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Macquarie Bank Limited Versus Uttam Galva Metallics Limited

Corporate Insolvency Resolution Process - Insolvency and Bankruptcy Code, 2016 - Whether the instant petition has been filed on the basis of a valid power of attorney? - Held that:- Under sections 271 and 272 of the Companies Act, 2013 as originally enacted, any creditor or creditors could file a petition for winding up of the company for its inability to pay the debts. These provisions had not been enforced till the time, the Code, became effective. The clause pertaining to the inability of the .....

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h is recent in time, authorising him to file the winding up petition etc. would fully cover the authority to file the insolvency resolution process under the Code. - Whether the petitioner is entitled to file this petition as an assignee of the original supplier? - Held that:- In view of the above admitted documents, the petitioner would definitely comes within the definition of the term 'operational creditor', as defined under Section 5(20) of the Code, as meaning a person to whom an operat .....

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accordingly held in favour of the petitioner. - Whether there is non-compliance of clause (c) of Section 9 (3) of the Code? If so, Its effect? - Held that:- The contention that the respondent is not prejudiced, having admittedly not made the payment cannot be accepted, there being non- compliance of the mandatory requirement of Section 9(3)(c) of the Code. The intent of the legislature for laying down the mandatory compliances is keeping in view the time line within which an application is r .....

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Held that:- The definition of dispute is inclusive and not exhaustive. The same has to be given wide meaning provided it is relatable to the existence of the amount of the debt, quality of goods or service or breach of a representation or warranty.Having given my thoughtful consideration to the rival contentions of the learned counsel for the parties and appraisal of the documents on record, would decline to attach much weight to the fetters Annexures R-9 and R-10 in preference to the exchange .....

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otherwise maintainable, could be defeated solely on that ground, as the corporate debtor cannot escape from its liability under the contract, in case it has made a default in payment of debt. The issue is accordingly held against the respondent. - CP (IB) NO. 22/CHD/HRY/2017 - Dated:- 1-6-2017 - MR. R.P. NAGRATH, J. For The Applicant : Ashish Aggarwal, Sr. Adv. and Kanwalvir Singh Kang, Adv. For The Respondent : Anand Chibbar, Sr. Adv. and Tarun Lehal, Adv. ORDER The Operational Creditor has fi .....

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r is situated at Gurgaon in Haryana State and therefore, the matter falls within the jurisdiction of this Tribunal. The application has been filed in terms of Form No.5 prescribed under the Rules. 2. The application was filed after the operational creditor sent a notice alongwith the invoices demanding the payment of the defaulted amount to the Corporate Debtor statedly in Form No.3, as prescribed in Rule 5(1) of the Rules by a registered post AD and through courier The demand notice dated 14.02 .....

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aising the dispute. 4. In terms of sub-rule 2 of Rule 6, the applicant was required to despatch forthwith a copy of the application filed with the Adjudicating Authority by registered post or speed post to the registered office of the company. Though the appearance on behalf of the respondent-corporate debtor was made by Mr.Anand Chibbar, Senior Advocate with Mr. Tarun Lehal, Advocate on 08.05.2017. the first date, when the matter was listed, yet the petitioner was directed to file an affidavit .....

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r the respondent submitted that there is no certificate from the Financial institution maintaining the account of the operational creditor, in terms of clause (c) of sub-section (3) of Section 9 of the Code, for which, learned counsel for the petitioner sought time to file the affidavit and the document, if available and the matter was adjourned to 24.05.2017. The certificate of the Applicant-Bank dated 15.05.2017 Annexure A-13 was filed along with the supporting Affidavit of Mr. Kanwalvir Singh .....

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mitted to the Hon'ble President of NCLT, New Delhi seeking extension of 10 days more time in disposal of the case in terms of Section 64 of the Code. The Hon'ble President has been pleased to grant the extension of 10 days time as conveyed to this Bench vide letter No.25/2/2017-NCLT, dated 31.05.2017. Facts 7. The Corporate Debtor approached the original supplier Hamera International Pte. Ltd., having its office in Singapore, for supply of Hot Rolled Steel Sheet In Coils and pursuant the .....

