TMI Blog2019 (1) TMI 1748X X X X Extracts X X X X X X X X Extracts X X X X ..... barred by laches and limitation. The law on issue as discussed above is also against the petitioner. Therefore, the petitioner failed to make out any prima facie case to admit the instant case and it is liable to be rejected. Application rejected. - C. P. (IB) No. 147/BB/2018. - - - Dated:- 11-1-2019 - Rajeswara Rao Vittanala Judicial Member And Dr. Ashok Kumar Mishra Technical Member For the Applicant : Pradeep Darak For the Respondent : Sharanjith Shetty ORDER RAJESWARA RAO VITTANALA (JUDICIAL MEMBER). - 1. C. P. (IB) No. 147/ BB/2018 is filed M/s. Unistil Alcoblends P. Ltd. (applicant/operational creditor) under section 9 of the Insolvency and Bankruptcy Code, 2016, read with rule 6 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 by, inter alia, seeking to initiate corporate insolvency resolution process (CIRP) in respect of M/s. India Brewery and Distillery P. Ltd. (respondent/corporate debtor), on the ground that corporate debtor fails to pay the total amount of ₹ 2,38,16,374 payable towards ; advance for supply of ENA ; towards machinery lent to the corporate debtor and towards value of stock withhel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the manufacture, blending and bottling of Unistil brands and products and also renew and keep valid all such licenses at its own cost from time-to-time ; (ii) The corporate debtor was to abide by all the laws, rules and regulations in force at any point of time and indemnify the applicant for all losses and damages arising out of any non-compliance thereof. (iii) The corporate debtor would manufacture IMFL products of the applicant exclusive as per the requirement on month to month basis with out fail. However, the corporate debtor was at liberty to bottle for some other company after obtaining prior written consent from the applicant. (iv) The applicant guaranteed minimum quality of 20,000 cases of applicant's brands per month. Further without any commitment on the part of applicant to explore the market potential to manufacture up to 1,00,000 cases per month. (v) The agreement was in force for a period of two years, i. e., it was valid up to January 11, 2013 and was to be renewed thereafter on such terms and conditions as may be mutually agreed upon by the parties, (f) Independent of the above agreement, the applicant was also purchasing ENA from the corpor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of ENA. It is claimed that the applicant is entitled for refund of advance amount along with interest at the rate of 18 per cent. amounting to ₹ 99,80,748 as on July 20, 2018 as the same was a commercial transaction. (k) Further, it is stated that the corporate debtor was also riddled with labour issues. Since the corporate debtor was not able to meet its commitment of production under the agreement dated February 21, 2011, the applicant agreed to supply high speed bottling unit equipment's to the corporate debtor to facilitate higher levels of production. Accordingly, the applicant and the corporate debtor entered into an memorandum of understanding dated August, 2011 recording the terms and conditions for lending of equipment's by the applicant to the corporate debtor. As per clause 2.6 of the memorandum of understanding, the corporate debtor was required to forthwith return the equipment's upon termination of the memorandum of understanding or upon so requested by the applicant. Further, as per clause 4.1 of the memorandum of understanding, the memorandum of understanding was co-terminus with the agreement dated February 21, 2011. (l) Even though, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cally denied any of the claims of the petitioner and has merely stated that it has filed a suit in A. A. No. 156 of 2018 in the city civil court for damages against the applicant. (p) It is stated that subsequent to the receipt of the demand notice dated April 5, 2018, the corporate debtor has filed an arbitration application bearing A. A. No. 156 of 2018 under section 9 of the Arbitration Act, 1996 on April 16, 2018 before the City Civil Court, Bengaluru. However, there is no substantive proceedings initiated by the corporate debtor either before or after receipt of the notice. It is stated that in the said arbitration application, the corporate debtor has raised the contention of breach of agreement dated February 21, 2018 for the first time, after so many years, and filed the arbitration application only after the applicant received the above demand notice. The corporate debtor has filed this mischievous and frivolous application after receipt of the above demand notice as a pre meditated step to enable the corporate debtor to take the contention of existence of dispute in the proceedings under the I and BC, 2016. The corporate debtor has filed this application only with an i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd. [2018] 4 Comp Cas-OL 343 (NCLAT) ; MANU/NL/0248/2018. 5. Shri Sharanjith Shetty, learned counsel for the respondent, has opposed the petition by, inter alia, contending that it is the petitioner, who have violated the terms and conditions of the agreement dated February 21, 2011, which caused huge losses to the corporate debtor. It is false to state that they have agreed the debt and default in question. On receipt of the demand notice from the petitioner, they have replied to them disputing the claim of the petitioner and they have also filed an arbitration application on April 17, 2018 against the petitioner before the City Civil Court, Bangalore, by inter alia claiming an order on the petitioner to deposit a sum of ₹ 22, 71,071 apart from damages for a sum of ₹ 3,74,96,099. And the petitioner is contesting that application by filing a statement of objections dated July 6, 2018. Therefore, there is a dispute of issue raised in the instant petition and it is liable to be dismissed. 