TMI Blog2019 (4) TMI 1128X X X X Extracts X X X X X X X X Extracts X X X X ..... es due up to 20% and if not paid it amounts to default. The situation is otherwise. Without any fault from the side of Corporate Debtor concerned authorities of Government of Maharashtra issued order of suspension of the project work. The Corporate Debtor cannot be blamed for the suspension order passed by the authorities of Government of Maharashtra. The suspension order does not show that it was issued on account of failure on the part of Corporate Debtor to perform its part of the contract given to it by the Government of Maharashtra. The Operational Creditor becomes entitled to retention money of 25% or 20% as the case maybe only if it completes the terms of purchase order, especially erection, commissioning and trial run. This part of the contract was not completed. The amount becomes due only if Operational Creditor completes the remaining part of the Purchase Order. Till then, the amount does not become due. When the amount does not become due, then there is no question of default. Operational Creditor failed to establish that there is a debt due and payable and it was committed default. As far as IBC is concerned, the Operational Creditor to establish debt as well ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erational Creditor for supply of mechanical components for construction of Majalgaon Lift Scheme from Loni Sawangi Barrage (Sadola Village) Taj Majalgaon Distt Beed under GMIDC for a total consideration of ₹ 9,65,39,184.50. 2.4 It is the case of Operational Creditor, the work order was amended on 10.03.2014 and vide amended work order, the Operational Creditor was given work order for storage, erection, testing and commissioning of mechanical components for a total consideration of ₹ 34,50,815.50. 2.5 It is averred in pursuant to above orders, various bills were also raised by Operational Creditor. An amount of ₹ 2,97,79,977.24 was due as on 10.12.2016. A mail was sent to the Corporate Debtor on 10.12.2016 to clear the dues and a representative from Operational Creditor also visited the project site but no amount was released. 2.6 When Corporate Debtor failed to make payment, the Operational Creditor issued a Demand Notice dated 24.05.2018 directing the Corporate Debtor to clear the dues of ₹ 2,97,79,977.24. 2.7 It is the case of Operational Creditor, though no reply was received by the Operational creditor to the demand notice, an email dated 31 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncial convenience between the Corporate Debtor and M/s Shreehari Associates Private Limited, there was a split in the scope of supply of goods as well as services initially ordered to the Operational Creditor, as such amendment in the Purchase Orders dated 26.02.2014 and Work Order dated 10.03.2014 were made. Balance of the goods and services were covered in the purchase order and work order placed by M/s Sreehari Associates Private Limited on the Operational Creditor separately. However, total scope of supply of goods and services initially placed with the Operational creditor remained unchanged though the quantum of supply of goods and quantum of work was split purely due to internal arrangement. Further it is the case of Corporate Creditor that purchase order dated 26.02.2014 was placed by the Corporate Debtor on the Operational Creditor and Operational Creditor accepted the terms and conditions of the purchase order. 3.6 It is the case of Corporate Debtor that it had made 75% of the value as per the terms of the purchase order dated 26.02.2014 to the Operational Creditor. Further, Operational Creditor admits that out of the total invoice amount of ₹ 8.93 crores, ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that only erection and commissioning part of the contract is suspended by Govt. of Maharashtra and Corporate Debtor has paid in full for the goods supplied by the Operational Creditor. 3.13 It is the case of Corporate Debtor that it did not reply to the demand notice dated 24.05.2018 as there was no default on the part of Corporate Debtor as contemplated under Section 8 of IBC, 2016. Further, it is their case that since two notices were issued to each of the joint venture partner, a common reply dated 31.05.2018 was sent to the Operational creditor briefly explaining the facts and suggested that a joint meeting between the representatives of Operational Creditor and joint venture partners be held in Aurangabad. Subsequently, a joint meeting was held on 11.06.2018 at the office of Operational Creditor and discussed in detail the facts and circumstances of the matter and that is why the demand notice demanding payment issued on 24.05.2018 is pre-mature. Letters dated 18.05.2018 and 28.06.2018 were also sent to Operational Creditor giving the same facts. 