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s term was also there in the sales contract. The others are the invoices dated 21.12.2015 and 31.12.2015 at pages 43 and 44 of the paper book respectively, mentioning therein the amount of the goods being supplied with the same terms of payment within 150 days from the date of Bill of Lading. 9. It is further stated that on 27.07.2015 receivables purchase agreement was executed between the original supplier and the applicant- operational creditor. By virtue of this Agreement, the applicant-opera .....

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and the third Bill of Exchange refers to the Bill of Lading dated 31.12.2015. The copies of the Bills of Lading aforesaid are at Annexure 7 (Colly). The maturity date of one bill of exchange, therefore, is 19.05.2016, the other 17.05.2016 and the third is 29.05.2016 respectively i.e. the expiry of 150 days of the date of Bills of Lading. Accordingly, the debt fell due w.e.f. 19.05.2016, 17.05.2016 and 29.05.2016 respectively. The total amount of default is USD 6,321,337.11, equivalent to ₹ .....

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further the version of applicant that there was exchange of emails between the original supplier and the respondent-corporate debtor with regard to the outstanding payments relied upon by the operational creditor. These reminder emails are dated 03.05.3016 and 03.06.2016 to which the operational creditor sent responses vide emails dated 23.05.2016 and 06.06.2016. There is also a reference to the meeting between the applicant and respondent with regard to the payments due, as reflected in the ma .....

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y the original supplier by relying upon the receivables and purchase agreement dated 27.07.2015 as also the bills of exchange and the bills of lading, 13. The instant application has been filed by the operational creditor1 through Pankaj Sachdeva, the Attorney Holder on the basis of the power of attorney executed by the applicant Bank in favour of three persons mentioned in the first schedule to the power of attorney Annexure 2, Out of the three persons, in whose favour the power of attorney was .....

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voices, bills of exchange, the statutory notice issued under sections 433 and 434 of the Companies Act, 1956, the demand notice under the Code and reply thereto are all admitted facts because even with the objections copies of these documents have been attached by the respondent. 15. According to the respondent, various complaints as regards the goods supplied were received, but not limited to the quality thereof by the end user. In view of the said complaints, various meetings were held with th .....

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n receiving statutory notice dated 15.09,2016 sent under Sections 433 and 434 of the Companies Act, 1956 to which reply dated 05.10.2016 was sent stating therein that there was already a quality claim dispute with the supplier causing huge loss to the respondent. The issue relating to quality of the goods was not to the Knowledge of the respondent at the time, when the bills of exchange were drawn. 17. Allegation of the applicant that the debt was assigned to it by the original supplier vide agr .....

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g on the debtor, there being no privity of contract between the parties to this petition. Copy of the civil suit is Annexure R-15. It is stated that Hon'ble Bombay High Court granted leave to file the suit vide order dated 14.03.2017, copy of which is at Annexure R-16. 19. The respondent has referred to the sales contract dated 02.12.2015, where there is a specific clause of assignment, which is reproduced as under:- Neither this Agreement nor the Rights and Obligations arising out of it may .....

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to a financial Institution. It is thus contended that in view of the above specific clause, the rights and obligations arising out of the sales contracts cannot be transferred by either of the parties without consent of the other 20. Another contention raised in the objection filed by the respondent is that the purported claim of the applicant was insured with the insurance company Euler Hermes and pursuant thereto the petitioner has received the entire amount claimed under this petition from t .....

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n 11.05.2017 and there being non- compliance to the mandatory requirement of clause 2 of sub-rule 1 of Rule 6 of the Rules, the instant petition should be rejected. The aforesaid objection should not detain the Adjudicating Authority for proceeding to dispose of the matter on merits, as the petition was listed before the bench after the application was despatched by registered post as per acknowledgement due on 01.05.2017 to the registered office of the respondent-company. 22. Another issue rais .....

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this petition. 23. I have heard the learned Senior Counsel for both the parties and perused the record with their able assistance. 24. The following issues arise for determination in the instant petition. 1. Whether the instant petition has been filed on the basis of a valid power of attorney? 2. Whether the petitioner is entitled to file this petition as an assignee of the original supplier? 3. Whether there is non-compliance of clause (c) of Section 9 (3) of the Code? If so, its effect? 4.Whet .....

