9911796707
TMI Blog2024 (2) TMI 972X X X X Extracts X X X X X X X X Extracts X X X X ..... hik, for Intervenor ( REC Ltd. ) JUDGEMENT NARESH SALECHA , MEMBER ( TECHNICAL ) 1. The present Appeal i.e., Company Appeal (AT) (Insolvency) No. 1185 of 2022 was filed by Mr. Chandan Mishra, Suspended Director of Sinnar Thermal Power Ltd. (in short 'Corporate Debtor') under Section 61 of the Insolvency & Bankruptcy Code, 2016 (in short 'Code') being aggrieved by the Impugned Order dated 19.09.2022 in C.P. (IB) No. 2561/(ND)/ 2019 passed by the National Company Law Tribunal, New Delhi Bench- IV (in short 'Adjudicating Authority') whereby the Adjudicating Authority admitted the Corporate Insolvency Resolution Process (in short 'CIRP') filed under Section 9 of the Code by M/s Shapoorji Pallonji & Co. Private Limited who is the Operational Creditor and Respondent No. 1 herein. 2. Mr. Chandan Mishra expired on 22.11.2022 and Mr. Jeevagan Narayana Swami Nadar moved an application for change name as the Appellant which was allowed by this Appellate Tribunal. 3. Mr. Adarsh Sharma is the Respondent No. 2 herein, was appointed as Interim Resolution Professional (in short 'IRP') of the Corporate Debtor. 4. Heard, the Counsel for the Parties and perused the record made available includi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d an application bearing C.A. No. 503 of 2019 to bring on record work completion certificate 09.05.2019 issued by the Corporate Debtor with reference to BTG work as additional document which was dismissed by the Adjudicating Authority vide order dated 17.01.2022. 13. It has also been brought out that on 23.09.2019, the Respondent No. 1 issued notice to the Corporate Debtor invoking arbitration under Section 21 of the Arbitration Act. The Arbitral Tribunal was constituted on 24.11.2019 to adjudicate upon the claims and counter claims in the matter of Shapoorji Pallonji and Company Private Limited Vs. Sinnar Thermal Power Limited. The final arbitration award was passed on 22.04.2022. 14. It is the case of the Appellant that Arbitral Tribunal award was challenged by him before Hon'ble High Court of Delhi under Section 34 of Arbitration Act being O.M.P. (Comm.) No. 324 of 2024 which is still pending. The Appellant submitted that in view of the pendency of the challenged Arbitral Tribunal's Award, the averment made by the Respondent No. 1 regarding their claims allowed by the Arbitral Tribunal should not be given undue reliance and weightage. 15. The Appellant gave reference to the j ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . At the outset, the Respondent No. 1 submitted that the Impugned Order has been passed by the Adjudicating Authority after detailed consideration and after going into all details of facts and law. 22. The Respondent No. 1 refuted the allegations made by the Appellant that the Respondent No. 1 concealed the fact regarding arbitration proceeding pending before the Hon'ble High Court of Delhi. 23. The Respondent No. 1 gave full background of the case, including the awarded work through legally binding contracts on account of the Corporate Debtor executed by them and chequered history of pending payments. 24. It is the case of the Respondent No. 1 that out of total cumulative work done worth Rs. 208.33 Crores, the Appellant paid only Rs. 146.14 Crores and thereby leaving outstanding dues of Rs. 62.19 Crores. The Respondent No. 1 submitted that he gave all the opportunities to the Corporate Debtor to settle the dues but the Corporate Debtor miserably failed to meet its obligation according to the contracts and therefore, the Respondent No. 1 was compelled to issue demand notice under Section 8 of the Code on 16.08.2019 which was replied by the Corporate Debtor on 29.08.2019. It is t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te Debtor. The Respondent No. 1 strongly pleaded that during the entire duration of contract or even during the 'Defect Liability Period' (in short 'DLP') or even prior to issue of demand 8 notice, the Appellant never raised any dispute and so-called issue being raised in response to the demand notice No. 8 are only with ulterior motives. 29. It is further the case of the Respondent No. 1 that in reply to demand notice dated 29.08.2019, the Corporate Debtor admitted that the entire work was done by the Respondent No. 1 and did not raise any issue regarding quality or quantity of services provided under the contracts. 30. The Respondent No. 1 submitted that only in response to his petition before the Hon'ble High Court of Delhi filed under Section 9 of the Arbitration Act, the Corporate Debtor raised alleged pre-existing disputes in order to illegally encash PBG of the Respondent No. 1 of Rs. 9 Crores. 31. The Respondent No. 1 submitted that the very fact that unqualified work completion certificate was issued by the Corporate Debtor as on 09.05.2019 to the Respondent No. 1, indicate that entire work was completed without any grievances and therefore at this stage such plea of pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te Tribunal to dismiss this Appeal with exemplary costs. Finding 38. From the above averments, the following issues emerges :- a) Whether there were any pre-existing disputes between the parties prior to the issue of demand notice issued under Section 8 of the Code by the Respondent No. 1 to the Corporate Debtor on 16.08.2019. b) Whether the arbitration case pending before the Hon'ble High Court of Delhi has any impact on Section 9 application under the Code by the Respondent No. 1 which is subject matter of the present appeal before this Appellate Tribunal. c) Whether, the work completion certificate dated 09.05.2019 was rightly relied upon by the Adjudicating Authority. 