TMI Blog2022 (11) TMI 933X X X X Extracts X X X X X X X X Extracts X X X X ..... ncrete evidence has been brought out or documentation has been produced to establish that there existed any pre-existing disputes between the parties. The Arbitration proceedings that the 2nd Respondent is trying to portray as a pending dispute is infact not between the 2nd Respondent (Corporate Debtor) to 1st Respondent (Operational Creditor) and is rather between 2nd Respondent and his principal employer for the supply services i.e. TANGEDCO - this Appellate Tribunal, therefore, in the present appeal do not find any error in the impugned order passed by the Adjudicating Authority and notes that the Adjudicating Authority followed all the steps laid down in Mobilox while ascertaining the application under Section 9. Therefore, this Appellate Tribunal holds that the Adjudicating Authority has correctly examined the existence of debt which was not paid and there was no pre-existing dispute between the 2nd Respondent (Corporate Debtor) and the 1st Respondent (Operational Creditor). Whether the Corporate Debtor is liable to pay for the debts or not? - HELD THAT:- It is seen that, though an NOC was issued by the 2nd Respondent however they did not seek prior approval ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... modems as per purchase orders. Moreover, the 1st Respondent has completed installation of only 2945 modems as opposed all 20000 modems which were to be installed. In addition, the 1st Respondent did not give integration and Facility Management Services as expected from them as per contract. 4. It has been alleged that the supply of the modems was badly delayed in spite of the purchase order stipulating that all supplies need to be made within 60 days. Therefore, the 1st Respondent failed to perform its obligations under the purchase orders and thus allegedly not entitled to any payment and accordingly, debt was not due and 2nd Respondent had no liability to pay any debt. 5. It has been brought out that in accordance with request made by the 1st Respondent that the 2nd Respondent transferred the right to claim performance from the beneficiary third party, TANGEDCO to the 1st Respondent and hence claims of the 1st Respondent, if any, are only against TANGEDCO and not against the 2nd Respondent. 6. The 2nd Respondent herein had initiated arbitration proceedings as against the TANGEDCO for recovery of dues. However, TANGEDCO raised an issue on the non- completion of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngly, Rs. 2,77,27,15/- has been paid to 1st Respondent. 13. The Learned Counsel for the Appellant clarified that this reflects that out of the aforesaid sum of Rs. 2,77,27,150/- paid to the 1st Respondent, main component i.e. Rs. 2,52,56,800/- represents 40% of the value of supplies and Rs. 23,04,253/- represents payment of further 20% towards the installation of 2945 modems in terms of clause 2 of Purchase Orders. The Learned Counsel for the Appellant emphasised that hence the payment has strictly been paid in accordance with Purchase Orders. 14. The Learned Counsel for the Appellant assailed the impugned order of the Adjudicating Authority treating this payment as Part payment of the debt whereas the debt claimed by the 1st Respondent is for entire value of supplies made which is not in accordance with terms of Purchase Orders, whereas payment made by 2nd Respondent is in accordance with the ratios mentioned in Purchase Orders. Therefore, the said payment cannot be construed as part payment of the 1st Respondent claim under the I B Code, 2016 application . 15. The Learned Counsel for the Appellant elaborated that the TANGEDCO sought written undertaking from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xisting dispute. The Learned Counsel for the Appellant emphasised that the NOC dated 08.12.2018 to approach TANGEDCO was given on 1st Respondent s request without mentioning any specific amount due and merely certifying that 1st Respondent had supplied 16,140 modems and installed around 3000 modems. 21. The Learned Counsel for the Appellant admitted that the first demand raised by the 1st Respondent is by way of Form 3 to which the 2nd Respondent unfortunately could not reply but mere failure to reply to demand notice is not sufficient to admit application under Section 9 of the I B Code, 2016. In this regard the Learned Counsel for the Appellant cited judgment of this Appellate Tribunal in the matter of Neeraj Jain Vs. Cloudwalker Streaming Technologies Private Limited (Company Appeal (AT) Ins. No. 1354 of 2019). 