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ition has been filed, authorising them inter-alia:- (a) To ask or demand the outstanding amount from Uttam Galva Metallics Limited (the 'Debtor') having its registered office at 502, Global Foyer Building, Sector 43, Golf Course Road, Gurgaon- 122002, Haryana, India and having its Cl No. as U27200HR2007 PLC 037927, alongwith the overdue interest thereon and costs, owed to the company. (b) to file and/or defend suits in respect of the Debtor, to sign and verify all the plaints including w .....

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thority for Industrial and Financial Reconstruction (AAIFR), from the lowest to the highest, concerning any matter in respect of the said outstanding amount and the said petitions/appeals in respect of the Debtors; (c) to engage advocate(s) and technical counsels for the conduct of the proceedings for recovery against the debtor; (d) To settle, compromise, compound or withdraw the said petition, suits, appeals, reviews, revisions, petitions with respect to the Debtor, upon obtaining a written co .....

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he divergent opinion expressed by the two members Bench of NCLT, Kolkata. The power of attorney in the said case was executed on 20.10.2014 i.e. more than two years before coming into force of the Code. The general power of attorney in the said case authorised the attorney holder to commence and institute any proceedings before any Court of law including NCLT. In the said case, the power of attorney authorised the attorney holder to appoint pleaders, advocates and solicitors to appear and act on .....

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attorney under the instrument above, cannot be stretched to embrace the power to initiate a corporate insolvency resolution proceeding under Section 7 of the Code. 27. That judgment cannot provide much support to the respondent because it was held by the Special Bench that when the financial creditor executed the power of attorney on 20.10.2014, he could not have visualized even remotely that the donee would be required, one day, to initiate a corporate insolvency resolution proceeding under th .....

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d till the time, the Code, became effective. The clause pertaining to the inability of the company to pay the debt entitling the creditor to file a petition for winding up, has been omitted as per the amendment to these sections incorporated in the 11th Schedule of the Code. So, the only remedy to a creditor against a company is to take steps for winding up of the company, for which the appropriate recourse is provided under sections 7 and 9 of the Code exclusively in respect of the financial an .....

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tition thus was found to be instituted through a duly constituted attorney. In view of the above, the issue is held in favour of the petitioner and against the respondent ISSUE NO.2. Whether the petitioner is entitled to file this petition as an assignee of the original supplier? 30. Learned senior counsel for the petitioner relies upon the non- recourse receivables purchase agreement dated 27.07.2015 Annexure-5 between the original supplier Hamera International Pte Ltd. and the petitioner- oper .....

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am unable to agree with this contention because the seller has been specifically allowed to transfer the receivables arising under the agreement to a financial institution and the petitioner undoubtedly is a financial institution. The sole purpose of this permission seems to be to save the original supplier from the botheration of having recourse to the process of law for making the recovery in case of default. 32. The non-recourse receivable purchase agreement dated 27.07.2015 Annexure-5 enter .....

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ween a debtor and Hamera approved in writing by the Bank. 33. Learned senior counsel for the respondent, however, contended that agreement No.003, dated 08.05.2015 stood closed because payment under the said contract was made in October, 2016 and therefore, this document cannot be applicable to the subsequent transaction entered into on the basis of Sales contracts of 02.12.2015. The learned senior counsel for the respondent laid emphasis on the clause of the sales contracts dated 02.12.2015, wh .....

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only pertains to the specific contract dated 08.05.2015 between the original supplier and the respondent, but also to any other contact between a 'Debtor' and the original supplier, which is approved by the Bank in writing. The term 'Debtor' has been defined in the document dated 27.07.2015 as three different customers including the respondent. 35. Import of this term in the receivable purchase agreement dated 27.07.2015 is very wide so that the parties thereto are not required t .....

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ndent-corporate debtor and the petitioner is 'payee' in these documents. The Bill of Exchange is a negotiable instrument which makes both the maker and drawee equally liable under the Negotiable Instrument Act. The bills of lading in respect of the disputed supplies are at Annexure 7. In all these documents, the name of consignee is the petitioner Bank with notified party as the respondent. 37. In view of the above admitted documents, the petitioner would definitely comes within the defi .....