39. These issues and other issues raised in the appeal are inter-connected and inter- dependent and hence we shall deal all the relevant issues conjointly in the following discussions. 40. We will go through some of cited judgments by the Appellant which reads as under :- a) K. Kishan v. Vijay Nirman Co. (P) Ltd., (2018) 17 SCC 662 b) M/s Annapurna Infrastructure Pvt. Ltd. vs. M/s Soril Infra Resources Ltd. in Company Appeal (AT) (Insolvency) No. 32 of 2017. 41. The first case is of K. Kishan v. Vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bject-matter of an arbitration proceeding, and as per KCPL's accounts, the respondent was liable to pay larger amounts to them. After the notice and reply, on 20-4-2017, a Section 34 petition was filed by KCPL under the Arbitration and Conciliation Act, 1996 (the A&C Act) challenging the aforesaid award. This petition was filed within the period of limitation set down in Section 34(3) of the A&C Act. It is only thereafter that a petition was filed under Section 9 of the Insolvency and Bankruptcy Code, 2016 (the Code), on 14-7-2017. The issue involved in this appeal was whether the Insolvency and Bankruptcy Code, 2016 can be invoked in respect of an operational debt where an arbitral award has been passed against the operational debtor, but which has not yet been finally adjudicated upon?" (Emphasis supplied) Thus, we find that above cited case is based on fact that the Demand Notice was based on the Arbitral Tribunal which was challenged under Section 34 of the Arbitration Act unlike in the present appeal where the Demand notice and Section 9 is on the basis of unpaid invoices. We will refer to another cited judgment of Hon'ble Supreme Court of India in the matter of M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... note of the part IV of demand notice dated 16.08.2019 issued under Section 8 of the Code by the Respondent No. 1 to the Corporate Debtor. In part IV, the Respondent No. 1 specifically asked for pendency of any suit or arbitration proceedings in relation to any pre-existing disputes before the receipt of any demand notice dated 16.08.2019. However, in the reply dated 29.08.2019 no specific reference of any pending arbitration case or suit, has been given and reference were given only to their alleged deficiency of services address to the Respondent No. 1 in their correspondence made earlier especially with regard to alleged slow progress by the Respondent No. 1. 45. We further note from the said part IV of application that the Respondent No. 1 specifically brought to the notice of their petition filed before the Hon'ble High Court of Delhi vide petition number O.M.P. (Comm.) No. 262 of 2019 under Section 9 of the Arbitration Act. As such we do not find any force in the arguments of the Appellant that the Respondent No. 1 concealed the fact regarding arbitration before the Adjudicating Authority. 46. During averments before us, the Respondent No. 1 submitted that the entire work wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee for writing Order in terms of Procedural Order no. 1 and 3 on or before 30.04.2021." ( Emphasis Supplied ) 48. Now we will take up the issue regarding pre-existing disputes between the parties prior to issue of demand notice under Section 8 of the Code on 16.08.2019. Dispute is not mere denial and dispute should be in accordance with the Section 5(6) of the Code. 49. It has been the case of the Respondent No. 1 that alleged pre-existing dispute were raised for the first time by the Corporate Debtor in his reply to petition filed under Section 9 of the Arbitration Act before the Hon'ble High Court of Delhi. Since, the Corporate Debtor raised issues regarding contractual breaches and disputes, the Respondent No. 1 also had to issue notice invoking arbitration in compliance with the terms of contract regarding raising of disputes and had to move a suitable application under the Arbitration Act. We note that the Arbitral Tribunal comprising of Justice R.M. Lodha, Former Chief Justice of India, Presiding Arbitrator, Jusitce C.K. Prasad, Former Judge, Supreme Court of India, Co-Arbitrator and Justice A.K. Sikri, Former Judge, Supreme Court of India, Co-Arbitrator was constituted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le Supreme Court of India caring issue of Pre-existing disputes under the Code. In Mobilox Innovations P. Ltd. vs. Kirusa Software (P) Ltd. [(2018) 1 SCC 353]. The Hon'ble Supreme Court of India has stipulated the following test for existence of dispute :- a) Whether the Corporate Debtor has raised a plausible contention requiring further investigation which is not a patently feeble legal argument or an assertion of facts unsupported by evidence; b) Whether the defence is not spurious, mere bluster, plainly frivolous or vexatious; c) A dispute, if it truly exists in fact between the parties, which may or may not ultimately succeed. 53. From the various averments of the parties, we note that prior to issue of demand notice, no formal letter has been written by the Corporate Debtor to the Respondent No. 1 regarding raising any specific disputes on aspect of quality and quantity of work executed under the contracts. In this connection, we have taken note of reply dated 29.08.2019 filed by the Corporate Debtor to demand notice. From the said reply, it seems that the Corporate Debtor has referred to various communications and Minutes of Meeting (in short 'MoM'), wherein the Corpo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... qualified erection welders were not deployed at the elevated structure, there was lot of compromise with the quality of the work by the Operational Creditor, as there were various defects in the same. It is also submitted that vide MoM dated 01.11.2014 the Corporate Debtor expressed its concern over the nonavailability of 250 MT Crane, which the Operational Creditor have to provide in the month of Oct 2014 and the Corporate Debtor also asked the Operational Creditor to provide the completion programmer in line with the requirement of the Corporate Debtor, but no further progress was made. Subsequently, vide MoM dated 12. 