22. The Learned Counsel for the Appellant assailed the impugned order which according to him is Non-speaking order as the Adjudicating Authority , in its findings, did not mention anything about the disputes raised by the 2nd Respondent and wrongly presumed payments made by 2nd Respondent in accordance with Purchase Orders as part payment towards 1st Resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the 2nd Respondent has acknowledged its liability to pay the 1st Respondent by issuing NOC dated 08.12.2018 wherein it has admitted to the supply of 16,130 modems and installation specified modems as per the contract and is further requested that the 1st Respondent to directly deal with the TANGEDCO . The Learned Counsel for the Respondent stated that it is relevant to note that in terms of the said NOC the 2nd Respondent has also affirmed that in case no money has been received from the TANGEDCO in respect of the said invoices, the 2nd Respondent shall remain liable, and has further clarified that it is the debt of the 2nd Respondent that the TANGEDCO was called upon to clear. However TANGEDCO citing the lack of privity between the 1st Respondent and itself rejected the request of the 1st Respondent and further stated that it had disputes with the 2nd Respondent for which -arbitral proceedings had been pending since 2017. The Learned Counsel for the Respondent emphasised that there was no dispute between the 1st Respondent and the 2nd Respondent and therefore question of existence of any pre-existing dispute did not arise. 27. The Learned Counsel for the Responden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng this issue in I B Code 2016. (b) The debt has been defined in Section 3 (11) of I B Code, 2016 which is as under:- 3(11). debt means a liability or obligation in respect of a claim which is due from any person and includes a financial debt and operational debt; (c) Since, the term claim is mentioned in above definition of debt, there is a need to refer to definition of claim under Section 3(6) of IBC which is as under:- 3(6). claim means- (a) A right to payment, whether or not such right is reduced to judgment, fixed, disputed, undisputed, legal, equitable, secured or unsecured; (b) Right to remedy for breach of contract under any law for the time being in force, if such breach gives rise to a right to payment, whether or not such right is reduced to judgment, fixed, matured, unmatured, disputed, undisputed, secured or unsecured; (d) The `Financial Creditor and `Financial Debt is also defined under Section 5(7) Section 5(8) of the I B Code, 2016, which as under:- (7) financial creditor means any person to whom a financial debt is owed and includes a person to whom such debt has been legally assigned or transferred to; (8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rnment or any local authority; 5(20). operational creditors means a person to whom an operational debt is owed and includes any person to whom such debt has been legally assigned or transferred; These definitions make the distinction between Operational Debt and Financial Debt. As seen from above, financial debt is an inclusive and non-exhaustive definition given under Section 5(8) of the I B Code to mean a debt alongwith interest, if any, which is disbursed against the consideration for time value of money. Financial creditors have relationship with the entity as financial contract, like loan or security etc. Whereas, an operational debt as defined under section 5(21) of I B Code, 2016 signifies a claim in respect of the provisions of goods or services. It will be pertinent to refer to judgments pronounced by the Hon ble Supreme Court of India on this aspect. In Mobilox Innovations Private Limited Vs. Kirusa Software Pvt. Ltd., (2018) 1 SCC 353 Hon ble Supreme Court of India held:- Therefore, the adjudicating authority, when examining an application under Section 9 of the Act will have to determine: (i) Whether there is an operational debt as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Debtor) to 1st Respondent (Operational Creditor) and is rather between 2nd Respondent and his principal employer for the supply services i.e. TANGEDCO . This Appellate Tribunal, therefore, in the present appeal do not find any error in the impugned order passed by the Adjudicating Authority and notes that the Adjudicating Authority followed all the steps laid down in Mobilox while ascertaining the application under Section 9. Therefore, this Appellate Tribunal holds that the Adjudicating Authority has correctly examined the existence of debt which was not paid and there was no pre-existing dispute between the 2nd Respondent (Corporate Debtor) and the 1st Respondent (Operational Creditor). Issue No. (II) Whether the Corporate Debtor is liable to pay for the debts or not? The claim of the Appellant that the application filed by the 1st Respondent is not maintainable since the Appellant assigned the debt to TANGEDCO seems erroneous. The Appellant claims that 2nd Respondent had issued the NOC with regard to the pending payments, therefore the claims of the 1st Respondent lies only as against TANGEDCO since the 1st Respondent has agreed to accept ..... X X X X Extracts X X X X X X X X Extracts X X X X
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