TMI Blog2020 (2) TMI 915X X X X Extracts X X X X X X X X Extracts X X X X ..... Member Shreyas Shrivastava and Kumarjit Das, Counsels for the Petitioner. Vasudeva Rao Devaki, PCS for the Respondent. ORDER Dr. Binod Kumar Sinha, Under consideration is company petition filed by M/s. Skytouche Aggregate Private Limited (in short, Petitioner/Operational Creditor ) against M/s. Prism Johnson Limited (RMC (India) Division) (in short, Respondent/Corporate Debtor ) under section 9 of the Insolvency and Bankruptcy Code, 2016 (in short, IB Code, 2016) read with Rule 6 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 (for brevity, IB Rules, 2016). 2. The background facts as stated by the petitioner are hereunder: 2.(a) That the Operational Creditor is a company incorporated under the Companies Act, 1956. The Operational Creditor is engaged in the business of mining, manufacturing and supply of building materials known as aggregates. Further, the Operational Creditor also has a Ready-Mix Concrete (RMC) plant at Khopoli, Maharashtra which it either operates on its own or lends it out to interested parties on lease/license basis. 2.(b) That the Corporate Debtor formerly known as Prism Cement Limited o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ansion and for achieving economics of scale the Respondent had entered into a Memorandum of Understanding (MoU) on 8th May, 2017, with the Operational Creditor for operating and maintaining a 30 cum/hr capacity ready-mix concrete plant owned by the Petitioner at Khopoli, Raigad district, Maharashtra on the following commercial terms and considerations among others: Sl. No. Particulars Rental Charges/Month 1 Land and RMC Machinery as per list attached in MoU, dated 8th May, 2017. ₹ 2,50,000/- Plus applicable Taxes 2 Aggregates (Raw material) ₹ 340 per MT (Inclusive of royalty) plus taxes; FOR delivered Above rental is for the usage of land, plant and machinery loader including fuel and fixtures for entire tenure of 5 years. 3.(ii) It is stated that the Petitioner has represented to the Respondent that the Operational Creditor was also a manufacturer of aggregate products, which is one of the raw materials required for manufacturing Ready-mix concrete. The Petitioner represented the Respondent tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lost credibility in the market due to these reasons, which called for enhanced quality check of the Raw material supplied by the Petitioner in order to ensure adherence by Petitioner to the quality parameters agreed upon between the parties. This was brought to the notice of the Petitioner by the Respondent by way of emails right from the months of July/August, 2017 itself. It is further submitted that under the garb of DMF levy which already existed on the date of MoU, the Petitioner started demanding price increase of ₹ 7/- per ton for aggregate products, over and above the fixed price agreed under the said MoU. 3.(vi) It is submitted that since the Respondent is a Public Limited Company, a formal agreement was required to be executed for its statutory compliances. However, under the garb of such unwarranted and unlawful demands, which is completely contrary to the terms and conditions of the said MoU, the Petitioner even refused to execute the said formal agreement inter alia recording the terms and conditions already agreed and recorded in the said MoU. 3.(vii) It is stated that the Respondent was left with no other alternative but to address the Petitioner a notice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dispute between the parties and the pendency of the related Special Civil Suit No.534/2018, before the Hon'ble Civil Judge, Senior Division, Panvel, District Raigad, Maharashtra, the present petition maybe rejected. 4. The Operational Creditor filed rejoinder to the reply of the Corporate Debtor stating that the petitioner agreed to enter into an arrangement with the Corporate Debtor whereby its plant at Khopoli was to be provided to the Corporate Debtor on leave and license basis. Further, the Operational Creditor having quarry of its own also agreed to provide various aggregated (raw material) to the Corporate Debtor for its operation of the plant. However, the key terms of such arrangement were not finalized. The Operational Creditor raised various points as to price and other material conditions of operations which were not closed at the time of signing of MoU. The Corporate Debtor represented to the Operational Creditor that the MoU is signed as an interim measure and that the Corporate Debtor wished to try out the arrangement on an experimental basis before entering into a final agreement. Further, on the issues raised (before signing the MoU) by the Operational Credit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8. 4.(IV) The Operational Creditor also filed written submissions stating that the Corporate Debtor themselves have accepted in their reply that they have stopped the payment towards outstanding invoices to force the Operational Creditor into an agreement. This shows that there is no challenge as to existence of the debt and moreover, the existence of such outstanding amounts is accepted by the Corporate Debtor. The Corporate Debtor has nowhere challenged the provision of subject goods and services and their consequent receipt by the Corporate Debtor. Furthermore, there is absolutely no basis to treat this outstanding amount as set-off against any hypothetical loss as enunciated in these submissions. 4.(V) It is stated that the non-binding nature of the MoU becomes clear by mere reference to the terms of the MoU which itself states that an agreement is to be entered into between the parties on June 1, 2017, for a term of five years. This not only goes on to show the temporary nature of the MoU but also shows that it was an agreement to enter into an agreement. This later agreement was to be for a term of five-years after all the terms are finalized and not the MoU itself. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g executed the MoU with the Respondent for operation maintenance of their CUM/hour capacity RMC plant by the Respondent and having received the Security Deposit of ₹ 8,50,000/- from the Respondent, had duly handedover the possession of the plant to the Respondent for the operation, supplied raw material to the Respondent as per the terms of the MoU, received Rent for the plant and payment for the raw material from the Respondent and having failed in their attempt to coerce the Respondent into agreeing for higher rates for further supply of the raw material and reduced payment cycle for raw material supplies, had abruptly stopped the supply of raw material to the Respondent and dispossessed the Respondent from the plant premises and in view of this, the Respondent could not carry out the operations resulting in substantial monetary loss to the Respondent. 5.(A) It is further submitted that, the Respondent had filed a civil suit before the Court of the Hon'ble Civil Judge, Senior Division, Panvel, District on the grounds of non-supply of aggregates by the Petitioner among other grounds there by resulting in huge monetary loss and damages and loss of reputation in the m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, in the instant case, a civil suit has been filed by the Corporate Debtor for the breach of terms of MoU, dated 08.05.2017 and therefore, the same can be placed within meaning of section 5(6)(c) as extracted above. 6.(5) The Hon'ble Supreme Court in the case of Mobilox supra have laid down that the Adjudicating Authority shall reject the application made under section 9 of the IB Code, 2016, if there exist genuine dispute in fact, which is neither hypothetical nor illusory or just a feeble legal argument or a statement of fact unsupported by evidence. It is observed from the material papers filed by the parties that there was a dispute in fact between the parties as evidenced by the exchange of emails referred to above as well as exchange of legal notices and replies thereof between the parties during May, 2018 to October, 2018, culminating in filing of civil suit bearing No.534/2018, in the court of Civil Judge Senior Division at Panvel in Maharashtra by the Corporate Debtor on 23.10.2018. 6.(6) It is pertinent to note here that the claim made by the Operational Creditor in the instant application pertains to the following: (a) Lease rent for land and machinery; and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 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 s 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 examine the merits of the dispute except to the extent indicated above. So long as a dispute truly exists in fact and is not spurious, hypothetical or illusory, the adjudicating authority has to reject the application. 6.(10) In view of the facts and circumstances of the present case, it is observed that there is evidence on record to show that there is an existence of genuine dispute between the parties prior to the issue of the demand notice served under section 8 of the IB Code by the Operational Creditor on the Corporate Debtor. Following the guidance of the Hon'ble Supreme Court's order supra, this Adjudicating Authority is of the considered view that the Corporate Debtor has a plausible contention which requires further investigation/adjudication by the learned Civil Judge in Civil Suit No.534/2018, before Civi ..... 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