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TMI Blog2023 (5) TMI 249X X X X Extracts X X X X X X X X Extracts X X X X ..... tice and the voluminous exchange of correspondences which has taken place between the two parties relating to supplies, delay in completion of project, pendency of risk and cost account of BHEL and LD related issues. The tone and tenor of these protracted correspondences clearly manifest existence of dispute prior to the date of Section 8 demand notice on 16.09.2019 - these disputes were raised much before the issue of the issue of Demand Notice. For such disputed operational debt, Section 9 proceeding under IBC cannot be initiated at the instance of the Operational Creditor. Though there is no need to enter into final adjudication with regard to existence of dispute between the parties regarding operational debt, but the contents of these emails/ letters/minutes of meetings ought to have been factorized to arrive at a finding whether the defence taken by the Corporate Debtor is moonshine defence unsupported by evidence. Surprisingly none of these emails and letters establishing the existence of pre-existing disputes between the parties have been taken into cognisance by the Adjudicating Authority. These being pertinent factors for consideration, to our mind the Adjudicating Aut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ply of material for water system, EPT and CW treatment system which is hereinafter referred to as the Project. The date of completion of the project was 09.06.2012 with purchase order issued on 10.08.2011 for a total value of Rs.7.86 cr. It has been further submitted that the Operational Creditor/Respondent No.1 had sought several extensions of time and in spite of time extensions having been allowed at regular intervals, the Operational Creditor failed to adhere to the timelines both in respect of supply of delivery as also commissioning of the project. It was further contended that the ground of non-payment raised by the Operational Creditor as an alibi to withhold the supply of balance material and resultant delay in the commissioning of the whole project lacks credulity. 3. Due to the inefficiency and lackadaisical approval of the Operational Creditor, the Corporate Debtor was compelled to request BHEL to complete the project and supply the materials against the risk and costs of the Corporate Debtor. It was also pointed out that since BHEL was executing the balance work at risk and cost of the Corporate Debtor and some material was still under procurement stage by BHEL, con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... easons attributable to the Corporate Debtor since it failed to perform crucial reciprocal promises and obligations namely the timely release of funds for supplies made and works executed. Moreover, the Operational Creditor had sent 29 emails from 02.06.2018 to 08.01.2019 seeking payment of its outstanding dues. As against gross billing of Rs.7.63 cr the Corporate Debtor had released payment of Rs.5.78 cr. Further, in various minutes of the meeting including the meeting held on 28.09.2015, it was clearly recorded that the Operational Creditor had requested the Corporate Debtor to release the outstanding payment to expedite the work. 7. Moreover, the Corporate Debtor had on more than one occasion admitted and acknowledged their liability in writing. The Corporate Debtor in their email dated 14.11.2017 had clearly admitted that an amount of Rs.98 lakh was outstanding. This was followed by another email dated 09.01.2019 wherein an amount of Rs.87,01,843/- has been admitted by the Corporate Debtor as liability as per their own reconciliation statement. More importantly, these communications did not make any mention that the outstanding dues were to be subjected to adjustment after fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r on 16.09.2019 and notice of dispute was raised by the Corporate Debtor on 07.11.2019 but beyond the prescribed period of ten days. 12. We notice that the Adjudicating Authority has returned the finding that the Corporate Debtor having failed to reply within 10 days, the Operational Creditor has successfully proved that Corporate Debtor has not complied with Section 8(2)(a) of the IBC. We however like to make it clear that it is now settled law as laid down by this Tribunal in Company Appeal (AT) (Ins.) No.958 of 2020 that even if reply notice is not submitted within ten days, it does not preclude the Corporate Debtor from raising the issue of pre-existing disputes by bringing relevant material before the Adjudicating Authority. Hence it has been erroneous on the part of the Adjudicating Authority to overlook the disputes raised in the notice for dispute by holding that an undisputed debt was acknowledged by the Corporate Debtor simply on the basis of an email dated 09.01.2019 sent by the Corporate Debtor. 13. Now coming to Section 9 of IBC, sub-section (1) thereof provides that if the Operational Creditor does not receive payment from the Corporate Debtor or notice of the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cations issued on 04.05.2018 and 14.02.2019 but to no avail. Hence the Demand Notice under Section 8 was issued on 16.09.2019 demanding the admitted sum of Rs.87,01,843/- being the amount in default. It was further added that even in the notice of dispute on 07.11.2019, an amount of Rs.5,39,414/- has been admitted as a liability which was also above the prescribed threshold. 