TMI Blog2020 (10) TMI 585X X X X Extracts X X X X X X X X Extracts X X X X ..... of disputes. Moreover, the Corporate Debtor also has succeeded in proving that the claim of the Operational Creditor is much prior to the expiry of the warranty period mentioned in the terms and conditions in Annexure-IV. Keeping in view of the matters, facts and circumstances and position of law, it is held that the application is liable to be rejected under section 9(5)(ii)(d) of the Code. Application dismissed. - C.P. (IB) No. 987/KB/2019 - - - Dated:- 10-2-2020 - Jinan K.R., Member (J) and Harish Chander Suri, Member (T) For the Appellant : P.K. Mittal, Advocate, Siddhartha Murarka, C.S., Joy Sana, Sr. Advocate For the Respondent : Supriyo Gole, Zeeshan Haque and Rajarshi Banerjee, Advocates ORDER Jinan K.R., Member ( J ) 1. This application under Section 9 of the Insolvency Bankruptcy Code read with Rule 6 of the Insolvency Bankruptcy (application to Adjudicating Authority) Rules, 2016 has been filed by M/s. Raunaq EPC International Limited (formerly known as Raunaq International Limited) through its Company Secretary Mr. Sukhvir, hereinafter referred to as the Operational Creditor, seeking initiation of Corporate Insolvency Resolution Process ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cuments: The drawing approval has been delayed immensely with no clear cut and piecemeal comments on drawings. Some of the drawings had to be revised up to revision 10-11. Finally the design engineering was closed during meeting requested by us at site on 05.11.2015 to ensure engineering closure. The delay on this account was almost 01 year for the 06 month contract period. (B) Delay in approval of supply/service BBU/Price break up: There was substantial delay of over 06 months in the approval of supply BBU and over 04 months in the approval of Service BBU for the contract with a completion period of 06 months. As a result bills against supply could not raised in time. 5. It is stated that the Operational Creditor supplied the goods to the Corporate Debtor during the period March, 2015 to March, 2017 and also rendered/provided services towards installation of LP piping system tanks etc., at the project site of the Corporate Debtor during the period August, 2015 to June, 2018. It is submitted that the debt fell due for payment from time to time in the month of February, March June, 2018 when these invoices were submitted for services rendered by the Operational Cre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n under section 9 of the Code. 9. The Corporate Debtor appeared and filed reply affidavit contending in brief the following:- i. The application has not been affirmed as per the requirements of the IBC; 2016 nor specific authorisation has been given to Mr. Sukhvir to initiate CIRP against the Corporate Debtor. Whereas, it is settled law that a specific authorisation is required to initiate CIRP. Moreover, the demand notice as required under Section 8 of the IBC, 2016 issued by the Operational Creditor was not in accordance with the Rules and Regulations under the IBC, 2016 and hence the petition filed by the Operational Creditor is liable to be dismissed. Furthermore, it is not maintainable on grounds of existence of pre-existing dispute as explained in paragraphs herein below. The Application filed is also time barred and should therefore be dismissed. ii. The project contract was governed by the general commercial terms and conditions of contract, special conditions of contract and special conditions for erection and commission in pertinent purchase orders/work orders given by the Corporate Debtor to the Operational Creditor. It is stated that the Operational Creditor vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0.5% of the contract price per week of delay, subject to 10% of the contract value. Thus, the Corporate Debtor is entitled to liquidated damages under the contract which far exceeds the retention amount purportedly claimed by the Operational Creditor. v. The Operational Creditor was also informed of the delays arising due to insufficient T P [Poclain, dumper and hydra] and delay in mobilization of UT Machine and agency which constituted derogation by the Operational Creditor from its contractual duties via emails dated 29.10.2015 and 06.04.2016 as well as during meetings between the Operational Creditor and Corporate Debtor on 17.08.2015 and 05.11.2015. vi. Thus, there were several pre-existing disputes between the Corporate Debtor and the Operational Creditor, due to the breach of contract by the Operational Creditor which were raised and communicated to the Operational Creditor by the Corporate Debtor. E-mails/letters addressed by the Corporate Debtor to the Operational Creditor w.r.t. the dispute is annexed to the reply and marked as Annexure-A. The operational Creditor has deliberately suppressed all such communications. vii. Proceedings under IBC are summary proceedin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erational Creditor. xi. The purported e-mails forming Annexures X to XIX of the Application do not evidence any admission by the Corporate Debtor of any liability whatsoever. The Corporate Debtor denies and disputes that the said e-mails can be termed