TMI Blog2017 (12) TMI 1180X X X X Extracts X X X X X X X X Extracts X X X X ..... 13, 14 33 of the Insolvency and Bankruptcy Code, 2016 by seeking to initiate Corporate Insolvency Resolution Process (CIRP) against M/s Gayatri Projects Ltd./Respondent/Corporate Debtor under the provisions of IBC, 2016. 2. Brief facts, leading to filing of present petition, which are relevant to the issue in question, are as follows;- (1) Jaycon Infrastructure Limited (herein referred to as Petitioner/Operational Creditor) was incorporated under the Companies Act, 1956. Its primary business is construction of Buildings, Roads and Bridges etc. (2) Gayatri Projects Limited (herein referred to as Respondent/Corporate Debtor) was incorporated under the provisions of Companies Act, 1956 on 15.09.1989. And its authorised share capital is ₹ 80 crores with paid-up capital of ₹ 35.45 crores (approx) divided into 3, 54, 50, 380equity shares of ₹ 10/- each. (3) On 09.10.2007, the Corporate Debtor was awarded a contract by NHAI of design, construction, development, finance, operation and maintenance of km 0.000 to km 49.700 On National Highway No. 25/26 in the states of Uttar Pradesh and Madhya Pradesh under North South Corridor (NHDP Phase-II)- Package NS1/BOT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l to corporate debtor on this date whereby it reaffirmed the points of discussion held on the day. (7) The corporate debtor despite of having acceptance to the terms as agreed in the meeting dated 24.03.2014, once again agreed and accepted their liability towards the petitioner Company vide their mail/reply dated 25.03.2014 whereby Shri. J. Brijmohan Reddy, Vice Chairman of the corporate debtor agreed to all points as mentioned in the e-mail dated 24.03.2014 written by the petitioner and requested that the first instalment shall be paid by them in the month of April, 2014 instead of March, 2014 and second instalment shall be paid in the month of June, 2014 instead of April, 2014. However, till date nothing has been paid so far. (8) The Petitioner/Operational Creditor issued a Demand notice dated 20th February, 2017 in prescribed Form 3 under Rule 5 of Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 to the Corporate Debt or by calling upon them to pay the outstanding amount of ₹ 2,28,32,742 which includes interest within 10 days from the date of receipt else communicate pendency of suit or arbitration proceedings in respect of demand. (9) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the balance amount of ₹ 11,10,497/- was adjusted against the amount payable by the Petitioner in the 3rd Agreement referred above i.e. Agreement dated 19.04.2011. Hence, it is contended that the Respondent is not liable to pay any amount to the Petitioner. Since the Petitioner has abandoned the works as per Agreement dated 19.04.2011 in May 2014, the question of executing the further works by Petitioner beyond May, 2014 does not arise. The whole case is revolving around RA Bill Nos. 27 and 28 or Agreement dated 19.04.2011, which work was never executed by the Petitioner. (d) It is reiterated that the Respondent entrusted a bridge work to the Petitioner vide Agreement dated 19.04.2011 and it has to construct the bridge at km. 577.550 to km. 610.00 of Indore-Dewas Project and should be completed within a period of 18 months from the date of handing over of the site. The Respondent handedover the hindrance free site on 31.06.2011. Therefore, the schedule completion date was 31.12.2012. As per the agreement dated 19.04.2011, all the works to be completed in all respects by January, 2013. However, the Petitioner has executed only up to 51% work. As per Clause No.29 of Agreement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... invoices (RA Bills) as raised by the Operational Creditor. (2) It is the settled position of law that money given on contract cannot be adjusted against the amounts due in another contract. The contention to adjust the dues against the liquidated damages for the delay is nothing but an afterthought. (3) It is stated that the delay in execution of the contracts in question was due to the reasons attributable to the Corporate Debtor. The Petitioner is not aware about the imposition of any liquidated damages and the Corporate Debtor has come with plea of liquidated damages, when the Petition is filed. (4) After receiving notice under Section 8 of the IBC, 2016 on 22.02.2017, the Respondents failed to reply the same within the stipulated period i.e. 10 days, thereby forfeited its right to give any reply for the same. The contentions of the Respondents that they have given reply to notice under section 8 of IBC i.e. on 16.03.2017 cannot be considered it as a reply to the demand notice. It is relevant to point out that the copy of the present petition was delivered to the Respondents on 15.03.2017 and sending the said reply on 16.03.2017 is an afterthought. Moreover, it is basel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or on 15.03.2017 It was only after then, when the corporate debtor came to know about the filling of the present petition before this Hon ble Tribunal, it sent a vague, false, vexatious and hopelessly delayed reply dated 16.03.2017 alleged to be a reply to the notice dated 20.02.2017 by way of afterthought, manipulation and with mala fide intention. There is no proof of payment is either being annexed or referred by the corporate debtor in the said reply dated 16.03.2017 or in its counter; though in the counter-affidavit it has wrongly and falsely alleged to have paid certain amounts as claimed in the present petition It has also failed to give any reference of any dispute or proceedings pending before any court of law or arbitration in terms of the provisions of the Code and as discussed