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TMI Blog2024 (8) TMI 213X X X X Extracts X X X X X X X X Extracts X X X X ..... ng Authority on 07.05.2024 whereby the petition filed under Section 9 of the Code was rejected on the contentions of the Corporate Debtor that there lies a preexisting dispute between the Parties. This Appeal requests a reversal of the Impugned Order. Submissions of the Appellant 2. The underlying dispute arises from two agreements between the Appellant and the Corporate Debtor (Respondent) pertaining to a barrage project. Superintending Engineer, Flood Works circle Department of Irrigation Govt. of U.P. Bareilly had awarded the Corporate Debtor ("Ghanaram Infraengineers Pvt. Ltd."), the work of "Construction of Ramganga Barrage, Upstream & Downstream Guide Bund and Main Canal Head Regulator. (Main Contract). 3. In turn, on 08.12.2011, the Corporate Debtor ("Ghanaram Infra Engineers Pvt. Ltd.") entered into a Sub-Contract Agreement (Supply Agreement) with the Appellant concerning the Design, Fabrication, Supply with Rope Drum Hoist and Counter Weight, etc. The Corporate Debtor also entered into another Sub-Contract Agreement (Erection Agreement) with the Appellant for the execution of part of the above works concerning to erection and commissioning of Vertical Lift Steel Gates ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 6. Despite the Appellant's attempts to reach an amicable resolution, the Respondent did not settle the outstanding debt. On 23.05.2018 there was a meeting conducted between the Appellant and the Corporate Debtor whereby the Appellant informed the Corporate Debtor that it will be filing an application for initiation of Corporate Insolvency Resolution Process, if the payments are not released. On 08.09.2018, the Appellant herein sent an email to the Respondent requesting a time for a meeting to finalize the account of the Appellant and releasing the balance payments, which was decided in an earlier meeting held in August 2018 itself. On 11.09.2018, the Respondent sent an email to the Appellant stipulating: "Dear sir, In ref. to your, it is to inform you that after site verification, it has been found that you have done work only for Rs. 18,76,79,023.00 (Statement enclosed) against which we have already paid Rs. 20,89,14,223.00 i.e. excess payment of Rs. 2,12,35,200.00 has already been released to you. As such we request you to please refund our excess amount immediately. It is also mentioned that if there is any confusion, we may feel free to write to us so that meeting m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olous narrative of a dispute against the demand raised by the Appellant herein. 12. Perusal of the reply to the demand notice demonstrates that all the points as mentioned in the reply to the demand notice were either an afterthought or an attempt to evade the amount that has become due and payable. 13. Thereafter, on 21.02.2022, a petition under Section 9 of the Code was filed by the Appellant whereby the following amount was mentioned: (Principal: Rs. 5,92,95,099/- + Interest of INR 2,64,30,993/-). 14. The said petition was listed before Adjudicating Authority on 22.04.2022 whereby the matter was heard on the point of issuance of notice and the orders were reserved. On 11.05.2022, the Ld. Adjudicating Authority dismissed the Petition filed under Section 9 of the Code by the Appellant on the ground of limitation. 15. Thereafter, the Appellant herein preferred an Appeal against the said order dated 11.05.2022 before this Hon'ble Appellate Tribunal bearing Company Appeal (AT) (Insolvency) No. 911 of 2022, and this Hon'ble Appellate Tribunal was pleased to issue notice on the said Appeal vide Order dated 17.08.2022. The Respondent herein filed their reply dated 20.09.2022 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 21. In the fiscal year 2011-2012, the Respondent company was awarded a contract by the Ministry of Irrigation, Government of Uttar Pradesh, for the construction of the Ram Ganga Barrage. This contract included the construction of 30 steel gates, as per Agreement No. 05/S.E./2011-12. 22. To fulfil the contractual obligations, the Respondent entered into two sub-contracts for the supply, erection, and commissioning of the steel gates. The Appellant was awarded a contract for 17 gates, while Kay Iron Work (Yamunanagar) Pvt. Ltd. was awarded a contract for the remaining 13 gates. These sub-contracts were formalized through separate agreements executed on December 8, 2011, and December 16, 2011, respectively. 23. Both sub-contracts outlined a payment schedule in Clause 7, stipulating that 85% of the contract value was payable at certain stages of the project, and the remaining 15% was to be paid upon the complete commissioning of the project. It is undisputed that the Appellant did not complete the entire project, having only finished 11 out of 17 gates by July 2017, when they abandoned the site. 24. Consequently, the project was never fully completed or commissioned. In fact, the De ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nment of the work and site precludes any claim of "admitted debt. ii. Misrepresentation of Admitted Debt: The Appellant asserts that the Respondent admitted a debt through communications dated July 11, 2017, and August 16, 2018. The Respondent contends that these communications merely acknowledge the receipt of invoices and do not constitute an admission of debt. The payment schedule in the sub-contract agreement clearly stipulates that payments were to be made in stages, with the final payment contingent upon project completion and commissioning. The Respondent further argues that the Appellant has failed to prove that these stages were achieved and has presented a forged letter to support their claim. False Affidavit and Dispute Existence: 30. The Appellant filed a false affidavit with the petition, claiming an admitted debt despite the dispute raised on September 11, 2018. Under Section 3(12) of the IBC, a debt is defined as unpaid when it is due and payable. Given the terms of the sub-contract agreement and the pre-existing dispute, the alleged debt is not due. Limitation Period: 31. The demand notice is barred by limitation due to the existence of a dispute raised befo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raised a claim of excess payment in an email dated September 11, 2018, which was promptly refuted by the Appellant in their response dated September 17, 2018. Following the non-responsive stance of the Respondent, the Appellant sent a legal notice demanding payment on December 3, 2021, and a statutory Demand Notice on December 27, 2021. The Respondent replied to this notice on January 7, 2022, raising disputes over the claimed amount. Subsequently, a petition under Section 9 of the Code was filed by the Appellant on February 21, 2022, mentioning the outstanding principal amount of Rs. 5,92,95,099/- plus interest. The Adjudicating Authority dismissed the petition on the grounds of limitation, which was later set aside by this Appellate Tribunal, reviving the Section 9 Application. 