TMI Blog2019 (2) TMI 1113X X X X Extracts X X X X X X X X Extracts X X X X ..... ing Authority to admit the petition filed by the Appellant under Section 9 of the I&B Code after giving limited notice to the Respondent – Corporate Debtor so as to enable it to settle the claim before its admission. - Company Appeal (AT) (Insolvency) No. 582 of 2018 - - - Dated:- 21-12-2018 - Mr S. J. Mukhopadhaya, Chairperson And Mr. Member (Judicial) For The Appellant : Mr. Amir Arsiwala, Advocate For The Respondent : Mr. Ajay K. Jain and Mr. Atanu Mukherjee, Advocates JUDGMENT BANSI LAL BHAT, J. This appeal has been preferred by M/s Overseas Infrastructure Alliance (India) Pvt. Ltd. , claiming to be an Operational Creditor against the order dated 26th July, 2018 passed by the Adjudicating Authority (National Company Law Tribunal), Mumbai Bench in Company Petition No. CP(IB)-20(MB)/2018, by virtue whereof petition filed by the Appellant under Section 9 of The Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as I B Code ) against Respondent - M/s Kay Bouvet Engineering Ltd. for initiation of Corporate Insolvency Resolution Process has been dismissed on the ground that there was existence of a dispute between the two part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was that the first tranche contract between Mashkour and the Appellant was almost completed without involvement of Respondent. However, since the EXIM Bank did not release the payment under second tranche agreement dated 9th February, 2014 executed between Mashkour and the Appellant, Mashkour terminated the contract vide its letter dated 15th June, 2017 citing unwillingness of Government of India and EXIM Bank to support the project with the Appellant as an EPC Contractor. This prompted the Appellant to file suit no. 382 of 2017 before the Hon ble High Court of Bombay praying for certain reliefs mentioned therein. In view of Mashkour appointing the Respondent as its EPC contractor for the said project in terms of EPC contract dated 5th July, 2017, the earlier Tripartite Agreement dated 18th April, 2010 became invalid and incapable of being performed. The Appellant, in view of the aforesaid development, demanded refund of the advance amount as in terms of the fresh contract Respondent instead of the Appellant had been appointed as EPC Contractor for Mashkour. In its reply to the demand notice issued by the Appellant, the Respondent alleged existence of dispute with respect to the Op ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly, 2017 which was after the filing of the suit. Hence, the impugned order was liable to be set aside. 6. Learned counsel for the Appellant would submit that in terms of the Tripartite Agreement the Appellant and Mashkour jointly appointed the Respondent as sub-contractor to complete the works specified in the Tripartite Agreement. The total consideration to be paid to the Respondent for the work to be undertaken was US$.106.2 million and it was in furtherance of such Tripartite Agreement that the Appellant advanced an equivalent value of US$.10.62 million in Indian currency and since Mashkour terminated the bilateral EPC contract with the Appellant on 15th June, 2017, the Tripartite Agreement itself stood terminated in terms of its clause no.15.2, due to which the advance amount of US$.10.62 million became due and payable by the Respondent to the Appellant. Learned counsel for Appellant would further submit that the debt owed to the Appellant by the Respondent falls under the definition of Operational Debt . He further submits that the suit filed by the Appellant cannot be considered as proof of existence of dispute between the parties as it relates to a distinct transaction w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... udes an Operational Debt which is defined under Section 5 (21) of the I B Code as follows: 5(21) operational debt means a claim in respect of the provision of goods or services including employment or a debt in respect of the repayment of dues arising under any law for the time being in force and payable to the Central Government, any State Government or any local authority; Section 5(20) of the I B Code defines Operational Creditor as under:- 5(20) operational creditor means a person to whom an operational debt is owed and includes any person to whom such debt has been legally assigned or transferred; On plain reading of the aforesaid definitions, it comes to fore that the person seeking triggering of Corporate Insolvency Resolution Process under Section 9 of I B Code must be a person to whom a claim in respect of the provision of goods or services including employment or a debt in respect of the repayment of dues arising under any law and payable to the Central Government, State Government or local authority is owed. Whether, in a given case, the claim is in respect of the provision of goods or services has to be ascertained from the agreement govern ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e