and settled in the case of Kirusa Software (P.) Ltd. v. Mobilox Innovations Limited decided on 24.05.2017 vide Company Appeal (AT) (Insolvency) 6 of 2017 by the Hon'ble NCLT, New Delhi (3) There are unequivocal, undisputed and unambiguous admissions on behalf of the corporate debtor in respect of the due amounts vide different communications as well as in its reply/counter filed to the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1.05.2015 they have shown the operational creditor in debt of ₹ 3,59,372/- while in their reply dated 16.03.2017, it has shown a balance of ₹ 14,69,869/- Therefore, in one communication the corporate debtor has deliberately, mala fidely and in order to cover up their own wrongs have referred some other figure while in another communication some other. Therefore, these communications neither could be believed nor considered in the present proceedings being manufactured only with an intention to cause wrongful gains from it. (9) He has further contended that the Corporate Debtor has deliberately and mala fidely given adjustment to the amounts due to the Operational Creditor in respect of the contract dated 12.10.2007 against the contract dated 19.04.2011. And the same is not legally tenable in terms of the Judgment passed by the Hon ble Supreme Court in the case of Union of India v. Raman Iron Foundry AIR 1974 SC 1265 and by Punjab and Haryana High Court in the case of SECL Industries Ltd. v. State of Haryana CWP No. 13285 of 2012 decided on 09.10.2012 . (10) It is further contended that the I B Code is a separate legislation, which has been introduced to keep a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ition without exhausting alternative remedy under the said agreement. (4) It is stated that the Corporate Debtor has awarded 4 works to the Operation Creditor. The details of the Agreements executed between the parties are as follows: (i) Agreement dated 12.10.2007 in relation to UP-2 and UP-3 Bridge works; (ii) Agreement dated 26.02.2008 in relation to Bridge work entrusted to the Operation Creditor in UP-2 package; (iii) Agreement dated 19.04.2011 in Indore-Dewas of NH-3 Package, whereby the Corporate Debtor entrusted a Bridge work; and (iv) LOI dated 23.01.2011, whereby the Corporate Debtor entrusted earth work in Indore-Dewas of NH-3 Package. The issues in relation to Agreement Nos. 1 and 2 were settled in June 2012. Therefore, the disputes in relation to Agreement Nos. 1 and 2 are barred by limitation. And no dispute was raised by the Corporate Debtor in relation to 4th Agreement. The present petition is filed against Agreements dated 12.10.2007 and 19.04.2011 and the following are his contentions: In re: The disputes in relation to the Agreement dated 12.10.2007: While agreeing with the execution of agreement, it is stated final account was settled in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . As per Clause No.29 of the Agreement dated 19.04.2011, the Corporate Debtor is empowered to recover liquidated damages if delay is attributable to Operational creditor. (c) While explaining that the delay in completion of works in question, the respondent in fact is entitled for damages and it can adjust the same with the amount payable to petitioners in other works. (d) It is contended that that since the Corporate Debtor had invoked the Arbitration in relation to the 2nd Agreement; Company Petition is liable to be dismissed on this count also. 9. The case listed for admission on 12.04.2017, 26.04.2017, 08.05.2017, 09.06.2017 and finally on 10.10.2017and the counsel for the Respondent takes notice on 12.04.2017. The case was adjourned on the above dates in order to give sufficient opportunity to the Respondent so as to put their defence to their satisfaction and also to see whether the respondent, being a reputed Company, wanted to settle the issue before initiating CIRP against it, by this Tribunal. Since the Respondent are not willing to settle the outstanding bills of the Petitioner pending with them, there is no other alternative the Adjudicating Authority to consi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Debtor to respond to the demand notice either with payment or intimation of existence of dispute with regard to the issue. The intention behind stipulating 10 days time is to avoid roving inquiry into unrelated disputes being raised by the Corporate Debtor. So the Adjudicating Authority, in the first instance is supposed to see whether statutory demand is responded by the Corporate Debtor with suitable material or not. Thereafter, it has to examine whether debt and default in question occurred or not. In the instant case, as stated by the learned counsel for the petitioner, the respondent did not respondent to the statutory demand notice under the provisions of IBC, 2016 except giving a belated reply, that too after filing the present Company petition, stating unrelated and untenable grounds, as an afterthought. 13. As per section 9(1) of the IBC, 2016, after the expiry of the period of 10 days from the date of delivery of the notice or invoice demanding payment, the Operational Creditor may file an application before the Adjudicating Authority for initiating a CIRP, if he has not received payment or intimation of dispute, the Adjudicating Authority has to admit the applicatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... above reply in the first instance is given after expiry of 10 days as stipulated and secondly, it did not given any particulars of payment of outstanding as claimed in the Demand notice in question. It is also to be pointed here that earlier notices were given by the petitioner Company itself under the Companies Act. Even they did not say they have raised any dispute before any authority or resorting to arbitration. Moreover, this reply cannot be treated a reply to the demand notice. 