TMI Blog2017 (10) TMI 356X X X X Extracts X X X X X X X X Extracts X X X X ..... Nishant, Advocate, Mr. Pallav Kumar, Advocate, Mr. Sidhant Kapur, Advocate And Ms. Kaveri Gupta, Advocate ORDER PER SMT. INA MALHOTRA, MEMBER (J) The petitioner, claiming to be an Operational Creditor has prayed for initiation of a resolution process against the Corporate Debtor, BHEL, invoking the provisions of the Insolvency and Bankruptcy Code 2016 (herein after referred to as Code). 2. The facts of the case are that the Operational Creditor was awarded 3 job works by the Respondent/Corporate Debtor for civil work of insulation to be executed at sub-stations at Patiala, Kaithal and Barsingsar on 07.05.2004, 14.08.2004 and 12.02.2007 respectively. The debt claimed in the present petition pertains to payments in respect of the first two contracts executed at Patiala Kaithal. It is submitted that bills amounting to ₹ 16,98,578/- were raised more specifically vide invoices detailed as under :- a. Invoice Book No. 001, T1 No. 0010 : ₹ 9,72,213/- b. Invoice Book No. 001, T1 No. 0011 : ₹ 5,26,365/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arred and on grounds of a pre-existing dispute. It is their case that no amount is due as they have to seek counter recoveries from the Operational Creditor. Mr. P. V. Kapur, Ld. Sr. Counsel for the Corporate Debtor has pointed out that the Operational Creditor has failed to disclose material facts and therefore should be punished as per the provisions of Section 76 of the Code. 8. It is not disputed by the Corporate Debtor that the amounts payable to the Operational Creditor for the job works executed at Patiala and Kaithal were withheld against the work order under the third contract awarded to Operational Creditor. These were withheld as Risk and Costs to be recovered as per the terms of assignment of the work. The Corporate Debtor has submitted that they were well within their rights to invoke the Risk Cost clause in the contract bearing no. BSM/Barsingsar/Civil/Yard/CA/06-07 and had duly communicated to the Operational Creditor vide their letter dated 24.10.2009 that the Risk Costs amount stood at ₹ 42,24,244/-. The amounts claimed under the earlier bills were to be adjusted against the same as per their entitlement under the terms and condition of the job work. L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orporate Debtor has drawn the attention of the attention of the Adjudicating Authority to Clause 5.6 of the job work (referred to on page 42/53 of the petition) which categorically states that: No interest shall be payable by BHEL on Security Deposit or on any money due to the contractor. 12. In view of the aforesaid stipulation, duly accepted by the Operational Debtor by accepting the job order, it is emphasised that as specifically agreed between the parties, no interest would be paid on the security amount or any amount due to the contractor. The claim for interest is clearly disputed. 13. Given these facts, it is contended on behalf of the Corporate Debtor, that there is a pre-existing dispute between the parties, not only in respect of the quantum of the amount claimed by way of interest, but also in respect of their right to withhold the payments due under the first two contracts under the Risk and Cost clause. It is pointed out that the right to withhold the amount was well within the knowledge of the Operational Creditor. The Operational Creditor had prayed for delinking the payments under these two contracts with the payment due under the third, but the Corpor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that arbitration proceedings have come to an end merely on the dismissal of application under section 34 of the Arbitration Act as sought to be canvassed on behalf of the applicant. The proceedings are yet to attain finality as appeal under Section 37 of the Arbitration Act is pending. 18. Ld. Counsel for the Operational Creditor submits that the said petition under Section 37 had still not been listed till date on account of the Corporate Debtor's negligence in removing objections and there is no stay granted by the Hon'ble Court. If the respondent/Corporate Debtor had failed to remove the objection to enable the matter be listed, there was no justification for the petitioner/Operational Creditor to suffer indefinitely. It is further pointed out by him that even otherwise, the amounts claimed were not the subject matter of the Arbitration proceedings or the Award. 19. With respect to the liability to pay interest, if any, on overdue amounts, the same is also repudiated on the basis of clause 5.6 of the agreement referred to above. It is for this reason, under similar circumstances, the Hon'ble Apex Court disallowed any interest for the pre-award period to the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e exists in respect of the claim made by the Operational Creditor. The dispute rests its foundation on clauses 7.4 5.6 of the job. We find merit in the arguments advanced on behalf of the Corporate Debtor that in view of the specific clause for non-payment of interest, the claim would be disputable, if not, unsustainable. Further, as pointed out by the Ld. Sr. Counsel that the claim for interest under the MSME, if disputed could only be referred to the Micro and Small Enterprises Facilitation Council. We further find merit in the arguments advanced on behalf of the Corporate Debtor that notwithstanding the tender of the principal amount during the pendency of the present proceedings, there exists a dispute with respect to the retention of the amount in the hands of the Corporate Debtor which they continue to withhold till the outcome of the appeal pending before the Apex Court. 22. Under such circumstances, having come to the conclusion that there is an existing dispute with respect to the right to withhold, and also in respect of the liability to pay interest, the insolvency resolution process against the Corporate Debtor cannot be admitted. The petition is therefore Rejected ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... BHEL to respond by 21st August. He added that the legal counsel from the side of the PSU has requested the court to allow some time to be able to respond. Gupta informed that BHEL in its affidavit to court, has already accepted the liability before the bench, leaving the PSU with just two options in the next hearing of the court scheduled on Tuesday, August 29th. Either BHEL will have to concede and accept that it denied payments to us for all these years, and the court will instruct the PSU to make the payment along with the due interest, or it will be declared insolvent. If the counsel designates the PSUs as insolvent, the BHEL stocks will terribly fall by over 40 per cent, said Gupta. Sources also revealed that the court has even warned BHEL Chairman of strict action in case he fails to take appropriate action by the next hearing. With the next hearing due in two days from now, the MSME entrepreneur expects that the court will do the justice and stand with the MSMEs that for long have been exploited at the behest of the big corporates and PSU. (KNN/DA) 25. A perusal of the order sheet reflcets that no such order or observation was made. The order ..... X X X X Extracts X X X X X X X X Extracts X X X X
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