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Judgment
ORDER
Per: V. Nallasenapathy, Member (T)
The Petition reveals that the Corporate Debtor raised several purchase orders on the Petitioner for supply of Automated Meter Reading (AMRs) devices for various Distribution Companies (DISCOMs) within the states of Gujarat and Andhra Pradesh, who were the customers of the Corporate Debtor. Based on the purchase orders the Petitioner supplied the AMRs to the DISCOMS.
Petitioner submits that they had supplied 50,297 AMR units and 230 DCUs to the DISCOMS in Gujarat. It is submitted, that 46,509 units were installed and 32,000 units were successfully commissioned. The Petitioner raised invoices for the above said supply from 28.12.2010 to 01.07.2013 to the extent of ₹28,72,95,617/-, out of which the Corporate Debtor made payments to the extent of ₹23,95,67,700/- and a sum of ₹4,77,27,917/- is still due.
Petitioner further submits that they have supplied 1,04,000 AMR units to the DISCOMS in Andhra Pradesh, out of which 90,421 units were installed and 81,995 units were successfully commissioned. The Petitioner raised invoices for this supply from 30.06.2011 to 28.03.2014 amounting to ₹36,78,34,937/- out of which a sum of ₹31,08,15,465/- was paid by the Corporate Debtor and still there is an outstanding due of ₹5,70,19,473/-.
The Petitioner further submits that in order to ensure efficient and seamless working of the AMRs, tailor-made additional investments to the extent of ₹1,90,00,000/- was made and the same is recoverable from the Corporate Debtor.
It is submitted that total of the above said three components works out to ₹12,37,47,390/- and the interest at the rate of 18% from the date of the bill works out of ₹7,70,05,171/- and thus there is a total due of ₹20,07,52,561 recoverable from the Corporate Debtor and accordingly the Petitioner issued demand notice on 04.01.2018 under Section 8 of the Code, demanding the said sum from the Corporate Debtor.
The Corporate Debtor by its reply to the demand notice dated 15.01.2018 denied the liability saying that the claim is utterly false, bogus, ex-facie misconceived, disingenuous and time-barred. It is also stated that the demand notice glosses over the multitude of disputes raised by the Corporate Debtor pertaining to the supply of deficient modems relating to the AMRs supplied to various DISCOMS within the states of Gujarat and Andhra Pradesh, including multiple instances of negligence and incompetence afflicting daily schedules, failures to rectify and/or replace faulty defective modems in timely manner, non-submission of requisite certificates, reports, bank guarantees, apart from raising premature invoices without completion of project milestones. It was further alleged that in respect of Gujarat DISCOMs, the Petitioner failed to commission nearly 23,000 modems, inaction on certain purchase orders and due to multiple defaults, a notification was given on 31.07.2013 pointing out the various deficiencies and inadequacies in performance of obligation under the purchase orders. The reply further notes that the Corporate Debtor suffered losses including penalties imposed by their customer, in the form of liquidated damages for the delays and damages due to negligence of the Petitioner in deploying active SIMs in defective modems resulting in loss of meter data, misuse of capital SIMs, leading to abnormal GPRS billing, etc. It was further stated that in respect of purchase orders relating to Andhra Pradesh DISCOMs, the Corporate Debtor, in fact, entitled to refunds relating to non-delivery and/or defective quality of AMRs, failure to provide delivery proof, bank guarantee etc., together with entitlement to recover liquidated damages.
The Corporate Debtor filed reply to the Petition, rejoinder was filed by the Petitioner, for which the Corporate Debtor filed its sur-rejoinder and both parties filed their written submissions and both sides argued the matter exhaustively.
The following are the contentions of the Petitioner in support of the Petition:
a. The Corporate Debtor is liable to pay ₹20,07,52,561 as demanded.
b. Owing to its long-standing association with the Corporate Debtor, they consistently supported the Corporate Debtor by working in the absence of advance payments, accommodating continual delays in payment, undertaken obligations such as replacement of defective SIMs etc. for the benefit of both the parties.
c. Admittedly, the parties were not acting in terms of purchase orders raised.
d. Owing to the unprofessional attitude and the deliberate failure to make payments on the part of the Corporate Debtor, they are constrained to withdraw from the Gujarat and Andhra Pradesh projects during December 2013 and January 2016 respectively.
e. The last payment received was in March 2015.
f. On 19.07.2017, the Petitioner had addressed an email to the Corporate Debtor, enclosing its ledger balance statement, for the Corporate Debtor’s confirmation, requesting to provide the confirmation within 15 days failing which the Petitioner’s ledger statement would be deemed confirmed and the same is extracted below:
g. The Corporate Debtor, on 21.08.2017, in response to the above email, requested the Petitioner to:
confirm the period for which the balance is mentioned, and
ii) provide invoice wise breakup for the balance outstanding amount.
h. The Petitioner complied with the above said request of the Corporate Debtor vide email dated 21.08.2017 which is extracted below:
“Dear Sir/ Madam, Highly appreciate your reply. We have attached herewith balance details till 31.03.2017 (same balance as on date as no transaction entered during the year). Detail invoice wise list attached for your reference and reconciliation. Please inform to us if you required further information and detail for reconciliation.”