35. Per contra, the Respondent contends that the project was never fully completed or commissioned due to defects identified by the Ministry of Irrigation, UP Govt. The Respondent alleges that the Appellant abandoned the project in July 2017 after completing only 11 out of 17 gates, resulting in the reassignment of the remaining work to Hoisto-Structures and Equipment's Pvt Ltd. The Respondent had ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment & release of payment. We have already received the account Statement from your side on dated 11.07.2017 & dated 16.08.2018 only confirming our balances as on 24.06.2017 for amount Rs. 5,92,95,098.00. Now as per our last meeting in mid of August your good self only told us that we will again meet in 1st week of September and finalize the amount of balance supplies to be made and accordingly our accounts shall be settled, as you were busy with other tender work. Now you have sent the account statement modified as per your wish to reduce the total outstanding value (in some item you have mention 65% payment and in some item it is 100%) which is not as per our agreement and not at all acceptable. We have raised all the bills only after completion of that work and all the bills for supplies as well as erection has been accepted by your site office & your head office and accounted for an being reflected in your books of accounts also. Sir, We have already discussed in our last 3-4 meetings since April 2018, that our accounts shall be settled, after finalizing the market value of balance supplies to be made rest all the account is already settled and final. Now if you ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was never served. However, from this email quoted supra the Appellant had accepted the matter of foreclosure of erection contract and giving of this balance work to other contractor. The remaining work was then assigned to Hoisto-Structures and Equipment's Pvt Ltd, as acknowledged by the Appellant into the verified dated September 17, 2018 (supra). Thus, the claim of forgery regarding the termination notice contradicts the Appellant's own communications and conduct. 43. The Respondent's allegation of forged documents and the Appellant's failure to complete the work further support the existence of a pre-existing dispute, which doesn't appear to be a moonshine. The Respondent's actions, such as reassigning the remaining work, align with the termination of the contract, contradicting the Appellant's claim. Without looking into the genuineness of claims and counter claims of forgery by both parties, we still come to the conclusion of the pre-existing dispute basis other facts on record as noted in the previous paragraphs. 44. The Respondent's reply to the statutory demand notice dated January 7, 2022, further substantiates the existence of a pre-existing dispute. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pplication within 3 years, when the right to apply accrues. Since the invoices had been raised from 2013 and the applicant claims that the amount was also defaulted in the year 2013. Therefore, the first date of the default was in the year 2013, when the payment of the invoices was due and not paid period. Hence the present application is barred by limitation and was dismissed. The same was challenged by the Appellant before this Tribunal vide order dated 26.09.22 had ordered that : "8. Adjudicating Authority itself in its order has quoted part-IV of the application which itself noticed that last payment made by the Corporate Debtor was on 07.06.2017. 9. The order does not notice the order of the Hon'ble Supreme Court passed in suo moto writ petition no. 3 of 2020. 10. Further it appears that last invoice is not 18.04.2016 but 24.06.2017 which is at page 256 of the paper book which was part of Section 9 application. 11. We thus are of the view that reasons given by the Adjudicating Authority for rejecting the application Section 9 as barred by time are not sustainable. We set aside the order dated 11.05.2022 and revive the application under Section 9 before the Adjudicat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng as a dispute truly exists in fact and is not spurious, hypothetical or illusory, the adjudicating authority has to reject the application..." 50. The Corporate Debtor had raised a plausible contention about a pre - existing dispute, which in the instant case is not a moonshine or feeble legal argument. Therefore, the Adjudicating Authority was not incorrect to reject the application filed under Section 9 of the Code. 51. The Appellant has placed reliance on Soham Polymers Pvt. Ltd. Vs. Flocksur India Pvt. Ltd. (Company Appeal (AT) (Insolvency) No. 924 of 2021) of this Hon'ble Tribunal which in its order dated 14.02.2022 has held that a dispute raised by the Corporate Debtor solely with an intent to create a smokescreen of the dispute would not constitute as "pre-existence of dispute" under the scheme of IBC, 2016. The facts of that case are different as in that case there was no dispute raised prior to the issuance of Section 8 notice period. But in this case lot of disputes have risen before the issuance of Section 8 notice. Therefore, this case may not of help to the Appellant. Conclusion 52. On the basis of the materials on record, it can be observed that in the ins ..... X X X X Extracts X X X X X X X X Extracts X X X X
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