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TMI Blog2023 (3) TMI 1075X X X X Extracts X X X X X X X X Extracts X X X X ..... sed by the Corporate Debtor - whether there was a plausible dispute supported by the materials raised by the Corporate Debtor in Reply to Demand Notice? - HELD THAT:- On looking into the contents of allegations made in the Reply to the Demand Notice, it is clear that Reply notice raises substantial and genuine issues to oppose the claim of the Operational Creditor s amount due. The issue of deficiency in terms of defects and delays in respect of supplies received from the Operational Creditor was raised by the Corporate Debtor prior to issue of demand notice of 29.07.2020 as borne out from a series of emails placed at pages 432-437 of APB. Concisely put, the email dated 10.10.2017 from the Corporate Debtor raises issues about repair/replacement of supplies made; email dated 18.10.2017 relates to complaint about oil drums having been sent without sealing; email dated 18.05.2018 is about non-supply of oil; email dated 29.11.2018 is about oil drums sent without sealing; email dated 23.02.2019 is about repair of leaking power transformers; email dated 15.10.2019 and 26.11.2019 are about repair of power transformers. These emails which are on record clearly substantiate that the Ope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Corporate Insolvency Resolution Process ( CIRP in short) against Corporate Debtor-M/s. SPML Infra Limited (the present Respondent). Aggrieved by the impugned order, the present appeal has been preferred by the Operational Creditor. 2. The brief facts of the case necessary to notice for deciding the appeal are as follows: - The Respondent/Corporate Debtor was in the business of executing rural electrification contract for South Bihar Power Distribution Company Limited ( SBPDCL in short). For this purpose, it engaged in a business relationship with the Appellant/Operational Creditor since 2014 for supply of power and distribution transformers and other related items. The Corporate Debtor issued purchase orders ( POs in short) to the Operational Creditor against which materials were delivered and payments were made by the Corporate Debtor by Letter of Credit ( LC in short) having 90 or 180 days tenure. The Appellant/Operational Creditor sought early release of payment for goods delivered against POs issued in 2017-18 but the Corporate Debtor on refusing to make good the payment, the Appellant/Operational Creditor sent a demand notice under Section 8 of IBC on 29.07.2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payments were cleared. However, since payments were not released, the Operational Creditor sent further reminder emails on 04.06.2020, 18.06.2020 and 25.06.2020 but these communications did not lead to any payment being received. 5. A sum of Rs. 5,04,70,413 was due and payable by the Corporate Debtor as principal amount besides an interest amount of Rs. 1,37,24,977/- only. In addition, an amount of Rs. 2,06,00,000/- was due from the Corporate Debtor on account of manufacture of 261 transformers which were however admittedly not lifted by the Corporate Debtor. Instead of releasing the payments, the Corporate Debtor on 18.07.2020 refused to accept the outstanding operational debt and made allegations of lapses on the part of the Operational Creditor. It has been contended by the Learned Counsel for the Appellant that the allegations of deficiencies raised were false since the Corporate Debtor had been accepting all supplies till then without any demur and protests. The Operational Creditor therefore sent a reply on 27.07.2020 to the Corporate Debtor denying the disputes as false and vexatious and sought payment of outstanding dues besides threatening further legal action. 6. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es as a pre-existing dispute between the parties in terms of Section 8 of the IBC Code. It was further added that post-2016, the Operational Creditor started defaulting in performing their part of obligations under the terms of the PO and that this was conveyed from time to time to them even before receipt of demand notice. It was added that these shortcomings had a consequential impact in that Corporate Debtor in turn defaulted in performing their contractual obligations in respect of rural electrification contracts qua SBPDCL resulting in sanctions from SBPDCL. It is also submitted that several arbitration applications were also filed before the Hon ble Calcutta High Court which is indicative of pre-existing disputes. 8. We have duly considered the arguments and submissions advanced by the Learned Counsel for the parties and perused the records carefully. 9. The short point for consideration is whether there was any discernible pre-existing dispute surrounding the debt claimed to be due and payable by the Operational Creditor. 10. We find that the Corporate Debtor in its reply dated 08.08.2020 to the Section 8 demand notice had disputed both the quantum of operational de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ghtly observed in the impugned order that the Corporate Debtor had raised an issue with regard to the existence of amount claimed by the Operational Creditor and asked for reconciliation of accounts. 13. Next we come to the issue of deficiencies in respect of discharge of contractual obligations by the Operational Creditor as raised by the Corporate Debtor. The crux of the matter in the present case is to find out as to whether there was a plausible dispute supported by the materials raised by the Corporate Debtor in Reply to Demand Notice. It will be useful at this stage to peruse the reply dated 08.08.2020 of the Corporate Debtor in response to the demand notice dated 29.07.2020 as extracted below: - 4. It is a matter of record that there were transactions between our client and your client whereby our client had issued several purchase orders to EIUL for supply of Distribution Transformers for Patna, Gaya and Kaimur projects and Power Transformers for Patna and Gaya projects. The supplies of the Distribution and Power Transformers as aforesaid were required to be made strictly as per the technical specifications which were informed to EIUL and the supplies were to be mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate Debtor prior to issue of demand notice of 29.07.2020 as borne out from a series of emails placed at pages 432-437 of APB. Concisely put, the email dated 10.10.2017 from the Corporate Debtor raises issues about repair/replacement of supplies made; email dated 18.10.2017 relates to complaint about oil drums having been sent without sealing; email dated 18.05.2018 is about non-supply of oil; email dated 29.11.2018 is about oil drums sent without sealing; email dated 23.02.2019 is about repair of leaking power transformers; email dated 15.10.2019 and 26.11.2019 are about repair of power transformers. These emails which are on record clearly substantiate that the Operational Creditor was put to notice regarding non-supply of goods, delay in supplies, supply of defective goods which are clear signs of pre-existing disputes. We also find that the Adjudicating Authority in para 24 of the impugned order has also taken note of these emails in recording its findings. 15. It has also been submitted by the Learned Counsel for the Respondent that the Corporate Debtor from September 2020 onwards had preferred 5 applications under Section 11 of the Arbitration and Conciliation Act, 1996 bef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ral issues of deficiencies in the supply of goods, breach of obligations, non-supply of bank guarantee by the Operational Creditor which clearly establish that disputes continued to subsist. It will be useful to reproduce relevant portions from the said communication appearing at page 95 of APB: However several lapses were observed on the part of EIUL towards supply of DTRs PTRs required for our projects at Patna, Gaya Kaimur which are as follows: 1. Non submission of CPBGs PBGs in terms of PO s for the aforesaid projects. Please find enclosed worksheet towards value of non-submitted CPBG s PBG s for sum of Rs.3.46 Cr. EIUL initially had submitted some PBGs for a sum of Rs.0.30 Cr however subsequently failed to renew the same. 2. Delays in Supplies within Stipulated time period and thereby failed to account LD in terms of the PO s terms Conditions. Please find enclosed worksheets towards the LD amount of Rs.0.81 Cr which are to be paid by EIUL towards delays in completing the Supplies as per PO s. 3. It is found that EIUL had not supplied transformer oil in terms of PO conditions. Please find enclosed worksheet duly mentioning the quantity and amount o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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