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spondent's version is not that it has paid the amount of these supplies to the original supplier or to the petitioner. The issue is accordingly held in favour of the petitioner. ISSUE NO 3 Whether there is non-compliance of clause (c) of Section 9 (3) of the Code? If so, Its effect? 38. Sub-section (3) of Section 9 of the Code lays down certain requirements to be furnished by an operational creditor along with the application. Clause (a) requires furnishing of copy of invoice demanding payme .....

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furnished. 39. The crucial issue in this case is the non-compliance of clause (c) sub-section 3 of Section 9 of the Code. No such certificate was filed along with the petition. The above non-compliance was pointed out on behalf of the respondent, when the matter was listed on 22.05.2017. The petitioner filed the certificate on 24.05.2017, but the learned senior counsel for the respondent objected to the filing of the said document at that stage being the requirement to be furnished along with t .....

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he tune of USD 6,321,337.11 along with interest is outstanding and no payments have been received from the respondent. It was contended by learned counsel for the petitioner that this certificate was received by email. The certificate has been filed on record with the affidavit of Mr.Kanwalvir Singh Kang, Advocate for the petitioner. I am of the considered view that no authenticity can be attached to this document in the absence of any provision of law or rules permitting such an unauthentic doc .....

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financial institution as defined in section 45-I of the Reserve Bank of India Act, 1934 (2 of 1934); (c) public financial institution as defined in clause (72) of section 2 of the Companies Act, 2013 (18 of 2013); and (d) such other institution as the Central Government may by notification specify as a financial institution. The learned counsel for the petitioner fairly conceded that the petitioner, which is a foreign based Bank is not covered within any of the clauses of definition of the term .....

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ional creditor confirming that there is no payment of unpaid operational debt by the corporate debtor as prescribed under clause (c) of sub-section (3) of Section 9 of the Code, is mandatory or directory. In the said case before the Hon'ble Appellate Tribunal, the operational creditor was given an opportunity to complete the record by enclosing the certificate of financial institution and remove the defect within 7 days, but it failed to do so. The Hon'ble Appellate Tribunal categoricall .....

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of India. It was also contended that the appellant being a foreign based Operational Creditor , the 'Adjudicating Authority' was required to interpret the provisions of the Code in such a manner that Section 9 would have taken in its fold all the Operational Creditors', who are entitled to recover the debt defaulted by the Corporate Debtors' of India. The Hon'ble Appellate Tribunal held that the above argument that foreign companies having no office in India or no account in .....

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s to attach copy of the relevant accounts from the banks financial institutions maintaining the accounts of the operational creditor confirming that there is no payment of the relevant unpaid operational debt by the corporate debtor, if available. It was thus contended by the learned senior counsel that Section 9(3)(c) of the Code has to be interpreted in such a way as not to render the statutory rules nugatory. 45. The learned senior counsel for the petitioner vehemently contended that there wa .....

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b-silentio would be applicable. To support this contention, it is submitted that respondent has not stated that the payment of the amount of claim has been made, rather it has tried to raise the issue of default in quality of goods. 46. In support of this contention, the learned senior counsel relied upon Arnit Das v. State of Bihar [2000] 5 SCC 488. The Hon'ble Supreme Court held as under:- A decision not expressed, not accompanied by reasons and not proceeding on a conscious consideration .....

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w on the subject before the Hon'ble Supreme Court. The Hon'ble Supreme Court observed that in all the referred cases, the counsel for the contesting parties before the Court made their submissions by assuming that the date of the offence was the relevant date for determining the age of the juvenile and in none of those cases, there was a specific issue by reference to which date (the date of the offence or the date of the production of the person before the competent authority), the Cour .....

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urnam Kaur [1989] 1 SCC 101, it was held that the precedents sub-silentio and without argument are of no moment. A decision, which is not expressed and is not founded on reasons nor it proceeds on consideration of issue, cannot be deemed to be a law declared to have a binding effect as is contemplated by Article 141 of the Constitution of India. 49. In the present case, however, there was a specific issue raised before the Hon'ble Appellate Tribunal with regard to the compliance of various c .....

