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TMI Blog2023 (12) TMI 687X X X X Extracts X X X X X X X X Extracts X X X X ..... onal Company Law Tribunal, Jaipur Bench admitting Section 9 Application filed by Saudi Basic Industries Corporation ("Operational Creditor", who is Respondent No.1 herein). 2. Brief facts of the case necessary to be noticed for deciding the Appeal are: (i) Operational Creditor and the Corporate Debtor entered into a Sale Order Agreement for purchase of goods. Goods were delivered and invoice dated 06.06.2017 was issued by Operational Creditor for an amount of USD 403,920, which was to be paid within 90 days, i.e., by 04.09.2017. Only part payment of USD 276,580 was made by the Corporate Debtor, leaving a balance of USD 127,340. (ii) Different emails were sent by the Operational Creditor requesting the Appellant - Director of the Corporate Debtor to make the payments upto date. The Appellant on behalf of Corporate Debtor sent email on 15.09.2017, replying to the email stating that they were expecting extension of their bank limit and they will pay dues under all the outstanding invoices. The Appellant on behalf of the Corporate Debtor acknowledged the dues vide emails dated 21.09.2017 and 30.09.2017. By letter dated 26.03.2018, the Corporate Debtor issued a letter of acknowledg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herein). 4. Shri Virender Ganda, learned Senior Counsel challenging the impugned order submits that the Operational Creditor having received the amount from the Insurer, i.e., Tawuniya, which fact was suppressed in Section 9 Application, there is no debt due on the Corporate Debtor for which Section 9 Application could have been proceeded with. The Operational Creditor having concealed the aforesaid fact, the Application deserved to be dismissed. It is submitted that the Appellant having withhold the material information that it has received the claimed amount from Insurer, Application under Section 9 deserved to be dismissed. It is submitted that Operational Creditor has come up in Section 9 Application with unclean hand and has failed to produce all the documents executed by it, which were relevant to the litigation, which constitute a fraud on both, the Court and the Corporate Debtor. The Application filed by Operational Creditor ought not to have been entertained and deserved to be rejected under Section 65 of the Code. The Code cannot be used for recovery proceedings. It is submitted that Section 9 Application filed by the Operational Creditor is a proxy litigation on behalf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at Operational Creditor vide email dated 20.09.2017 as well as by email dated 26.09.2017 had requested the Corporate Debtor to make payment, otherwise, the Operational Creditor shall lodge their claim with Insurance Company. Thus, filing of the claim before the Insurance Company was very much communicated to the Corporate Debtor. It is further submitted that Insurance Agreement between the Corporate Debtor and the Insurance Company has nothing to do with the Corporate Debtor and payment of insurance claim by the Insurance Company to the Operational Creditor does not absolve the Corporate Debtor from its liability to pay its dues. It is submitted that the Operational Creditor is under obligation to initiate legal proceedings against the Appellant to recover the outstanding debt. The amount received by Operational Creditor from the Insurance Company has to be remitted back. It is submitted that there is no question of any concealment or playing fraud to Court or on the Appellant. There was no subrogation made by the Operational Creditor in favour of the Insurer and the Operational Creditor was fully entitled to prosecute legal proceedings against the Corporate Debtor. It is submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed on its email dated 20.09.2017, where it has requested the Corporate Debtor to arrange for payment, otherwise, the Operational Creditor will file the claim with Insurance Company. The email dated 20.09.2017 is as follows: "Dear Sir, Please find below the due payment details. Request please arrange to make payments due for the month of July and August asap, otherwise SABIC will file the claims with insurance Company. Payment Due Date Amount in USD 22.07.2017 66,330.00 22.07.2017 67,320.00 18.08.2017 31,432.50 08.09.2017 403,920.00 21.08.2017 181,670.00 08.09.2017 25?444.00 80.09.2017 82,812.50 10.09.2017 208,656.00 08.10.2017 186,620.00 Total 1,392,205.00 Best Regards" 10. By email dated 30.09.2017, the Appellant again communicated that 100% dues shall be paid. The said email is as follows: "Dear Sir We have already paid one invoice and we will be able to give you swift copy on 3rd or 4th. Our bank limits enhancement has been delayed by 2 weeks, so please keep patience and support. Rest assured you will get your 100% dues. Milan Agarwal" 11. In response to letter issued by the Operational Creditor for requesting payment, an a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s at USD 289980 which totals to USD 806760. We acknowledge the amount of USD 806760 outstanding and owing to SABIC as at the date of this letter, and that we agree not to raise any disputes to SABIC lawful claim for the amount. We are pleased to inform that our request for working capital enhancement has finally been approved by our group of bankers, and awaiting for the disbursement. We also expect to get GST refund soon, and hope to clears all your dues by April 2018." 14. Even on 02.05.2018, assurance was given by the Appellant in following words: "Dear sir, We shall pay as soon our enhanced limits are cleared. Let's hope it happens asap/ within may. Milan Aggarwal Prayag Polytech Pvt. Ltd. C-587, phase 1, bhiwadi industrial area Bhiwadi, Rajasthan, India" 15. Part payment was made on 01.08.2018 of USD 127,340 and the balance thereafter remained as USD 127,340. 