TMI Blog2021 (6) TMI 626X X X X Extracts X X X X X X X X Extracts X X X X ..... Corporate Debtor' GIPL' on the date of filing of the Petition, i.e. on 21 September 2017 under Section 9 of the I B Code, 2016. Pre-existing dispute or not - HELD THAT:- Undisputedly AJVPL failed to make the payment as per the terms of MOU. Accordingly, consequences of the breach of the terms of MOU dated 14 December 2013 and further violation of the terms of MOU dated 20 May 2016 cannot be determined in a summary jurisdiction given to the Adjudicating Authority under the Insolvency and Bankruptcy Code, 2016 - Before the issuance of the demand notice, several correspondences are showing the existence of a dispute between the parties. The alleged claim regarding the liability of the Corporate Debtor to pay ₹ 2.03 crores to Respondent No.1 SPJV was subject to the completion of work to the satisfaction of the Corporate Debtor GIPL. In response to the letter of the Operational Creditor dated 12 July 2014 for releasing the amount of ₹ 2.03 crores, the Corporate Debtor intimated that the payment against the withhold amount could be made after the completion of work. It was suggested by the Corporate Debtor to speed up the pace of the work and complete their pendi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l Creditor. 3. Maintainability of the Petition against the Corporate Debtor, i.e. Gati Infrastructure Private Limited GIPL . Brief facts as stated in Appeal Appellant Mr Yogesh Kundra, suspended Director of the Appellant/Corporate Debtor Gati Infrastructure Private Limited (in short 'GIPL'), has challenged the impugned order dated 26 April 2021 passed by the Adjudicating Authority under Section 9 of the I B Code in CP (IB) No. 227/9/HDB/2017. The original parties status in Company Petition represents them in this Appeal for the sake of convenience. 2. Operational Creditor, i.e. SEW and Prasad JV (in short 'SPJV') (Respondent No. 1) and Corporate Debtor (in short 'CD') 'Gati Infrastructure Private Limited' (in short 'GIPL') agreed and executed an Agreement on 12 August 2006 to perform various civil and hydro-mechanical works of 99 MW power project in Sikkim. The project was to be completed by March 2009, but it was delayed and finally commissioned in 2013. 3. On account of delay in completion of the project, Corporate Debtor GIPL, Respondent No.1 Amrit Jal Venture Private Limited (in short 'AJVPL') along with other pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and restoration of land dump yards. 10. Respondent No.1 also filed an Application being CP (IB) No.8/9/HDB/2017 under Section 9 of IBC against 'AJVPL' for the same claim. However, on 17 September 2019, after admission of Petition, Respondent No.1 applied for withdrawal of the above Company Petition initiated against 'AJVPL', which was allowed by the Adjudicating Authority. 11. Arbitration Application No. 110 of 2017 filed by Corporate Debtor (GIPL) under Section 11 before the Hon'ble High Court was also dismissed on 4 August 2020. 12. After that, Respondent No. 1 (SPJV), by its letter addressed to RP of AJVPL, withdrew its claim from the said CIRP, which was also acknowledged by RP vide its email dated 14 October 2020. Privity of Contract/Debtor-Creditor relationship between the Corporate Debtor and Operational Creditor. 13. The Appellant contends that the Settlement Agreement dated 14 December 2013 was entered between Corporate Debtor 'GIPL', Respondent No. 1 Operational Creditor SPJV, the holding Company of the Corporate Debtor, i.e. 'AJVPL', Mahendra Investment Advisors Private Limited (MIAPL), Arbitrators Mr Sai Ram and Mr C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e settlement of claims. In any circumstance, once the payment obligations of GIPL as set out in clause 2.3 above has been satisfied in full. 17. The Appellant contends that as per Clause 2.3 of the Settlement Agreement dated 14 December 2013, the Corporate Debtor's liability was limited to ₹ 10 (ten) crores. However, it is undisputed that the said ₹ 10 (ten) crores payment was made on 24 November 2013. Thus the Corporate Debtor had no further liability or obligation regarding the Contract Agreement dated 12 August 2006 and Settlement Agreement dated 14 December 2013. Accordingly, as there is no debt and 'default' subsisting between the Operational Creditor, i.e. SPJV and Respondent Corporate Debtor, i.e. GIPL, a petition under Section 9 against the Corporate Debtor GIPL is not maintainable. 18. The Appellant has also pleaded that the debt owed to Respondent No.1 was assigned to 'Sew Infrastructure Ltd', which is evident from the letter dated 22 March 2015 as addressed by Respondent No.1 and as per Memorandum of Understanding (MOU) dated 20 May 2016. Copy of MOU is annexed with the Petition. 