effective. Viewed thus it is manifestly clear that the Appellant, who jointly with Mashkour engaged the Respondent as sub-contractor for execution of the works specified in Tripartite Agreement was to render services to Mashkour while the Respondent in his capacity as sub-contractor was required to render services to Appellant as also Mashkour in terms of the Tripartite Agreement. Having glanced through the terms of Tripartite Agreement, we have no doubt in mind that the same made provision for rendering of services in the nature of execution of works related to construction, installation and commissioning of the Sugar Plant with clear stipulation for supply of goods including equipment towards execution of work. It is expressly stipulated in the Tripartite Agreement that the Appellant has paid 10% of the contract value to the sub-contractor (Respondent) as advance payment. Therefore, there should be no difficulty in holding that the Tripartite Agreement provided for supply for goods and rendering of services and the Appellants claim was in respect of such provision of goods and services. Viewed in this perspective, it can be stated without any hesitation that the Appella ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cial creditor triggering the process, Section 7 becomes relevant. Under the Explanation to Section 7(1), a default is in respect of a financial debt owed to any financial creditor of the corporate debtor - it need not be a debt owed to the applicant financial creditor. Under Section 7(2), an application is to be made under sub-section (1) in such form and manner as is prescribed, which takes us to the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016. Under Rule 4, the application is made by a financial creditor in Form 1 accompanied by documents and records required therein. Form 1 is a detailed form in 5 parts, which requires particulars of the applicant in Part I, particulars of the corporate debtor in Part II, particulars of the proposed interim resolution professional in Part III, particulars of the financial debt in Part IV and documents, records and evidence of default in Part V. Under Rule 4(3), the applicant is to dispatch a copy of the application filed with the adjudicating authority by registered post or speed post to the registered office of the corporate debtor. The speed, within which the adjudicating authority is to ascertain the existenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contemplated under Section 8(2)(a) of the I B Code in Mobilox Innovations (P) Ltd. v. Kirusa Software (P) Ltd., (2018) 1 SCC 353 , held as under:- 51. It is clear, therefore, that once the operational creditor has filed an application, which is otherwise complete, the adjudicating authority must reject the application under Section 9(5)(2)(d) if notice of dispute has been received by the operational creditor or there is a record of dispute in the information utility. It is clear that such notice must bring to the notice of the operational creditor the existence of a dispute or the fact that a suit or arbitration proceeding relating to a dispute is pending between the parties. Therefore, all that the adjudicating authority is to see at this stage is whether there is a plausible contention which requires further investigation and that the dispute is not a patently feeble legal argument or an assertion of fact unsupported by evidence. It is important to separate the grain from the chaff and to reject a spurious defence which is mere bluster. However, in doing so, the Court does not need to be satisfied that the defence is likely to succeed. The Court does not at this stage ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... specific performance of contract was sought against the Respondent in the lis filed at the instance of Appellant (who was virtually non-suited by the Hon ble High Court), it can be said without hesitation that the dispute raised in regard to existence of dispute was a spurious defence not supported by evidence. Given the frame of the suit and the nature of relief claimed therein coupled with the fact that no relief with regard to the subject matter of petition under Section 9 of I B Code was claimed therein against the Respondent, we are of the considered view that the contention raised by the Respondent does not require further investigation and the dispute raised in reply to the demand notice is a mere bluster. 9. For the foregoing reasons, the impugned order passed by the Adjudicating Authority on 26th July, 2018 cannot be supported. The impugned order suffers from grave legal infirmity. The Adjudicating Authority seriously erred in declining to recognize Appellant as an Operational Creditor and in arriving at the conclusion that there was an existence of dispute prior to filing of the petition. Having regard to the findings recorded hereinabove the impugned order cannot be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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