16. Now, we come to the submissions of Shri Virender Ganda, learned Senior Counsel that non-disclosure by the Operational Creditor that it has received amount from Insurer is concealment of relevant fact and playing fraud on the Court and the Corporate Debtor. Suffice it to say that the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om all further obligations in respect of the claim. Please note that we are currently not exercising our rights of formal assignment of debt and by accepting this settlement offer you agree to maintain full rights in respect of the receivables subject to this claim and to formally assign this debt to Tawuniya when requested. Failure to agree to a formal assignment of debt upon our request will be a breach of policy condition and in such case; you agree to return the liability payable amount back to Tawuniya within 7 days of Tawuniya making a formal demand for return of this claim liability payable amount. As this Offer is a legally binding document, Tawuniya is unable to advise you on its terms. You should obtain your own independent legal and financial advice before signing and returning it to us. Upon receipt of signed acceptances of our Offer, Tawuniya will endeavour to finalise payment to you within Fourteen (14) business days during which time our Recoveries Agent will be in contact with you. In the interim, we remind you of your obligation to do everything possible to recover your loss after we pay you the amount under this Offer. Please note that under the terms ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... non-mentioning of the release deed at the trial is tantamount to playing fraud on the court. We do not agree with the observations of the High Court that the appellants-defendants could have easily produced the certified registered copy of Ex. B-15 and non-suited the plaintiff. A litigant, who approaches the court, is bound to produce all the documents executed by him which are relevant to the litigation. If he withholds a vital document in order to gain advantage on the other side then he would be guilty of playing fraud on the court as well as on the opposite party." 21. The present is a case, which arises out of Section 9 Application filed by the Operational Creditor, which Section 9 Application was filed in prescribed proforma as per Rule-6 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 and all details as required under the prescribed form in Part-I to Part-V were mentioned. All relevant documents pertaining to debt and default committed by the Corporate Debtor has been mentioned. The contract between the Operational Creditor and the Insurer was third party contract with which Corporate Debtor was not concerned. The emails were already se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsignment was damaged. The Insurer settled the claim for an amount of Rs.4,47,436/- whereas the value of the consignment was Rs.7,70,948/-. On receiving the payment from the Insurance Company, a letter of subrogation-cum-special power of attorney was executed in favour of Insurance Company. Thereafter, a complaint was filed by both Insurance Company and Assured, which was allowed and direction was issued for payment of Rs.4,47,436/- along with interest. The Appellant, who was directed to make the payment, challenged the order before the State Consumer Disputes Redressal Commission and National Consumer Disputes Redressal Commission, which all were dismissed, against which the appeal was filed before the Hon'ble Supreme Court. The Hon'ble Supreme Court in the above context came to examine, as to whether the complaint can be maintained seeking compensation for loss in a case where assured has received the amount. The Hon'ble Supreme Court in Constitution Bench in paragraphs 14 and 16 laid down that even after receiving of the claim from Insurance Company, a complaint can be filed. The Hon'ble Supreme Court in paragraphs 14 and 16 has laid down following: "14. The assured entrusted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the assured (the first respondent) represented by the insurer and the insurer for recovery of Rs 4,47,436. The said order was affirmed by the State Commission and the National Commission. We find no reason to interfere with the same. The appeal is, therefore, dismissed." 26. The next judgment relied by Shri Amit Agrawal is judgment of the Bombay High Court in winding up petition, i.e., Rojee-tasha Stampings Pvt. Ltd. v. POSCO-India Pune Processing Centre Pvt. Ltd. and Anr. - (2019) (1) Maharashtra Law Journal Page 857. The above was a case where Company Petition was filed claiming a debt, which Company Petition was opposed on the ground that Company Petition was not maintainable since the Company has received the amount due and payable from its Insurer. In paragraphs 4 to 8, facts and submissions of the case has been noticed by the Bombay High Court, which are to the following effect: "4. The company Court thereafter took up the company petitions for hearing. The company filed an additional affidavit of Mr.Rohit R. Ganage dated 15 September 2015 opposing the petitions interalia introducing a new case namely that the company petitions were not maintainable, for the reason that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... une 2014. The learned Single Judge accordingly ordered that the company be wound up. The company being aggrieved by the impugned order is before the Court in the present appeals. 