16. The petitioner has also filed his banker statement (State Bank of India) at Pages 123 to 127 of the material papers filed along with the CP, to show that the amount was not paid by the Respondent. The above circumstance clearly shows that the petition/application filed u/s. 9 of IBC is complete in all respects and it is a fit case to admit the application u/s. 9(5) of IBC, 2016. 17. It is also relevant to point out here the casual nature of filing counter, on behalf of the Respondent, in a case, where serious consequences would ensue by admission of the case by the Adjudicating Authority. The Company petition is opposed by Respondent by filing a counter by one Mr. M. Praveen Kumar, DGM (Cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itioner that once the petitioner/Operational Creditor is able to proves that there is a debt and default, and the other side failed to respond to a statutory Demand notice issued under IBC bringing out existence of any dispute, the Adjudicating Authority should not grant any further time to the Corporate Debtor and it should admit the case by initiating CIRP as prayed for. Mr. Achin Goel is right with above contention. However, before initiating CIRP under IBC, which would have serious legal consequences apart from eroding the goodwill of Corporate Debtor, it is just and equitable to extend full opportunity to the Corporate Debtor so as to see that the issue in question should get some sort of solution. Apart from that, principles of natural justice are invariable to be to be followed by judicial Authorities, while passing any adverse orders affecting the rights of other party/parties. Therefore, we have granted enough time to the Corporate Debtor for reconciliation of the issue in question. Unfortunately, the Corporate Debtor, who is stated to be solvent to pay its debts, has failed to avail opportunity afforded by the Adjudicating Authority and taken Operational Creditor into con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evidence supporting those averments. 20. As stated supra, in order to initiate CIRP u/s 9, the first step is for Operational Creditor is to give proper demand notice u/s 8 of IBC. Admittedly, the respondent did not avail opportunity of 10 days given under the said provision. And the so called reply dated 16.03.2017 is cannot be called a reply to the Demand notice issued under the provisions of IBC and the Rules made thereunder. It is not in dispute that the petitioner and respondent are involved in several sub - contracts and the Adjudicating Authority cannot go into roving enquiry about each sub contract assigned to the petitioner by the respondent and it can consider only with reference to issue revolve around the Demand notice in question. Admittedly, the petitioner has made out a case with regard to the outstanding amount as per the impugned demand notice in question. In the absence of any agreement between the parties for set off, no party unilaterally can do it. And it should be mutually agreed between the parties. It is not case of respondent that the petitioner has accepted for the so called set off/adjustments/liquidated damages. 21. As per the arbitration clau ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpany appeal (AT) (Insolvency) 6 of 2017. However, the decision in the case is setaside the judgment of Hon ble NCLAT passed in the case, by the Hon ble Supreme Court of India in CA No. 9405 of 2017 filed by Mobilox Innovations Private Limited, vide judgment dated 21st September, 2017. One of the relevant para of the Hon ble Supreme Court in the said judgment, with reference to the present is para 45 which is extracted below for ready reference: Going by the aforesaid test of existence of a dispute , it is clear that without going into the merits of the dispute, the appellant has raised a plausible contention requiring further investigation which is not a patently feeble legal argument or an assertion of facts unsupported by evidence. The defense is not spurious, mere bluster, plainly frivolous or vexatious. A dispute does truly exist in fact between the parties, which may or may not ultimately succeed, and the Appellate Tribunal was wholly incorrect in characterizing the defence as vague, got-up and motivated to evade liability. Under para 4, it is further stated that the Demand notice sent by the respondent was disputed in detail by the appellant in its reply dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 01/IP- 00107/2017-2018/10214 dated 23-05-2017) as Interim Resolution Professional, by exercising powers under section 16 of IBC, 2016. (c) We hereby declare the following Moratorium by prohibiting the following actions:- (i) The institution of suits or continuation of pending suits or proceedings against the Corporate Debtor including execution of any judgment, decree or order in any court of law, Tribunal, arbitration panel or other authority: (ii) Transferring, encumbering, alienating or disposing of by the Corporate Debtor any of its assets or any legal right or beneficial interest therein; (iii) Any action to foreclose, recover or enforce any security Interest created by the Corporate debtor in respect of its property including any action under Securitization and Reconstruction of Financial Assets and Enforcement of Security interest Act, 2002 (54 of 2002); (iv) The recovery of any property by an owner or lessor where such property is occupied by or in possession of the corporate Debtor; (v) Direct to cause a public announcement of the initiation of Corporate Insolvency Resolution Process immediately as prescribed under section 15 (1) and (2) of Insolvency and ..... 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