19. It is evident that the 'MOU' dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 16 (Annexure-4, page 17 of the Counter) was entered between the parties to transfer an amount of ₹ 8,00,00,000 (eight crores) to M/S Intercontinental Infrastructure Ltd by AJVPL, as M/S SEW Infrastructure Ltd was its Creditor. However, since AJVPL failed to pay the said amount of Rs. eight crores, the MOU has been terminated. Therefore, the said MOU as such is not in existence. 22. Respondent No. 1 claims that the Settlement Agreement in the form of MOU, dated 20 May 2016, stood terminated because of non-payment of Rs. eight crores as per the terms of the Agreement. It is pertinent to mention that the non-payment of the remaining amount given the terms of settlement dated 14 December 2013 is the basis of the Section 9 petition itself. The same is the situation with the terms of settlement dated 20 May 2016, wherein one of the Party to the Agreement committed breach of the terms of MOU and failed to make the payment of Rs. eight crores. How can Respondent No.1 claim that after the violation of the terms of settlement dated 14 December 2013, the said Agreement is not terminated and gives Respondent No. 1 the right to file Petition u/s 9 of the Code. Per contra breach of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent dated 12 August 2006 was entered between the Corporate Debtor and Respondent No. 1 to execute various civil and hydro-mechanical works. Various disputes arose with the execution of the Agreement between the parties, i.e., rectifying, repairing, redoing the defects including compensation and delay in completion of the project by Respondent No. 1 for more than ten years, which in turn cause loss to the Corporate Debtor. However, in a unified manner, the Corporate Debtor, to resolve all the disputes, agreed to enter into a Settlement Agreement dated 14 December 2013. Clause 2.3 of the Settlement Agreement categorically stated and recorded the Agreement between the parties that the Corporate Debtor shall pay Rs. ten crores representing R A Bills due and part of the interest amount to Respondent No. 1, i.e. SPJV. After the payment of Rs. ten crores, the Corporate Debtor had no further liability or obligation regarding the Settlement Amount. Further, it was agreed that the SPJV could initiate any suit, action or proceeding against only the promoter ('Amrit Jal Venture Private Limited' to the exclusion of 'GIPL'.) To recover the balance settlement amount of ₹ 23. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pplication of the Corporate Debtor. 32. It is ill-founded in as much as the order dated 4 August 2020 passed by the Hon'ble High Court in Arbitration Case is on account of proceedings being premature and can in no manner be read to make out a case of admitted Operational Debt. 33. The alleged claim regarding the liability of the Corporate Debtor to pay ₹ 2.03 crores to Respondent No.1 was subject to the completion of work to the satisfaction of the Corporate Debtor, as evident from the letter dated 21 July 2014. 34. The Appellant has annexed the copy of a letter dated 21 July 2014 (page 185 of the Paper Book), which shows that the Corporate Debtor wrote a letter to the Operational Creditor SPJV in response to its request for releasing the withheld amount. It is stated in the letter that; Dear Sir This has reference to a letter No. SEW/TW/F.CHEP-DIL/SR-0649 DT 12 July 2014; vide which you have sought part payment against withhold amount of ₹ 2.03 crores. In view of the above, it is intimated that the payment against withhold amount of ₹ 2.03 crores shall be made after the completion of work, to the satisfaction of GIPL. Therefore, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... leting the above- works. Out of the above-mentioned amount of Rs., 5 lakhs was released till now and the balance is still pending to be released. We have made several requests in vain. Hence we once again request you to kindly release the balance amount of rupees one crore ninety-five lakhs immediately. (verbatim copy) 38. However, on perusal of the letter dated 23 January 2015, it is clear that work was not completed until then; that's why the Operational Creditor wrote to the Corporate Debtor that he had completed most of the works and only work relating to shifting of equipment and machinery is left. Therefore the Operational Creditor requested the Corporate Debtor to at least release one crore rupees from the withheld amount. 