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TMI Blog2024 (9) TMI 569X X X X Extracts X X X X X X X X Extracts X X X X ..... tor-Appellant seeking initiation of Corporate Insolvency Resolution Process ('CIRP' in short) against Respondent-Corporate Debtor-POSCO E&C India Private Limited. Aggrieved by this impugned order, the present appeal has been preferred by the Operational Creditor. 2. We have heard Shri Arijit Prasad, Ld. Sr. Counsel appearing for the Appellant and Shri Savar Mahajan, Ld. Counsel representing the Respondent. 3. Making his submissions on behalf of the Appellant, the Ld. Sr. Counsel outlining the sequence of events stated that the Appellant-M/s Agarwal Foundries Pvt. Ltd. was a supplier of TMT Bars and that the Respondent- POSCO E&C India Pvt. Ltd. vide their e-mail dated 10.06.2015 sought quotation from the Appellant for supply of TMT Bars to their contractor- Empathy Infra & Engineering Pvt. Ltd. ('Empathy' in short) in respect of their Nirvana Project. TMT Bars were thereafter supplied to Empathy from time to time for which invoices were raised by them against which payments remained outstanding. As payment was not forthcoming either from Empathy or from the Respondent inspite of the latter being a Guarantor qua the dues of Empathy, Demand Notices were issued on 27.07.2017, 11.10. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9 application ought to have been admitted and the Respondent admitted into CIRP. 5. Refuting the contentions raised by the Appellant, the Ld. Counsel for the Respondent submitted that the Appellant had neither provided any goods nor any services to the Respondent directly and therefore cannot claim to be an Operational Creditor of the Respondent. It was also contended that there was no legally valid contract of guarantee executed between the Appellant and the Respondent and unauthorized e-mails cannot be the foundation of a contract of guarantee. It was asserted that the Respondent did not fall within the definition of a "Corporate Guarantor" under Section 5(5-A) of the IBC. There is no provision whereby guarantee is covered in the definition of "Operational Debt" under Section 5(21) of IBC. Hence, application under Section 9 of the IBC is not maintainable against a guarantor of an Operational Debt. Advancing their arguments further, it was further submitted that the Adjudicating Authority had correctly held that the claim of the Appellant was time-barred. It was asserted that the limitation has to be counted from the date of default which is the point of time on which the cause ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ayment, it was incumbent upon the Respondent to make payment on account of the services rendered by the Appellant. The Respondent having defaulted in clearing the liability qua the Appellant, the Section 9 application ought to have been admitted and the Respondent admitted into CIRP. 9. It is the case of the Respondent that there was no privity of contract between the Appellant and the Respondent. Further, the Appellant cannot claim to be an operational creditor of the Respondent since it had not provided any goods or services to the Respondent directly. It has also been denied that there was any legally valid contract of guarantee executed between the Appellant, Respondent and Empathy. Admittedly, no guarantee agreement was executed in this regard. Hence the liability of operational debt of Empathy cannot be fastened on the Respondent by the Corporate Debtor. 10. The primary question before us is therefore to find out whether the Appellant is an Operational Creditor of the Respondent and whether the claim of the Appellant is an operational debt qua the Respondent. For better appreciation of the relationship between the Appellant and the Respondent and the nature of transactions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Coming to the e-mails which have been relied upon by the Appellant to substantiate their claim that the Respondent had stood guarantee, we find that consequent to a email dated 10.06.2015 received from the Respondent seeking competitive quotes from the Appellant for TMT bars, the Appellant on 24.06.2015 had requested the Respondent to issue a letter of assurance/guarantee of payment and for this purpose had even attached a format of the guarantee. The relevant extracts of the two emails are as reproduced below: From : Kalpesh Sent : Wednesday, June10, 2015; 05:05 PM Subject : PISO-EM-Enquiry for TMT bar for June-2015-Nirvana Project. Dear Sir, We would like to receive your most competitive quotation for below mentioned requirement of TMT bars. From: Sidharath Saraf Sent : Wednesday, June 24, 2015; 4:24 PM Subject : RE: PISO-EM-Enquiry for TMT bar for June-2015-Nirvana Project. ".....It is my earnest request to kindly issue us a letter of assurance/guarantee of the payment of Empathy Infra for which we would immediately dispatch goods on receipt. A format is attached for your reference...." Sidharath Saraf ( Emphasis supplied ) The Appellant has f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ertheless the minutes do not bear the signature of the parties. As regards the fifth email dated 30.10.2015, we notice that this email is addressed by the Respondent to Empathy stating that if they falter in adhering to the payment schedule, strict action would be taken against them and that the Respondent "will think about another way" in this regard. From a plain reading of this email, we are afraid that it cannot be treated as admission/acknowledgement of any liability on the part of the Respondent towards the Appellant or that the Respondent had taken the mantle of being a guarantor to any such liability. 14. In view of our analysis above, we are of the view that the Adjudicating Authority was not off the mark in observing that the Appellant has failed to produce any documentary evidence/tripartite agreement stipulating the terms and conditions of the guarantee of payment undertaken by the Respondent on behalf of the third party for the goods supplied to it by the Appellant. In the absence of any privity of contract between the parties, the Appellant cannot be treated as the Operational Creditor of the Respondent. 15. This now brings us to the issue of the claim of the Appell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, the Appellant/Operational Creditor had clearly failed to fulfil the requirements of Rule 5(1) of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 to establish their operational claims. The operative and primary requirements of Section 5(21) not having been met, we are therefore not convinced by the contention of the Appellant of their claim arising out of supply of goods as operational debt. In the absence of operational debt, no liability could be fastened on the Respondent to pay for these goods. We therefore hold that the precondition for initiation of Section 9 IBC proceedings was non-existent in the facts of the present case. 16. It is also pertinent to note that the Respondent has also denied any liability or dues payable to the Appellant in their reply to the demand notice. It has been contended that the allegations of existence of debt were false and concocted as the Respondent was not a party to any transaction involving the Appellant and that the Section 8 Demand Notice had failed to demonstrate the basis ingredients of a debt. It may be useful and constructive to peruse the relevant excerpts of the reply to the Section 8 Demand Notice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the Respondent on the judgment of the Hon'ble Supreme Court in BK Educational Services Pvt. Ltd. Vs Parag Gupta and Associates in CA No. 23988 of 2017 wherein it had held that proceedings under Section 9 of IBC are governed by the provisions of the Limitation Act, 1963. We are satisfied with the findings of the Adjudicating Authority that the claim of the Appellant was time-barred since the limitation was to be counted from the date of default which is the point of time on which the cause of action arose. In the present case, the date of default shown in Part IV of Form 5 was 28.08.2015. However, the Section 9 application was filed on 11.02.2019 which was clearly beyond the three years limitation period and hence clearly timebarred. 18. It is of paramount importance to keep in mind the objectives of IBC which is, inter-alia, to promote entrepreneurship, maximize value of assets, make available credit, and balance the interest of all stakeholders, in a time bound manner. We need to be mindful that no stakeholder takes any undue benefit of the provisions of the IBC. Interestingly, we find that the Appellant has been filing multiple Section 9 applications either against the Resp ..... X X X X Extracts X X X X X X X X Extracts X X X X
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