TMI Blog2020 (10) TMI 222X X X X Extracts X X X X X X X X Extracts X X X X ..... rmination notices dated 26.01.2016 and 27.02.2016 intending to terminate the contract that existed between the applicant and the Corporate Debtor - However, it was only on 06.04.2016, the Corporate Debtor had responded to the Applicant herein with regard to the payment of outstanding amounts. But even thereafter since nothing concrete materialized, the contract between the applicant and the corporate debtor came to be terminated on 04.06.2016 as per Article 15.2 of the Contract dealing with termination due to non payment of dues by the owner, i.e., the Corporate Debtor herein. It is a matter of record that the order of admission of the Corporate Debtor for CIRP was passed on 03.04.2018 and, subsequently, order of Liquidation was passed vide order dated 22.04.2019. However, in between the last PPC raised and the date of admission of CIRP (i.e. December, 2015 to March, 2018) the corporate debtor has neither disputed nor whispered anything contrary to the demand raised by the Applicant herein including the claim of 'idle charges'. From the records, it is also observed that the Corporate Debtor had not, at any point of time during the period December, 2015 to March, 2018, ob ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ointed Mr. Devendra Prasad as Interim Resolution Professional (IRP) who was later confirmed as the Resolution Professional (RP). 2.2. That since no resolution plan was forthcoming for the Corporate Debtor, Financial Creditor (PFC) filed an application before this Adjudicating Authority seeking liquidation of the Corporate Debtor. This Adjudicating Authority vide its order dated 22.04.2019, ordered for liquidation and appointed Respondent herein as a Liquidator in the matter of Corporate Debtor i.e., M/s. East Coast Energy Private Limited. 2.3. That the Appellant was appointed by Corporate Debtor as an EPC Contractor to execute works for construction of a 1320 MW (2 x 660 MW) coal based thermal power project in Srikakulam District in the State of Andhra Pradesh for a total contract price of ₹ 751 Crores vide Agreement for Civil and Construction Works Contract dated 30.01.2010. Later on, Amendment Agreement was entered between Appellant and Corporate Debtor on 04.10.2013 being the Amendment Agreement for Civil and Construction Works dated 04.10.2013 bearing Contract No. ECEL/BTPP/NEC/C C/011 whereby the Contract price was revised to ₹ 592,66,00,000/- and the Per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... PPCs or the above said reminder letters/emails received from Appellant, it however, did not respond to a single letter or email and thus defaulted in making payments. 2.10. That aggrieved by such breach of terms of the contract by Corporate Debtor, the Appellant herein issued a contractual notice dated 26.01.2016 under clause 15.2 of the Contract claiming payment of all outstanding PPCs and idle charges. Having not received any response from East Coast after the expiry of 30 days period provided under the Contract, the Appellant issued the second contractual notice in terms of the provisions of the contract, on 27.02.2016 claiming payments of all pending PPC due and idle charges at the earliest. 2.11. That upon receipt of the said notices, the Corporate Debtor held a meeting with Appellant on 06.04.2016 where, the Corporate Debtor informed the Appellant that the lenders have been intimated about the contractual notices issued by Appellant and assured Appellant that best efforts are being made to have the funds released from the lenders to clear all outstanding dues. 2.12. That both the lenders and the Corporate Debtor were duly informed about the Appellant's not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the occurrence of the idle charges as a reimbursement cost to the Corporate Debtor as mandated under Article 15.7.1 of the Contract. 3.2 That the termination of the Contract was not proper and the charge including idle charges arising from such defective termination cannot be considered as termination charges under Article 15.7 of the Contract. 3.3 That the charges which have been claimed by Operational Creditor originate because of the machines and labour were lying idle and may only be claimed as a loss of revenue or a cost connected to interruption of operation i.e., consequential damage and which is governed under Article 9 of the Contract and not under Article 15.7. 3.4 That Article 9 of the Contract excludes the liability of a party from all consequential damages like loss of revenue and cost due to interruption of works under the Contract and Operational Creditor and Corporate Debtor have expressly agreed to such terms. Therefore, as per Article 9.2 read with Article 9.6 of the Contract, it is clear that Operational Creditor and the Corporate Debtor had agreed mutually not to impose liability on the other party for any consequential damages and hence, the Cor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t and amended contract entered into between the applicant and the Corporate Debtor on 30.01.2010 and 4.10.2013 respectively. It is also a fact on record that the amount claimed relates to the period between 01.06.2015 and 30.11.2015 covered under Progressive Payment Certificates (PPCs) 46 to 51. It is also not in dispute that the applicant herein has written several letters dated 13.8.2015, 18.9.2015, 12.12.2015 and 25.01.2016 and reminder emails dated 19.8.2015, 15.10.2015 and 23.01.2016 to the Corporate Debtor calling for payment of outstanding amounts as per the contract - between them. Thereafter, since no reply was received to any of the letters or reminder emails, it appears that the Applicant herein issued termination notices dated 26.01.2016 and 27.02.2016 intending to terminate the contract that existed between the applicant and the Corporate Debtor. 6. However, it was only on 06.04.2016, the Corporate Debtor had responded to the Applicant herein with regard to the payment of outstanding amounts. But even thereafter since nothing concrete materialized, the contract between the applicant and the corporate debtor came to be terminated on 04.06.2016 as per Article 15.2 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the price of such item and the reasonable costs of delivery thereof shall be included in the Termination Payment. CCW-1 Contractor's right to the Termination Payment is subject to the condition precedent that CCW-1 Contractor shall execute and deliver all such papers as Owner may reasonably require for the purpose of assigning to and vesting in Owner all rights, title and interests of CCW-1 Contractor in and to all Subcontracts relating to the Facility to the extent provided for in Article 15.5.2 hereof. This Section 15.7 expressly survives the termination of the Agreement. 8. Thus the argument of the respondent regarding applicability of Article 9 instead of Article 15 does not hold any water. In fact, the claim made by the Applicant is not for any damages but of the cost incurred by the applicant due to sudden stoppage of work, non-payment of dues as per the PPCs referred to supra and ultimate termination of the Contract between parties after proper notice as stipulated in the Contract itself. 9. It is further important to note that in the Principal Contract Agreement entered into between the parties, there is a specific Article 20 for Dispute Resolution. A reference ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the date of admission of CIRP, had either disputed or objected to the amounts claimed including the idle charges as part of termination payments under Article 15.7 or opted for any other legal recourse available against such claim, the Liquidator ought not to have rejected the claim under the caption 'idle; charges' on the basis of his own interpretation of the such claim to be of nature of 'consequential damages'. 14. Further, the stand of the respondent/Liquidator that there was no invoice raised by the applicant herein with regard to the 'idle charges', this Adjudicating Authority observes that invoices could be raised only with regard to the work done in terms of the contract and that claiming of interest and other costs/charges on the outstanding balances would be based only on the terms of the contract entered into between the parties. 15. In view of the foregoing discussions, this Adjudicating Authority holds that the instant application deserves to be allowed and accordingly, the application is allowed. Consequently, the liquidator is directed to include the amounts claimed under the head 'idle charges' to the admitted claim of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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