11.20 14, the Corporate Debtor has expressed his concern on shortage of manpower, especially structural manpower and accordingly, the Operational Creditor was asked to immediate argumentation to meet the target dates. Therefore, vide MoM dated 18.12.2014, 22.12.2014 & 29.012.2014 the Corporate Debtor expressed its serious concern over the poor supervision at the project and repetitive failure on the part of the Operational Creditor for the weekly execution of works completion targets commitments. Vide MoM dated 06.01.2015 the same concern were expressed to the Oper ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quired to be admitted. 14. On a cojoint reading of the provision envisaged under Section 9 of the Code, 2016 and the Mobilox Innovations (Supra), we are of the considered opinion that it is a settled preposition that the adjudicating authority must follow the mandate of Section 9, as outlined above, and in particular the mandate of Section 9(5) of the Act, and admit or reject the application, as the case may be, depending upon the factors mentioned in Section 9(5) of the Act. 15. Adverting to factual matrix of the present case, we are satisfied that present petition is complete as per the provisions of Code, 2016 read with rules made thereunder, outstanding operational debt claimed in part IV of Forrn-5 of the petition is above the pecuniary threshold limit as envisaged under Section 4 of the Code, 2016 and duly supported by Agreement dated 28.05.2010 and addendums thereto, Running Account Bills and other ancillary documents, therefore, the requirements as envisaged under Section 9(5)(i)(a), 9(5)(i)((b) and 9(5)(i)((c) of the Code, 2016 are satisfied. 16. The only issue this Adjudicating Authority have to determine is whether there is existence of a dispute between the partie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reference to their various e-mails, other correspondences regarding slow progress of work, etc., and only after detailed analysis, the Adjudicating Authority came to conclusion that the Corporate Debtor has not raised any substantial objection or dispute pertaining to work performance by the Operational Creditor prior to issuance of demand notice dated 16.08.2019. 56. In Civil contract for construction of certain civil facilities like in the present case of BTG and OBTG contracts, what is to be seen is that the work has been completed and there has been no issues regarding quality or quantity of the services. Mere allegations regarding less mobilisation of manpower or regarding delay during the contract which was ultimately completed to the satisfaction of the Corporate Debtor for which the completion certificate, without any caveat or qualifications or conditions was issued to the Financial Creditor, such allegations may not fall in the definition of dispute under Section 5(6) of the Code and also will not meet the test as stipulated by the Hon'ble Supreme Court of India in the Mobilox Innovations P. Ltd. (Supra). 57. It may also be kept in view that the Adjudicating Authority i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r vide e-mail dated 23.01.2016, refuting the content and indicating action taken to mobilise resources and further raised the issue regarding pending payments to be released by the Corporate Debtor to the Respondent No. 1. This was followed with the communication from the Corporate Debtor on 23.01.2016, giving outcome of discussion with the Respondent No. 1 relating to payment to be made by the Corporate Debtor and mobilisation of manpower and tools and plants to be made available by the Respondent No. 1. The content of the letter was confirmed by the Respondent No. 1 vide their letter dated 25.01.2016 and finally the Corporate Debtor withdrew the termination letter. Thus, we find from above correspondence that the issue was regarding release of payment by the Corporate Debtor and in turn mobilisation of resources especially manpower and tools and plant by the Respondent No. 1 for which the termination letter was issued and subsequently withdrawn. Thus, we do not find any issue raised by the Corporate Debtor regarding quality or quantity of services resulting into pre-exiting disputes hence, on the contention of the Appellant that the work was terminated indicates pre-existing dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... completion certificate was not denied by the Appellant. We note that the Corporate Debtor has issued completion certificate on 09.05.2019 prior to issue to demand notice on 16.08.2019 stating that the Respondent No. 1 has completed the contract and their performance was found satisfactory. We find that the completion certificate was unqualified and without raising any issue regarding quality or quantity or progress of the work by the Respondent No. 1. Merely the fact that the certificate was issued at the request of the Corporate Debtor, the existence and validity and impact of the same cannot be denied at this stage by the Corporate Debtor. Thus, the work completion certificate was rightly taken into consideration by the Adjudicating Authority in their analysis and we do not find any error on the same. 67. We are conscious of the fact that completion of project in time along with requisite quality is the heart of the contract management. It can be no one's case that extra-ordinary delay which changes viability of the project can be simply brushed aside and should not be taken into consideration while deciding Section 9 application under the Code by the Adjudicating Authority. H ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
