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TMI Blog2023 (6) TMI 1006X X X X Extracts X X X X X X X X Extracts X X X X ..... tractual Relationship with the owner and shall not be entitled to prefer any Claims against the owner. The material on record establishes that there is no Operational Relationship between the Appellant and the Respondent herein and it is pertinent to mention that the Respondent is not even a party to the Agreements entered into between ISPL and IEDCL and ISPL and the Appellant/Operational Creditor. It is clear from the record that there are no goods and services supplied directly by the Operational Creditor to the Respondent herein and therefore it cannot be said that there is any Operational Debt between the Operational Creditor and the Respondent herein. Merely because the owner had given a bona fide assurance that if IEDCL fails to pay the amount they would pay the same on their behalf, the amount will not fall within the definition of Operational Debt as defined under Section 5(21) of the Code. The Hon ble Supreme Court in the matter of Essar Oil Limited Vs. Hindustan Shipyard Ltd. Ors. [ 2015 (7) TMI 373 - SUPREME COURT] , has held that when a principal employer grants a contract to a Construction Company the sub-Contractors cannot sue the principal employer for any is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... catena of cases has categorically stated the various aspects to be considered by the Adjudicating Authority while deciding the applications filed under sections 7 and 9 of the 18B Code, 2016. 14. The Hon'ble Supreme Court in Mobilox Innovations Private Limited vs. Kirusa Software Private Limited, (2018) 1 SCC 353, while dealing with an application filed u/s 9 of the 18B Code, 2016 has inter alia held as under: 25. Therefore, the adjudicating authority, when examining an application under Section 9 of the Act will have to determine: (i) Whether there is an operational debt as defined exceeding Rs. 1 lakh? (ii) Whether the documentary evidence furnished with the application shows that the aforesaid debt is due and payable and has not yet been paid? And (iii) Whether there is existence of a dispute between the parties or the record of the pendency of a suit or arbitration proceeding filed before the receipt of the demand notice of the unpaid operational debt in relation to such dispute? If any one of the aforesaid conditions is lacking, the application would have to be rejected. 15. Therefore, this Adjudicating Authority is only to see wheth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Company Limited (IEDCL), who in turn appointed M/s. Sterling Wilson Private Limited/the Operational Creditor herein as the sub-Contractor. In pursuance to this arrangement, it is averred that the Operational Creditor and IEDCL entered into several Contracts for the purpose of the works in relation to the Project and several invoices were raised for the period 21.12.2017 till 24.11.2018. It is submitted that IEDCL consistently defaulted in the payments of various invoices totally amounting to Rs.99,75,88,940/- and despite several requests did not make any payments, on account of which, the Operational Creditor issued a letter dated 04.10.2018 suspending the works in relation to the Project. 4. It is submitted that the Respondent / Corporate Debtor issued a letter dated 17.10.2018 stating that if the said invoices remained unpaid even after 15.01.2019, the Corporate Debtor would indemnify and clear them within 15 days from 15.01.2019. It is submitted that in relation to agreeing to pay the principal sum, the Corporate Debtor has also promised the Operational Creditor payment of interest to the tune of Rs.1,04,97,436/-. Learned Sr. Counsel drew our attention to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ledge of the terms of this Contract (other than the Contractor s pricing information, other than IEDCL, with whom such information may be shared) which are relevant to the Sub-Contractor and the agreement entered into between the Contractor and each Sub-Contractor provides for terms that are in all respects not less stringent than the terms of this Contract (other than the financial terms). The sub-Contractors shall include the following terms: (a) the Sub-Contractors shall be deemed to have knowledge of the terms of this Contract (excluding pricing and commercial terms, other than IEDCL which shall be deemed to have knowledge of such information), the Project Documents and the Scope of Works; (b) each Sub-Contractor shall observe, perform and comply with the terms and conditions of this Contract (whether or not this Contract expressly requires the Contractor to obtain the Sub-Contractor s compliance (herewith) insofar as they relate to the Works being performed by the Sub-Contractor or that part of the Works (including without limiting the generality of the foregoing, any erection, construction, testing, commissioning, insurance, quality assurance control, safety require ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Appellant and the Respondent herein and that no Proceedings under IBC can be sustained on the basis of a promissory estoppel. 9. Learned Sr. Counsel Mr. Mukherjee also brought to the Notice of this Bench that the Appellant / Operational Creditor filed a Claim against ISPL, which is undergoing Corporate Insolvency Resolution Process ( CIRP ) and that the Resolution Professional ( RP ) therein has admitted the Claim . Assessment: 10. The brief point that falls for consideration in this Appeal is whether the Adjudicating Authority was justified in dismissing the Application filed under Section 9 of the Code on the ground that there was no Contractual Relationship between the Appellant and the Respondent herein. For better understanding of the case, the relationship between the Appellant and the Respondent is explained in the following diagram: 11. It is clear from the aforenoted diagram that IEDCL had sub-Contracted the work to the Appellant / Operational Creditor herein. IEDCL is one of the subsidiaries of IL FS Solar Power Limited (ISPL)/ the main Contractor which had entered into a contract with Embassy Energy Private Limited /the R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ebt between the Operational Creditor and the Respondent herein. Merely because the owner had given a bona fide assurance that if IEDCL fails to pay the amount they would pay the same on their behalf, the amount will not fall within the definition of Operational Debt as defined under Section 5(21) of the Code. Learned Sr. Counsel for the Respondent submitted that all payments due and payable by the Respondent towards ISPL were made and discharged. The Hon ble Supreme Court in the matter of Essar Oil Limited Vs. Hindustan Shipyard Ltd. Ors. (2015) 10 SCC 642 , has held that when a principal employer grants a contract to a Construction Company the sub-Contractors cannot sue the principal employer for any issues, if payable, as there is no privity of contract between the sub-Contractors and the principal employer . The Hon ble Supreme Court in paras 24 to 28 has observed as follows: 24. It is true that ONGC had made payment to the appellant directly on several occasions. Upon perusal of the correspondence, we find that some understanding, but not amounting to any agreement or contract, was arrived at between ONGC and the Respondent for making direct p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the part of ONGC to make any payment to the appellant. Moreover, we could not find any correspondence establishing contractual relationship between ONGC and the appellant. In the circumstances, ONGC cannot be made legally liable to make any payment to the appellant. As stated hereinabove, only for the sake of convenience and to get the work of ONGC done without any hassle, ONGC had made payment to the appellant on behalf of the Respondent without incurring any liability to make complete payment on behalf of the Respondent . 28. The learned counsel appearing for the appellant failed to show any document in the nature of a contract entered into between the appellant and ONGC whereby ONGC had made itself liable to make payment to the appellant. Even when the payment had been made by ONGC, it was very clear that the payments were made on behalf of the Respondent as ONGC was debiting the account of the Respondent by the amount paid to the appellant. It is important that the payment was made to the appellant only upon certification of work done by the Respondent . ONGC had given a contract to the Respondent . ONGC had never entered into any contract with the appellant an ..... X X X X Extracts X X X X X X X X Extracts X X X X
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