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ed, having admittedly not made the payment cannot be accepted, there being non- compliance of the mandatory requirement of Section 9(3)(c) of the Code. The intent of the legislature for laying down the mandatory compliances is keeping in view the time line within which an application is required to be decided i.e. 14 days and that too even in the absence of the respondent despite being served or without calling upon the evidence. Therefore, there has to be uniformity. In ensuring the mandatory c .....

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the 'information utility'. It is informed that 'information utility' has not been established so far. So, the existence of the dispute has to be determined on the basis of available record. The term 'dispute' is defined in Section 5(6) of the Code, which reads as under:- 'dispute' includes a suit or arbitration proceedings relating to- (a) the existence of the amount of debt; (b) the quality of goods or service; or (c) the breach of a representation or warranty, T .....

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nveyed on earlier occasion as well, UGSL received the quality related complaints from its customers and due to these quality problems, UGSL suffered heavy monetary losses apart from having significant negative impact on the company's brand name and market positioning. In addition, UGSL has not been able to process the material in time and supply the same to its customers, which is accentuating their further losses apart from unsold inventory piling up at their end, thereby constraining their .....

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aints from buyers and end users. It was further stated in the reply dated 05.10.2016, that this fact has already been communicated by the client of the respondent to the original supplier on various occasions telephonically and in the meeting held between them. This was also the stand of the respondent in reply dated 22.02.2017 Annexure 12 to the demand notice sent under Section 8 of the Code. 54. To rebut this contention, learned senior counsel for the petitioner contended that the entire defen .....

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bai and there is no diary number of the letter Annexure R-9. Further there is no documentary evidence like postal receipt of despatch of the letter Annexure R-10 dated 16.05.2016 by registered post, speed post or by courier service or by even email to attach any authenticity to the said document. 55. Learned senior counsel would refer to four emails exchanged between the petitioner and the respondent, which are Annexure 8 (Colly). The first email is dated 03.05.2016 from the petitioner to Uttam .....

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epresentative of the petitioner. In this email, there is no reference to letters Annexure R-9 and R-10r which are prior in time to this email, raising the issue of quality of the goods. Further the petitioner sent another email dated 03.06.2016 to Mr. Miglani that they have not heard about any planned trip of Mr.Miglani to Singapore nor they have received any communication as to how and when the outstanding dues would be settled. The response from Mr. Miglani is by email dated 06.06.2016. Mr.Mig .....

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in particular. Copy of this mail is also addressed to Mr. Miglani. So, till then, there was no depute about the defect in quality, it is not the version of the respondent that it sent any further response to the email of the petitioner dated 10.06.2016. It is the pertinent to mention that the allegation of the exchange of these emails has not been disputed or challenged in the objection petition of the respondent. 57. The learned senior counsel for the petitioner would further submit that in the .....

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r on various occasions telephonically and in the meetings as well as in writing. 58. The learned senior counsel strongly relied upon the judgment of Hon'ble National Company Law Appellate Tribunal in case Kirusa Software (P.) Ltd. v. Mobilox Innovations (P.) Ltd. Co. Appeal (AT) (insolvency) 6 of 2017 , decided on 24.05.2017 in support of his contention. The Hon'ble Appellate Tribunal held as under: Though the words 'prima-facie' are missing in Sections 8 and 9 of the Code, yet t .....

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the application, but in either case, there is neither an ascertainment of the dispute, nor satisfaction of the Adjudicating Authority (Emphasis supplied). It was further held that the definition of dispute is inclusive and not exhaustive. The same has to be given wide meaning provided it is relatable to the existence of the amount of the debt, quality of goods or service or breach of a representation or warranty. 59. It was further held by the Hon'ble Appellate Tribunal that the true meaning .....

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sing a dispute for the sake of dispute, unrelated or related to clause (a) or (b) or (c) of sub-section (6) of Section 5, if not raised prior to application and not pending before any competent Court of law or authority cannot be relied upon to hold that there is a dispute raised by the corporate debtor. Further by merely giving a dispute a colour of genuine dispute or illusory, raised for the first time while replying to the notice under Section 8 cannot be a tool to reject an application under .....