39. The Operational Creditor relies only on the 'merit certificate' issued to the Corporate Debtor. But on perusal of documents filed by the Appellant, it appears that merit certificate was given to the Operational Creditor only for PQ purposes, for submission to other clients showing completion of the work. Still, it was issued only on request for submission to other clients. Therefore the Operational Creditor requested the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have neglected to rectify the same, despite your continuing liability under the construction contract referred above for the reasons best known to you. 5. The following are the incomplete works, deficiencies, defects and shortcomings that needs to be attended by you immediately;*** 6. The cost of rectifying, repairing, redoing the defects are estimated to be in excess of ₹ 36 crores which includes the compensation for delay and also rectifying the defects. We reserve the right to quantify further claims in due course. Since, you have failed and neglected to attain to them, despite repeated requests and reminders, we are entitled to recover the same amount from you and get the work done by some other contractor. 7. Since you have not been responding to our various communications and requests, we have no other option except to invoke clause 37 (governing laws-,-Arbitration and Dispute Resolution) of the construction agreement dated 12 August 2006. In terms of clause 37 i.e., Gati infrastructure Ltd, hereby appoint Mr Manoj Sen, an engineer for referring the aforesaid disputes to him for resolution of the issues in hand. (verbatim copy) 43. The Learned C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9;GIPL'. Contents of the letter are reproduced below for ready reference; To Mr Sunil Gupta Director Amrit Jal ventures private limited ** Dear Sir, subject; no objection for release the funds directly to Sew infrastructure Ltd. Company Appeal (AT) (CH)(Ins.) No. 53 of 2021 21 of 26 In reference to the above subject, we hereby agree to the adjustment of funds to the tune of ₹ 18 crores to be paid to SEW infrastructure Ltd against the outstanding as per the full and final settlement dated 14 December 2013. We further confirm that the total outstanding amount shall be reduced by ₹ 18 crores once the same is paid to SEW infrastructure Ltd. Thanking you, with regards for Sew-Prasad Joint Venture (Authorized Signatory) (verbatim copy) 46. The Learned Counsel for the Appellant argues that the Corporate Debtor did not issue the Completion Certificate in view of pending works to be carried on by Respondent No.1, 'SPJV'. However, in light of repeated request and assurance of Respondent No.1 as regards issuance of certificates for future bidding purposes solely as can be inferred from an email ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . It was suggested by the Corporate Debtor to speed up the pace of the work and complete their pending assignments at the site. 51. Further, the Operational Creditor, in its letter dated 23 January 2015, wrote to the corporate debtor for releasing Rs. two crores, which were withheld against their pending works. In this letter, the Operational Creditor contended that it has already completed almost all the pending works except the shifting of equipment and machinery. Therefore the request was made to at least release rupees one crore from the pending dues. 52. Based on the above discussion, I believe that the Appellant has proved a pre-existing dispute prior to issuance of the demand notice under Section 8 of the Insolvency and Bankruptcy Code 2016. 53. Hon'ble Supreme Court in Mobilox Innovations (P) Ltd. v. Kirusa Software (P) Ltd., (2018) 1 SCC 353: 2017 SCC OnLine SC 1154 : (2018) 1 SCC (Civ) 311 at page 403 has held: 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 ope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... invoice. 55. In the instant case, the claim under the Settlement Agreement, falls within the ambit of the term 'dispute' about the existence of debt . The alleged claims regarding the Corporate Debtor's liability to pay ₹ 2.03 crores to the Operational Creditor was subject to the completion of work to the satisfaction of the Corporate Debtor. The Operational Creditor relied on the merits certificate to show the completion of work to the satisfaction of the Corporate Debtor. However, the Appellant pleaded that the merits certificate was issued at the instance of the Operational Creditor, which was obtained for submission in other entities. Given the law laid down by the Hon'ble Supreme Court in the case of Mobilox (supra), the Adjudicating Authority does not need to be satisfied at the admission/rejection stage that the defence is likely to succeed. 56. The Appellant is relying on the Settlement Agreement dated 14 December 2013. Based on that, the Appellant is claiming that after payment of Rs. ten crores as per terms of the settlement, no further liability could be imposed on the Corporate Debtor. The Corporate Debtor's liability based on their ter ..... X X X X Extracts X X X X X X X X Extracts X X X X
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