TMI Blog2023 (12) TMI 856X X X X Extracts X X X X X X X X Extracts X X X X ..... ays of the date of occurrence of event and since no such notice had been raised, it is clear that no payment was claimed by the Operational Creditor in terms of Clause 18 of the Agreement. Further the final payment to the Operational Creditor was subject to a Taking Over Certificate for the work which certificate is also not placed on record - the Adjudicating Authority committed no error in relying on these clauses of the Work Order Agreement to come to the conclusion that the Operational Creditor has failed to establish default on part of the Corporate Debtor in payment of the operational debt. The Adjudicating Authority committed no error in concluding that the debit notes issued on grounds of defect in quality of services testifies the existence of a dispute. It is amply clear that there exists a pre-existing dispute with respect to the quality of services provided by the Operational Creditor to the Corporate Debtor. Present is a case where it cannot be said that defence taken by the Corporate Debtor in their reply affidavit is a moonshine defence unsupported by any evidence. For such disputed operational debt, Section 9 proceeding under IBC cannot be initiated at the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... topped making payments after 18.04.2018. Since an outstanding amount of Rs.1.58 crore had become due from the Corporate Debtor, the latter was requested to discharge their liability. However, the Corporate Debtor failed to liquidate the debt following which a Section 8 demand notice was served upon them on 30.07.2020. However, the Corporate Debtor did not reply to the demand notice or send a notice of dispute. Neither was the outstanding amount received from the Corporate Debtor. Hence, the Operational Creditor thereafter filed a Section 9 application on 09.04.2021 which was erroneously rejected by the Adjudicating Authority on 16.11.2022. 3. Refuting the submission made by the Appellant, it was submitted by the Learned Counsel for the Respondent that no payment was due and payable by the Corporate Debtor. It was pointed out that a Work Order Agreement had been signed between the Corporate Debtor and the Operational Creditor on 01.08.2014 in the context of a work order relating to construction of a road under the Agra Development Authority. In terms of the Clause 17 of the Agreement, payment was to be made to the Operational Creditor within 10 days from corresponding payment hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isputed fact that in the present matter, the Operational Creditor did not receive any payment from the Corporate Debtor after the issue of demand notice, and, thereafter proceeded to file an application under Section 9 of IBC on 20.05.2021. It is however noticed that in response to the Section 9 application, the Corporate Debtor filed reply affidavit thereon. 9. The Adjudicating Authority having considered the matter rejected the Section 9 application. At this stage, it may be useful to reproduce para 13 of the Impugned Order wherein the Adjudicating Authority has dismissed the Section 9 application and held as follows: 13. We have perused the averments and heard the arguments made by the applicant and the Corporate Debtor. The corporate debtor has raised objection as regards the default and claimed that no default has occurred and no amount is due and payable. Moreover, the corporate debtor has issued a debit note dated 20.07.2020 on grounds of defect in quality of services provided due to which it had to incur major losses and in terms of which an arbitration proceeding as regards the quality of services provided by the applicant due to which the payment has been withheld ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ditor on 01.08.2014 and no due had arisen in terms of Clause 17 of the Agreement. It is also pointed out that the Operational Creditor has included security amount while claiming outstanding dues at a time when security amount is not due and payable as per Clause 16 of the work order agreement as placed at page 81-88 of Appeal Paper Book ( APB in short). The Learned Counsel for the Corporate Debtor has also contended that merely on the basis of TDS deduction, no operational debt liability can be fastened on the Corporate Debtor. 12. For proper appreciation of the facts at hand, we may have a look at Clauses 17 and 18 of the Work order Agreement which is as extracted below: 17. PAYMENT Eligible payment will be released to the PRW (Piece Rate Worker) by the Company within 10 (ten) days after receiving corresponding payment from the Employer subject to any statutory and other deductions and monies owed by the PRW to the Company including recoveries if any; cash retention, deduction of monies due to the Company towards any plant, mandatory, materials or services arranged by the Company on behalf of the PRW and damages/costs levied by the Company/ the Employer, if any. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ayment to them. Further, the Operational Creditor was required to raise a notice for claims within 14 days of the date of occurrence of event and since no such notice had been raised, it is clear that no payment was claimed by the Operational Creditor in terms of Clause 18 of the Agreement. Further the final payment to the Operational Creditor was subject to a Taking Over Certificate for the work which certificate is also not placed on record. We are also inclined to agree with the Corporate Debtor that TDS deduction does not imply acknowledgment of any liability as outstanding qua the Operational Creditor. We therefore hold that the Adjudicating Authority committed no error in relying on these clauses of the Work Order Agreement to come to the conclusion that the Operational Creditor has failed to establish default on part of the Corporate Debtor in payment of the operational debt. 14. This now brings us to the issue of the pre-existing disputes which has been pressed hard by the Learned Counsel for the Corporate Debtor in the context of debit notes issued by them. It was submitted that these debit notes had been duly communicated to the Operational Creditor through WhatsApp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been placed at page 133 of APB. That this message was received by them from the Corporate Debtor has not been controverted by the Operational Creditor. Further at page 134 of APB, we find that the Operational Creditor has sent a response to the above WhatsApp message holding the debit note to be false and even threatened the Corporate Debtor of legal action. This shows that they were aware of debit notes before the issue of the Section 8 demand notice. Under such circumstances, the Adjudicating Authority committed no error in concluding that the debit notes issued on grounds of defect in quality of services testifies the existence of a dispute. We must add here that reliance placed by the Learned Counsel for the Appellant on the judgment of this Tribunal in KB Polychem (India) Ltd. v. Rapt Industries Pvt. Ltd. in CA (AT) (Ins.) No. 396 of 2020 to show that debit notes sent by emails are not in order is misplaced since in that case the emails containing the debit notes were internal emails of the Corporate Debtor which were not sent to the Operational Creditor thereby making the facts in that case distinguishable from the present. 17. It is relevant at this juncture to refer ..... X X X X Extracts X X X X X X X X Extracts X X X X
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