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that the dispute about the quality having already been raised, the instant petition may be rejected. The learned senior counsel for the respondent further submitted that the respondent has even filed a civil suit in the High Court of Bombay, impleading the original supplier as well as the petitioner as the defendants, raising the dispute about quality of the goods. Copy of the plaint in the said civil suit is Annexure R-15. The plaint in the said civil suit is dated 10.03.2017 which is much aft .....

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ed to by learned senior counsel for the petitioner. For the same reason, the institution of civil suit in the Bombay High Court after the receipt of demand notice under Section 8 of the Code, is also not considered as of much help to the respondent. 62. However, the respondent having raised the dispute of quality of the goods in the reply dated 05.10.2016 to the statutory notice sent in terms of Sections 433 and 434 of the Companies Act, 1956 i.e. much before the coming into force of the Code, w .....

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Forum: GSTR 3B Rectification

Notification: seeks to exempt Skimmed milk powder, or concentrated milk

Notification: Seeks to amend notification no. 2/2017- integrated tax(rate) dated 28.06.2017 to give effect to GST council decisions regarding GST exemptions.

Forum: 3B mistake

Notification: Seeks to amend notification no. 1/2017- central tax(rate) dated 28.06.2017 to give effect to gst council decisions regarding gst rates

Notification: Seeks to amend notification no. 1/2017- integrated tax(rate) dated 28.06.2017 to give effect to gst council decisions regarding gst rates.

Forum: GST - TRAN1 - filed - Data uploaded with Remarks Processed with Error - Not coming in Electronic credit ledger - need suggession guidance

News: Notification Issued For GST Actionable Claim On Branded Food Products

Highlight: Classification printed computer stationary/manifold Business Forms - to be classified under Chapter Heading 4820.00 or under Chapter Heading 4901.90 - items like A4 sheets, advertisement and job card to be classified under Chapter 49

Forum: GST Invoice

Article: RCM Applicability to persons not liable to get registered us 23(1)

Article: Credit of unsold stock [Section 140(3)] - Actual Credit as well as Notional Credit - Part-I - GST Transitional provisions

News: GST Refund - Blockage of Working Capital of Exporters - earlier also there was a normal blockage of funds for a period of 5-6 months at least

News: Clarification about Transition Credit - ₹ 1.27 lakh crore of credit of Central Excise and Service Tax was lying as closing balance as on 30th June, 2017 - claim of credit of ₹ 65,000 crore is not unexpected

Article: 20 Things You must know about E Way Bills in GST Law

Article: MISTAKES IN DRAFTING

Forum: Duty Drawback- Urgent

Highlight: The Customs and Central Excise Duties Drawback Rules, 2017 and All Industry Rates (AIRs) of Drawback related changes -reg. - Circular

Highlight: The definition of "subsidiary company" or "subsidiary" u/s 2(87) of the Companies Act, 2013 shall come into force w.e.f. 20-9-2017

Highlight: Central Government notified the All Industry Rates of Duty Drawback Schedule w.e.f. 1.10.2017 - Notification

Notification: All Industry Rates of Duty Drawback Schedule w.e.f. 1.10.2017

Circular: Investment by Foreign Portfolio Investors in Corporate Debt Securities Review

Notification: Exemptions on supply of services under UTGST Act

Notification: Rates for supply of services under UTGST Act

Notification: Exemptions on supply of services under IGST Act

Notification: Rates for supply of services under IGST Act

Notification: List of Exempted supply of services under the CGST Act

Notification: Rates for supply of services under CGST Act

Highlight: Acceptance of deposits by companies from its members - conditions relaxed in case of Specified IFSC Public company and a private company - Rule 3 amended

Notification: Rate of exchange of conversion of the foreign currency with effect from 8th September, 2017

News: Tax Payers Advised To Confirm Identities Of Income Tax Search Authorities

Notification: Amendment in Appendix 3 (SCOMET items) to Schedule- 2 of ITC (HS) Classification of Export and Import Items 2012



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