as any assurance whatsoever to release any payment whatsoever. The Operational Creditor has wilfully mis-characterised the said emails in order to mislead the Tribunal. Upon the said contentions the corporate debtor prays for dismissal of the application with cost. 10. The Operational Creditor filed Rejoinder denying the contentions in the reply affidavit by the Corporate Debtor, which are in brief as under:- i) That all dispute raised by Corporate Debtor pertained to the period 2015 in Para 9.1 to 9.8 of their Reply to the Company Petition and in any event, all these relatable to the reasons and grounds attributable to the corporate debtor only. Corporate debtor failed, neglected and defaulted on various facets concerning the execution of the contract and because of which, there was delay in execution of the project but, that delays were solely attributable to the Corporate Debtor Only. ii) It is submitted that after ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ged. 12. Before going in details about the allegation of existence of pre-existing disputes, it is significant to note here that Operational Creditor as well as Corporate Debtor raised allegations and counter allegations regarding delay in completing the Project work entrusted by the Corporate Debtor to the Operational Creditor. Operational Creditor alleged that completion of Project was delayed for the reasons exclusively attributable to the Corporate Debtor. To strengthen the said contentions, Operational Creditor relied upon certain letters Annexure-V to Annexure-xix. The Corporate Debtor also alleged that Operational Creditor violated the multiple obligations it bore under the contract between the Corporate Debtor and Operational Creditor by committing inordinate and unjustified delays in performing his contractually mandated duties thereby causing great inconvenience and losses to the Corporate Debtor for this Corporate Debtor is entitled to be compensated by way of damages. The Operational Creditor has wilfully neglected to deploy contractually mandated levels of manpower at the works site despite continuous reminders by the Corporate Debtor to do the same thereby causing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gh Sign Sign Sign 14. In addition to the completion certificate, the Learned Sr. Counsel for the Operational Creditor also relied upon a copy of letter addressed to the Manager ICICI Bank Ltd. by the Corporate Debtor discharging Bank guarantee of the Operational Creditor, which read as follows:- Hiranmaye Energy Limited (Formerly known as India Power Corporation (Haldia) Limited) Date: 17th August, 2018 To The Manager ICICI Bank Limited Commercial Banking, Division 9A, Phelps Building, Connaught Place, New Delhi-110001 Subject: Discharge of Bank Guarantee No. - 0007BG00196515 0007BG00217215 (Raunaq International Limited) Dear Sir, We are hereby discharging below mentioned BG to M/s. Raunaq International Limited. Bank Guarantee No- 1. 0007BG00196515 DT 19.12.2014 2. 0007BG00217215 DT 14.01.2015 Thanking you Yours Truly For Hiranmaye Energy Limited (Formerly India Power Corporation (Haldia) Ltd. 15. Referring to the above said two documents, Learned Sr. Counsel for the Operational Creditor Submits that corporate debtor by issuing Completion Certificate admitted succe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich according to him relevant consideration in regards the entitlement of the Corporate Debtor to claim liquidated damages for the delay despite issuing of completion certificate. The relevant terms he referred which are reproduced here under:- b) Seventy Five Percent (75%) of the contract price will be released on pro-rata basis after submission of Material Receipt Certificate (MRC) issued by the Project Site Engineer of the purchaser after receipt and physical verification of materials at site. Collection of Material Receipt Certificate from the site and its submission for claiming payment against MRC shall be the responsibility of the Seller/Contractor where E Care in the scope of the Vendor. c) (Five Percent) 5% of the contract price shall be released on completion of hydraulic test through covered under separate contract and handing over the system to the owner, closure of all punch points and submission of performance bank guarantee (10% contract value) valid from project completion period to till completion of warrantee period and having a grace period of 06 month. Note:- Other terms conditions will be as per GCC SCC. For supply of mandatory/o m Spare ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... im liquidated damages as per the terms of the contract or that it is an admission of its liability. He further would submit that the claim is premature because the warranty period mentioned in the contract referred to above has not expired. According to him, the corporate debtor successfully established a pre exiting dispute in regards the demand made by the operational creditor and hence the application is liable to be dismissed. 