TMI Blog2017 (7) TMI 505X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 operational debt is owed and includes the person to whom such debt has been legally assigned or transferred. The learned senior counsel for the respondent submitted that the documents relied upon by the petitioner would not be the illegal assignment, but perusal of the definition shows that it has wide connotation to include the petitioner without an iota of doubt. The respondent'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. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bankruptcy Code, 2016 (for short to be referred here-in-after as the 'Code') read with Rule 6 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules 2016 (for brevity the 'Rules') in relation to Uttam Galva Metallics Limited (for short the (Corporate Debtor'). The registered office of the Corporate Debtor 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 14.02.2017 for both the sales contracts is at Annexure-11. Two invoices are dated 21.12.2015 and the third invoice dated 31.12.2015, which are at Annexure-4. The other documents relied upon by applicant are three bills of exchange; one dated 05.01.2016; second dated 06.01.2016 and third Bill of Exchange dated 18.01.2016 at Annexure-6. The demand noti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 thereto, two sales contracts nos; (i) HIPL(S)- UGML/2015/004 and (ii) HIPL(S)-UGML/2015/005 Annexure A-3 (Colly) both dated 02.12.2015 were executed between them. 8. The original supplier issued three invoices Annexure A-4 (Colly) for the said deal. One invoice is dated 21.12.2015 describing the goods with total price for a sum of USD 1,407,622.07 relating to contract No.HIPL (S)- UGML/2015/004, dated 02.12.2015. The payment terms as per the invoices is 150 days from the Bill of Lading Date and this 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng, Advocate and the respondent sent reply thereto dated 05.10.2016Annexure 10. 12. The applicant has come up to file this application on the basis of the assignment of debt in its favour by 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 executed, is Pankaj Sachdeva, the authorised representative of the operational creditor in the instant application. This power of attorney is dated 14.12.2016 issued under the signatures of the Executive Director and Secretary of the applicant Bank under its Common Seal. 14. The respondent-corporate debtor filed objections to this application by way of affidavit of Mr.Mukesh Jaisani, the authorised signatory of the respondent-corporate debtor. However, the documents like the sales contracts, invo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nment, which is reproduced as under:- Neither this Agreement nor the Rights and Obligations arising out of it may be assigned, delegated or otherwise transferred by either the buyer or the seller to any third party without the other party's prior written consent, which consent shall not be unreasonably withheld despite the foregoing, either party is allowed in principle to assign its rights and obligations to an affiliated company, provided the credit worthiness of the affiliated company is acceptable to the other party. Also, seller is allowed to transfer the receivable(s) arising under this agreement 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 the insurer. In view of the aforesaid fact, the petitioner would not have t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rsons including Mr.Pankaj Sachdeva through whom the instant petition 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 winding up petitions, pleadings, written statements, affidavits, petitions, objections, to file execution applications, to undertake proceedings, appeals, review, revisions, writ petitions and to furnish evidence and to make statements and to file all sorts of applications and to prosecute all legal proceedings, memorandums of appeal, petitions, and to do all other legal matters in all the Courts/Tribunals including the Board for Industrial and Financial Reconstruction (BIFR) and the Appellate Authority for Industrial and Financial Reconstruction (AAIFR), from the lowest to the highest, concerning any matter in respect of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich came into force only w.e.f 01.12.2016 vide notification dated 30.11.2016. The present is a case, where the power of attorney was given on 14.12.2016 and by that time the provisions of the Code had already come into force. 28. It is pertinent to mention 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 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 and operational creditors respectively. So, the authority in favour of Pankaj Sachdeva, which is recent in time, authorising him to file the winding up petition etc. would fully cover the authority to file th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 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, whereby it supersedes any and all previous discussions, contracts and understandings between the parties. This contention of the learned senior counsel cannot be sustained as the sales contracts are inter se the original supplier and the respondent and the above term pertains to the past transactions between them only which cannot have any effect or bearing on the receivables purchase agreement between the Bank and the original supplier. 34. The receivables purchase agreement dated 27.07.2015 not 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 defin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the application that there is no notice given by the corporate debtor relating to a dispute of the unpaid operational debt and; as per clause (c) a copy of the certificate from the financial institutions maintaining accounts of the operational creditor confirming that there is no payment of an unpaid operational debt by the corporate debtor has to be 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 the application itself and thus cannot be considered a defect, which could be rectified by taking recourse to the provisio to sub- section 5 of Section 9 of the Code. 40. It is pertinent to mention that the Bank Certificate Annexure A-13 filed with CA No.66 of 2017 is dated 15.05.2017 issued by the petitioner, which is stated to be a Bank. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 categorically held that on perusal of the entire section, it is crystal clear that the entire provision of sub-section (3) of Section 9 of the Code are required to be mandatorily followed and it is not empty statutory formality. 43. An argument was also raised before the Hon'ble Appellate Tribunal that the foreign companies and multiple national companies having no office or having no account in India with any of the Financial Institutions will suffer to recover the debt as due from the Corporate Debtor 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 T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sly determined. 47. The question before the Hon'ble Supreme Court in that case was the relevant date for determining the age of the accused, who claims himself to be a juvenile and reference was made to the case law 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 Court shall determine whether the person was a juvenile or not, the same having neither been raised nor decided. 48. To further support this contention, the learned senior counsel also relied upon State of UP v. Synthetics and Chemicals Ltd. [1991] 4 SCC 139. It was observed in that case that a decision passes sub silentio, when the particular point of law involved in the decision is not perceived by the Court or present to its mind. By referring to another decision in Mun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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, The learned senior counsel for the respondent contended that the respondent had raised a dispute even before the enforcement of the Code and therefore, it is a clear case of existence of the dispute for which this application deserves to be rejected. 52. The first document relied upon by the respondent is a letter Annexure R-9. dated 11.04.2016 written by Uttam Galva Steels Limited (UGSL) to the respondent about the quality complaint of the disputed goods. It is stated in Annexure R-9, that as conveyed 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 working capital, wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at he would be visiting Singapore and to instruct Mr. Handa to fix appointment with the representative 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.Miglani assured to inform the petitioner about his visit to Singapore in advance. It was further assured that the respondent would sort out the pending matters during his visit to Singapore. 56. Thereafter the petitioner Bank again sent email dated 10.06.2016 addressed to Mr.Handa and Mr.Dipak, who visited the Bank to discuss the issue. It is indicated in this email that the representatives of the respondent explained the current business environment in Steel Industry in India in general and Uttam in particular. Copy of this mail is also addressed to Mr. Miglani. So, till then, there was no depute about ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... true meaning of sub-section (2)(a) of Section 8 read with sub-section (6) of Section 5 of the IB Code clearly brings out the intent of the Code, namely; the Corporate Debtor must raise a dispute with sufficient particulars. And in case a dispute is being raised by simply showing a record of dispute in a pending arbitration or suit, the dispute must also be relatable to the three conditions provided under sub-section (6) of Section 5 (a)-(c) only. The Hon'ble Appellate Tribunal further held that mere raising 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 Section 9 of the Code, if the operational creditor otherwise satisfies the Adjudicating Authority that there is a debt and there is a default on the part of the corporate debtor. It was f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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