18. Rivalling the above arguments advanced by the Learned Counsel for the Respondent No. 1, it is the case of the Appellant that in their reply to the demand notice dated 07.11.2019, they had disputed the liability to pay the amount claimed by the Operational Creditor. To find out as to whether the dispute raised by the Corporate Debtor is a moonshine dispute unsupported by any evidence, we need to look into the nature of allegations made in the Reply Notice and whether these allegations are built on a past foundation preceding the issue of the demand notice. 19. We notice that the reply notice listed out the need to make several adjustments on the debt claimed by the Operational Creditor occasioned by liquidated damages of Rs.68 lakh, sales tax due of Rs.4.82 lakh, Rs.95,539/- for short supply of materia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d at page 158 of APB. In a subsequent meeting held on 04.10.2016, the Operational Creditor had again sought time extension to complete the tank fabrication work as at page161 of APB. However, delay in the execution of the projects persisted. The Corporate Debtor sent emails on 13.12.2017 and 04.05.2018 for supply of certain specific materials as per scope of work for work completion at Namrup site as at pages 165-166 of APB. Another email of balance material was sent to the Operational Creditor on 02.02.2019 which preceded the Section 8 notice as placed at page 168 of APB. It may be helpful to reproduce the said communication as: - From VIRENDRA SINGH [email protected] Sent: Saturday, February 2, 2019 12.08.58 PM To: Adesh Butala (WF01 WIN Water); [email protected] Cc: Giridhar ; Anant Narayan Goyal ; Ravichandran BARATHAN ARIYUR ; Ashok Gupta ; [email protected]; [email protected]; [email protected], KRISHNA NAIK K ; [email protected]; [email protected]; pdev ; Saroj Kumar Das-Genl Manager-PSER ; M.Sai Phanindra Kumar Subject: Supply and supervision contract of Water system at NBPPL Namrup site Dear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k on risk cost to NBPPL, the same shall be passed on to you as per order terms conditions. As the BHEL is still executing balance Wipro supply, I have discussed with our site in-charge at NAMRUP site, you may please depute your representative at NAMRUP for the meeting with BHEL NBPPL site incharge and action plan for supply of balance items, so that risk and cost can be minimized. We are awaiting amount of risk and cost executed by BHEL as on today, till that we may not be in position to release any amount of M/s Wipro. Regards, Ashok Gupta (Emphasis supplied) 24. It was further contended that in their subsequent letter on 06.07.2019 it was categorically clarified that since the risk and cost value to be levied by BHEL on the Corporate Debtor was yet to be finalized, no amount was payable by the Corporate Debtor to the Operational Creditor as placed at page 173-174 of APB which is to the effect:- Ref. No:- NBPPL/Project/Water system/PO-2071/19/00 date 06/07/2019 To M/s Wipro Enterprises Pvt. Ltd Plot No. A-38, TTC Industrial Area Thane Belapur Road, Navi Mumbai 400705 Attention: Mr. Jintendra Mitangale, Manager-L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pta Sr. DGM (Project) (Emphasis supplied) 25. It was therefore asserted by the Learned Senior Counsel for the Appellant that the above communications dated 29.05.2019 and 06.07.2019 clearly showed that there was allegation of delay by the Operational Creditor in completing supplies and in the erection and commissioning of water system besides need to make adjustments of LD and risk and costs of BHEL which clearly signifies pre-existing disputes. Moreover, the very fact that requests were made by Operational Creditor seeking waiver of liquidator damages in itself manifests dispute. 26. Challenging the impugned order, the Learned Senior Counsel for the Appellant mentioned that the Adjudicating Authority has failed to note that there was a pre-existing dispute qua the claim received from the Operational Creditor. We are inclined to agree that these disputes having been raised prior to the issue of demand notice and the foundation of the disputes are adequately borne out from material placed on record before the Adjudicating Authority, the disputes were not illusory and hence the Section 9 application ought not to have been admitted. Reliance has also been placed on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that Adjudicating Authority has referred to both these judgments but failed to correctly appreciate and apply the ratio in the facts of the present case. 29. Perusal of the impugned order makes it clear that the Adjudicating Authority simply relied on the email dated 09.01.2019 to come to the conclusion that there was debt and default and admitted the Section 9 petition. The satisfaction of the Adjudicating Authority is sans consideration of the reply to the demand notice and the voluminous exchange of correspondences which has taken place between the two parties relating to supplies, delay in completion of project, pendency of risk and cost account of BHEL and LD related issues. The tone and tenor of these protracted correspondences clearly manifest existence of dispute prior to the date of Section 8 demand notice on 16.09.2019. We also notice that these disputes were raised much before the issue of the issue of Demand Notice. For such disputed operational debt, we are of the considered view that Section 9 proceeding under IBC cannot be initiated at the instance of the Operational Creditor. 30. Though there is no need to enter into final adjudication with regard to existence ..... X X X X Extracts X X X X X X X X Extracts X X X X
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