement and as a result multiple demand notices were sent by SDMC between the period 3.11.2017 and 18.11.2019. We note that while the contractor repeatedly failed to make timely payment of weekly remittances, it made many claims for reduction in payment of agreed amounts on account of loss of revenue due to certain factors during the period October, 2017 to September, 2019. These factors, as claimed by the contractor, related to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s orders dated 26.11.2019 disposed WP (C) No. 12483/2019 with the direction that the Writ Petition No. 12483/2019 would be treated as representation of MEP Infrastructure made to Commissioner, SDMC, who shall after giving opportunity of hearing to the contractor, pass a reasoned order/speaking order within two months. 36. It is further noted that the Commissioner, SDMC heard the MEP Infrastructure on its claims and passed a reasoned order dated 30.1.2020. A perusal of Para 20 of this order shows that MEP Infrastructure had raised the following claims prior to the filing of W.P. No. 12483/2019:- "20. Claims of MEP as per record, prior to filing of the Civil Writ-Petition No.12483 of 2019, MEP vide its different letters, which have been summarized below, had submitted following claims to the SDMC. S. No. Description of Claim Amount of claim 1. Indefinite Road Transport Strike by All India Motor Transport Congress (Period of claim 20.07.2018 to 28.07.2018) - claimed under Force Majeure Clause 15.1 (a) & (b) of Contract dated 28.09.2017 vide letter No. MEPIDL/OUT/2018-19/1027 date 29.09.2018, letter No.MEPIDL/ OUT/2018-19/1037 dated 03.10.2018 and further letter No. MEPIDL/OUT/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asion by commercial vehicles plying from free lanes at thirty border entry points during the period of October 2017-August 2019. It is thus clear that these claims that amount to Rs.465,49,10,137/- were first taken for consideration by the High Level Committee and later by the Commissioner, SDMC in compliance of the order of Hon'ble Delhi High Court in WP No. 12483/2019. 38. We find that the Commissioner, SDMC vide his order dated 30.1.2020 allowed certain claims amounting to Rs.9,85,02,384/-, but disallowed other claims, which were of much large quantum and which were on account of loss of revenue by evasion to Toll Tax by large of commercial vehicles (disallowed claim of Rs.1766 crores), loss of revenue due to diversion of commercial heavy traffic at Eastern Periphery Expressway and Western Periphery Expressway (disallowed Rs 257.77 crores), loss of revenue due to ban in construction activities in Delhi (disallowed Rs.7.60 crores), loss of revenue due to strike by motor transport (disallowed Rs. 5.96 crores) and loss of revenue due to drop in traffic in view of directions looking at increased air pollution (disallowed to the extent of Rs.9.85 crores out Rs.19.05 crores). Thus, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f appeal paperbook, Vol.II), which is as follows:- "29. In view of the above we hereby dispose-of both the Letters Patent Appeals by holding that: 1). The Force Majeure clause stands invoked- w.e.f. 26.03.2020 in terms of OM dated 18.05.2020 issued by MORTH, Govt. of India and shall stand revoked when 90% traffic, in comparison to the traffic. before lockdown period of weekly basis, stands resumed. ; 2). The SDMC shall be entitled to weekly payments of Rs.20.00 crores till 25.03.2020 and after resumption of 90% traffic in comparison to the pre-lockdown period on weekly basis during pendency of the writ petition. Arrears of Rs. 115.04 crores are held to be cleared without being affected by Force Majeure clause. 3).With effect from 26.03.2020 till resumption of 90% traffic in comparison to pre-lockdown period on weekly basis, MEP shall continue to deposit entire collection of toll tax, ECC, cash received from sale of monthly passes, fast tag stickers and any other revenue generated from any toll collection in the bank accounts of SDMC on daily basis by next day after deduction of administrative and toll collection expenses @7.5%. 4). Ld. Single Judge, may order for an exerc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... note while the writ petition was pending before the Learned Single Judge of Hon'ble Delhi High Court for adjudication, the SDMC went ahead to issue notice under section 8 on 12.1.2021. 45. From the detailed discussion regarding the issues/claims raised by the contractor MEP Infrastructure and their consideration in various forums including the High Level Committee of SDMC, Commissioner SDMC and Hon'ble Delhi High Court, we can infer that the claims, which arose out of disputes raised by the contractor, were the subject matter of litigations and adjudicatory processes. Further, as is noted from paras 20-21 of the Commissioner, SDMC's order dated 30.1.2020, these claims related to loss of revenue in Toll Tax and ECC collection due to various factors and events. 46. We also note that the first time the dispute was raised and was considered by the High Level Committee was in the year 2019 which was much before the section 8 notice dated 12.1.2021 was given to the contractor by SDMC. This it is clear that the disputes predate the demand notice under section 8 of the IBC issued by the SDMC, and furthermore, in the reply to demand notice sent by MEP Contractor vide letter dated 22.1.20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xx 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 adjudicating authority is to see at this stage is whether there is a plausible contention which requires further investigation and that the "dispute" is not a patently feeble legal argument or an assertion of fact unsupported by evidence. It is important to separate the grain from the chaff and to reject a spurious defence which is mere bluster. However, in doing so, the Court does not need to be satisfied that the defence is likely to succeed. The Court does not at this stage examine the merits of the dispute except to the extent indicated above. So long as a dispute truly exists in fact and is not spurious, hypothetical o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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