6. As per the demand notice, the following claims are made by the petitioner : (a) ₹ 44,00,000 advance paid towards supply of ENA to Solur Unit. (b) ₹ 47,57,800 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... petitioner assurance that they would fulfil their obligations and ensure that the off take would always maintained as provided in the agreement. They continue to appropriate action in accordance with terms and conditions of the agreement. How ever, the respondent failed to provide an off take of 1,00,000 cases. There fore, the capacity of the respondent remained under utilized and the petitioner has committed a breach of the agreement. Since the petitioner-company failed to follow the commitment as per the agreement, the respondent-company got into labour disputes leading to losses. (3) The promoters of the respondent-company are from a conservative family background and are not used to borrowing monies outside. Therefore, the promoters themselves contributed liberally for a sum of ₹ 9.85 crores (rupees nine crores and eight five lakhs), and same is shown outstanding in the books of the company. (4) It is also stated that the respondent, has, in all suffered a total loss (including interest) of ₹ 3,74,96,099 (rupees three crores seventy four lakhs ninety six thousand and ninety nine only). It is contended that as per clause 25 of the agreement, the petitioner is b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er. Therefore, it is deemed that there is dispute prior filing the instant petition. 9. The impugned claim consists of several claims as stated supra, and those claims are not part of main agreement dated February 21, 2011. It is also admitted by the petitioner that agreement do not contain interest clause. However, the petitioner claimed interest too. The advance payments admittedly paid out of manufacturing agreement and they were paid between January, 2012 to June, 2012. As stated supra, the petitioner in their statement of objections filed in an arbitration case, has opposed the claim of the respondent as barred by laches and limitation as the agreement in question lapses for more than. However, the petitioner filed the present petition basing on the very same agreement. Therefore, the claims in demand notice is not substantiated by appropriated documents. Apart from no interest, there is no agreement between the parties to return the advance amounts in question. Similarly, there is no agreement to pay the amount of ₹ 30,00,000 towards value of fully automatic high speed bottling line provided by the petitioner and only the petitioner is having lien on the equipment an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... too has taken the plea of limitation in its objections filed to arbitration case basing on the agreement dated February 21, 2011. 13. The hon'ble Supreme Court in Innoventive Industries Ltd. v. ICICI Bank [2017] 205 Comp Cas 57 (SC) ; MANU/SC/1063/2017; [2018] 1 SCC 407, it is observed as under (page 88 of 205 Comp Cas) : The scheme of section 7 stands in contrast with the scheme under section 8 where an operational creditor is, on the occurrence of a default, to first deliver a demand notice of the unpaid debt to the operational debtor in the manner provided in section 8(1) of the Code. Under section 8(1), the corporate debtor can, within a period of 10 days of receipt of the demand notice or copy of the invoice mentioned, in sub-section (1), bring to the notice of the operational creditor the existence of a dispute or the record of the pendency of a suit or arbitration proceedings, which is pre-existing-i. e., before such notice or invoice was received by the corporate debtor. The moment there is existence of such a dispute, the operational creditor gets out of the clutches of the Code. In another case, Mobilox Innovations P. Ltd. v. Kirusa Software P. Ltd. [2017] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... may then be put into operation. We may hasten to add that there may also be other cases where a section 34 petition may have been instituted in the wrong court, as a result of which the petitioner may claim the application of section 14 of the Limitation Act to get over the bar of limitation laid down in section 34(3) of the Arbitration Act. In such cases also, it is obvious that the insolvency process cannot be put into operation without an adjudication on the applicability of section 14 of the Limitation Act. With regard to the submission of learned counsel for the respondent, that the amount of ₹ 1.71 crores stood admitted by Mr. Banerji's client, as was recorded in the arbitral award, suffice it to say that cross-claims of sums much above this amount has been turned down by the arbitral tribunal, which are pending in a section 34 petition challenging the said award. The very fact that there is a possibility that Mr. Banerji's client may succeed on these cross-claims is sufficient to state that the operational debt, in the present case, can not be said to be an undisputed debt. 15. In another latest judgment rendered in Transmission Corporation of AP Ltd ..... X X X X Extracts X X X X X X X X Extracts X X X X
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