3.14 It is the case of Corporate Debtor that the Operational Creditor is well aware of the facts and circumstances of the mat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deny the averments made by the Corporate Debtor that joint venture was informed to suspend the work with immediate effect by Executive Engineer, Majalgaon Project Division but the fact was that project was already delayed due to the conduct and inability of the Corporate Debtor. 4.7 It is the case of Operational Creditor that there was a delay in erection and commissioning on the part of Corporate Debtor prior to issuance of order dated 22.02.2016 by the Executive Engineer. 4.8 The Operational Creditor deny the allegation that it was informed by the Corporate Debtor about the suspension of work at the project site. Further as per letter dated 10.12.2016 issued to Corporate Debtor, Operational Creditor showed concern over the delay in the execution of the project. Further in the same letter, Corporate Debtor was informed about the balance amount of 25% which was due and payable to the Operational Creditor. 4.9 Further, it is averred that the claim of the Operational Creditor is an operational debt within the meaning of 3(6) of IBC. 4.10 The Operational Creditor denies the allegation that it admitted the amount would be paid at the time of erection or commissioning. It fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Debtor sent reply on 18.06.2018 raising dispute qua operational debt. The contention of Counsel, Corporate Debtor categorically admitted in para 8 of the reply that only 75% of the Purchase order was paid to the Operational Creditor and rest 25% was yet to be paid. Thus, there is no dispute and Operational Creditor is entitled for the same. Counsel contended that there is no dispute about supply of goods as per Purchase order and only 75% of the money covered by the Purchase order was paid. The Counsel contended Petitioner/ Operational Creditor cannot be made to suffer on account of suspension of the work. The Operational Creditor cannot be asked to wait for unknown period. The mere fact Government of Maharashtra suspended erection and commission of part of contract does not take away the right of Petitioner to claim the rest of 25% of the contract amount. 7. The learned Counsel heavily relied upon the payment terms of the Purchase order and contended, out of Purchase Order, 75 of the amount was paid and balance amount of 25% is to be paid which is as follows:- (I) 10% advance is to be paid by the Corporate Debtor. (II) 65% against the supply of equipment at the site. ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eady paid 75% of the value. Counsel contended it is also the case of Operational Creditor that total invoice amount as per Annexure-4 is ₹ 8,93,00,000/- out of which ₹ 6,65,00,000/- paid by Corporate Debtor which is about 75% of the invoice. Counsel contended the Operational Creditor admitted it has not completed remaining part of the Purchase Order such as erection, commissioning and trail operational of the equipment because Government of Maharashtra suspended the project work and Corporate Debt approached the competent authorities for lifting the suspension order and it is not yet lifted. 12. The Counsel contended, there is no default on the part of Corporate Debtor. Government of Maharashtra suspended the project work. In each of the invoices, the Operational Creditor deducted 25% and balance was claimed which was paid. Thus, no amount is due against the invoices. 13. The Counsel contended if there is default, then only Demand Notice to be issued. No invoice was raised for 25% of the retention amount. Counsel relied on the definition contained in Section 3 (12) of the Code and contended the alleged debt does not become due and payable. Without performing the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder suspending the work. It is an unforeseen event. Parties to the Purchase order did not visualize such an event will take place. In the normal course if there is no suspension order, Operational Creditor can erect, commission and trial run the equipment. In case in the normal course, delay occurred on account of Corporate Debtor for completing the project on any ground other than the ground now referred to, then it can be said the retention money becomes due up to 20% and if not paid it amounts to default. 16. The situation is otherwise. Without any fault from the side of Corporate Debtor concerned authorities of Government of Maharashtra issued order of suspension of the project work. The Corporate Debtor cannot be blamed for the suspension order passed by the authorities of Government of Maharashtra. The suspension order does not show that it was issued on account of failure on the part of Corporate Debtor to perform its part of the contract given to it by the Government of Maharashtra. 17. In fact, it is the case of Corporate Debtor it filed applications to the concerned authorities of Government of Maharashtra to lift the suspension order and allow it to complete the c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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