19. The Learned Sr. Counsel appearing for the Corporate Debtor has also taken us through certain emails sent to the Operational Creditor for supporting his contentions regarding pre existing dispute. It is worthwhile to refer to the emails to reach to a right conclusion, a few of which are reproduced below:- From: Debasis, Swain@indiopower.com Tue, Aug 18,2015 Subject: Stoppage of Work in CW Pipeline at c 3x 150 MW IPC(H) L Haldia site To: raunak.ipcl@amail.com Kind attn.: Mr. G.J. Chaurasia, Project Manager, M/s. Raunaq International Ltd. The work of CW Pipe line by your sub-agency has been completely stopped since 17th Aug. 2015. You are advised to immediately start the pipe laying job under Road crossing as per our ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st us by releasing this payment immediately for which the bill already sent to your HO. The UT machine and operator are already available at site. Its service engineer is also reaching site tomorrow. Requesting once again to release the payment at the earliest assisting us to streamline erection activity. Looking forward for your usual positive response in the interest of the project. Thanks Regards G.J. Chaurasia PM-RIL/IPCL Haldia Site . Aug 28, 2015 Subject: Re-stoppage of Work in CW Pipeline at 3x150 MW IPC(H) L Haldia site To: Debasis Swain Dear Sir, Please note that point wise reply as asked by you. 1. We have already finalized the other agency to take up the CW Piping job who will start the mobilization from 01.09.2015. 2. Job will be started by 01.09.2015. 3. For no dues certificate from M/s. Roy Construction, we have already arranged the balance payment due also he needs the gate pass for his plant machinery, tools tackles etc. Kindly issue the gate pass by tomorrow morning then we will make his full final payment taking No Dues Certificate from M/s. Roy Construction. We are hereby ensuring ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terally alleged that the Corporate Debtor has committed default in submitting the drawings and thereby the delay was caused. The emails referred to above on the other hand which were admittedly received by the Operational Creditor indicate complaint regarding the delay in supply of service and supply of goods. 22. The above said circumstances are not at all sufficient to answer two questions having arisen for consideration. Firstly we are unable to answer who committed the default in completion of the work?. Secondly, we could not answer the question as to why there was delay in completion of the work?. Section 9 of the Code empowers this Adjudicating Authority to have a summery disposal of the issues involved in a case of this nature. To answer the said questions, it is quiet certain that larger evidence would have let in on both side. Moreover, we are not legally bound to go into the merit of the dispute if any found in existence. Here in this case existence of disputes regarding the delay in completion of work prior to the date of issuance of demand notice stand proved. 23. The above said view is supported by the following decisions cited by the Ld. Sr. Counsel for the cor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this is so, the Section 9 Application could not have been admitted. In fact, when e-mail dated 20th October, 2016 (Page-341) was already before the Adjudicating Authority and it had also noticed the same, the Adjudicating Authority should have found pre-existing dispute and the Section 9 Application should have been rejected. Only by observing that the Respondent-Corporate Debtor have not come forward to dispute the Application would not be sufficient to initiate CIRP, if the record already showed existence of dispute . 25. The Learned Sr. Counsel also argued that in the peculiar circumstances brought out in the case in hand, it is very relevant to rely upon the proposition as laid down in the Mobilox Innovations Private Limited vs. Kirusa Software Private Limited referred to above. The learned Sr. Counsel takes us to paragraph 51 of the said judgement which read 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 record of dispute in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Operational Creditor and therefore on that ground also this application is liable to be dismissed. According to the Learned Sr. Counsel Mr. Sukhvir has not been given any specific authority as per the resolution of the Board of Director of the Operational Creditor dated 22nd May 2019 and that subsequent resolution after the date of filing; i.e. resolution dated 13th November, 2019 cannot give authority to him as on the date of filing of this application and therefore the defect is incurable and the application is liable to be dismissed. 28. According to the Learned Sr. Counsel appearing for the Operational Creditor, the defect in Form-5 is a curable defect and if this Bench permit him to cure the defect, he will do the same. In regard, the authority given to Mr. Sukhvir, the Company Secretary who signed and verified the application the Learned Sr. Counsel appearing for the Operational Creditor would submit that as per one another resolution of the Board of Director dated 13th November, 2019 the action of the signatory was ratified and therefore, the said objection is unsustainable under law. The resolution dated 13th November 2019 produced along with Rejoinder to the reply affid ..... X X X X Extracts X X X X X X X X Extracts X X X X
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