6. Learned Counsel for the appellant/company in assailing the impugned order has made the following submissions:- (i) There should have been a disclosure by the respondent of the receipt of the amounts from the insurer-Ksure. This to ascertain whether the insurer was assigned the rights in respect of the debt of the company towards the respondent and/or to ascertain whether the insurer subrogates the rights of the respondent to the debt in question. (ii) As the respondents had received the entire amount from the insurance company, there was no longer a debt outstanding from the pvr 9/20 appl134- 18grp.doc company as also the respondent ceased to be creditors of the company within the meaning of Section 433 and 434 of the Companies Act. (iii) The observations of the learned Company Judge that the Company has filed a false affidavit when it contended that it had recently received the knowledge of the payment made by the insurer to the respondents-companies, is an error inasmuch as the affidavit w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, the company is a unknown entity to the contract of insurance between the respondent and its insurer Ksure. Being a third party the company pvr 14/20 appl134-18grp.doc cannot take shelter and disown its liability of a debt payable to the respondent on the basis of an insurance transaction which has taken place between the respondent and its insurer. In our opinion, such a plea introduced in the affidavit of Mr.Rohit R. Ganage is an argument of desperation. Being a third party, the company is not entitled to take a defence that the respondent being paid by the insurer, the liability of the company would ceased to exist, as the insurance contract between the respondent and its insurer is a matter inter-se between the said two parties. It is for the insurer depending upon the terms and conditions of the contract between the respondent and the insurer, to consider its position and recover any amount, if so is received by the respondent under the transaction in question. The company stands completely outside the insurance contract between the respondent and its insurer. In our opinion, the Company cannot espouse the cause of the insurer in making an argument that the respondent is unj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore, the railways was not liable for damages. In the majority judgment, the Court refused to accept the said contention and made the following observation:- "21. The defence of the Railway Administration was that the mill realised from the insurance company the damages and "as such the plaintiff (meaning thereby the respondent mill) has no right to claim any sum in this action". If the specific plea of assignment had been taken in the written statement the respondent mill would have impleaded the insurance company. The Court could 'have in those circumstances been in a position to afford full and complete relief to the parties. 22. In the present case the insurance company and the mill proceeded on the basis that the, insurance company pvr 18/20 appl134-18grp.doc was only subrogated to the rights of the assured. The letter of subrogation contains intrinsic evidence that the respondent would give the insurance company facilities for enforcing rights. The insurance company has chosen to allow the mill to sue. The cause of action of the mill against the Railway Administration did not perish on giving the letter of subrogation. 16. Considering the above position in law o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , to the extent of the receipts, the creditor company would refund the money to the Insurance Company. That would be a matter between the Insurance Company and the creditor company. The debtor is not entitled to take any benefits out of the said transaction." 9. Hence, even for a moment if I assume that the petitioner were to recover some money, the petitioner would be obliged to return the money to the insurance company. Hence, even otherwise there is no merit in the said plea raised by the petitioner." 30. To the similar effect is another judgment of the Hon'ble Gujarat High Court reported in (2005) SCC OnLine Guj 262 - PVD Plast Mould Industries Ltd. vs. ING BHF Bank Aktiengesellschaft, wherein it was held by the Gujarat High Court that petitioner cannot say that once the insurance company has paid the money to the principal creditor, then the Appellant-company is not answerable to anybody. In paragraph 6, following has been held: "6. In the present matter, it is to be seen that the loan was taken by the company somewhere in the year 1993 and the company which claims to be running profit making assetful company, did not discharge its liability within the statutory period ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reexisting dispute between the parties. Suffice it to say that the goods were received in 2017 and for two years there has been several correspondences between the parties as noted above and not even iota of any suggestion was given in any of the reply submitted by the Corporate Debtor that there is any deficiency in the goods. When the Demand Notice was issued on 03.04.2019 by the Operational Creditor, it was thereafter on 06.04.2019 a reply email was sent by the Corporate Debtor raising all types of frivolous and moonshine defenses. In the reply, which was submitted by the Corporate Debtor, there is no mention of any correspondence between the parties prior to receipt of the Demand Notice. The facts as noted above, indicate that the dues were clearly acknowledged by the Corporate Debtor and several assurances were given for payment of 100% debt. For two years, assurances were given by the Corporate Debtor for clearing the entire outstanding, but only part payment was made on 01.08.2018 by the Corporate Debtor. Thus, the plea taken by the Corporate Debtor in its reply that there is pre-existing dispute is dishonest and moonshine plea. The goods having been received and amounts ack ..... X X X X Extracts X X X X X X X X Extracts X X X X
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