The Corporate Debtor’s reply email dated 21.08.2017 is as below:
“Dear Sharma, Please find the status of invoice which are already booked and paid as per TCS books but still shown outstanding in statement. There are also few invoices which are partially paid, details of the same mentioned in below attached file. Payment details of the invoice mentioned in below attached file for reference. Request you to kindly remove the same and send a revised outstanding statement.”
j. Pertinently, not once was payment of the outstanding amount disputed by the Corporate Debtor. An amount of ₹48,16,839/- was shown as outstanding amount as per TCS books, in the Excel sheets attached to the email sent by the Corporate Debtor.
k. On 21.08.2017 itself, Petitioner provided the necessary details including invoices list for the Corporate Debtor’s reconciliation to the Corporate Debtor.
l. On 22.08.2017, the Corporate Debtor sent an email attaching a statement which contained details of invoices which were purportedly fully paid by the Corporate Debtor which is as below:
“Dear Sharma, The below file contains invoice which are fully booked and paid as per TCS books. Request you to kindly remove the paid invoice from statement and provide revised statement so that we can do further reconciliation for the balance invoice shown in outstanding statement. Details of payment mentioned in below attached file.”
m. The Corporate Debtor, despite having unequivocally acknowledged its liability by requesting for “revised statement” and “revised outstanding statement”, failed to make the payment, hence this Petition.
The Corporate Debtor raised the following contentions while opposing the Petition:
a. Commencing from 17.08.2010, 15 purchase orders were placed upon the Petitioner primarily for supply of AMRs to facilitate data collection from electricity meters. Each purchase order bore distinctive terms as to credit terms, payment milestones, supply, installation, commissioning, with the purchase orders stipulating the requirement of a performance bank guarantee in favor of the Corporate Debtor.
b. Petitioner raised invoices on the Corporate Debtor from 28.12.2010 to 28.03.2014.
c. Petition made no reference to any dispute or the terms of purchase orders raised upon the Petitioner, or the fact of abandonment of performance by the Petitioner, much less any waiver of dispute. The Petitioner attempted to mislead the tribunal, premised on the assertions that there is no dispute as regards the debt amount.
d. The Corporate Debtor submitted that there are performance lapses on the part of the Petitioner and the Corporate Debtor raised disputes across both the projects and referred to various email communications, the details of which are as below:
Email dated 14.03.2012 from the Corporate Debtor to the Petitioner, wherein the Corporate Debtor pointed out non-achievement of completion of targets in certain places; non-installation of modems due to unavailability of man power; non-initiation of modem installation; modems not communicating the data; non-submission of master data on time; forgetting to collect data appropriately; poor progress of rectification of defective modems and achievement of only 55-60% modem communication, despite the commitment being 90%.
Email dated 24.10.2012 from the Corporate Debtor to the Petitioner wherein the Corporate Debtor complained regarding poor resource management including unavailability of adequate manpower which was hampering the project execution such as employing only three persons where the requirement is of 12 in the case of towns under Dakshin Gujarat Vij Company Limited, contrary to assurance of 42 teams only two persons were on the field in the pilot town of Dhoraji, master data for modem installation was not submitted for more than 6000 modems where modems installation required to be completed in 6 months prior, faulty PCB and cable issues resulted in the requirement to replace almost 100% of the modems in certain places; failure to respond in respect of issues relating to Elster Meter Conversion and Substation Data Validation.
Notice dated 31.07.2013 sent by the Corporate Debtor to the Petitioner citing non-performance and non-compliance against certain purchase orders for supply installation and commissioning of modems, wherein it was stated that even after three years of the award of the Contract, the Petitioner failed to even submit the installation report for nearly 20,000 AMR Modems which were recalled by the Petitioner due to manufacturing defects. In the said notice, the Petitioner was required to complete the entire work assigned to them as per the purchase order, failing which the remainder of the work will be completed by engaging a third party vendor at the risk and cost of the Petitioner and to recover from the Petitioner the excess payment made by the Corporate Debtor. It was also stated that the Corporate Debtor reserves their right to apply penalty as per purchase order’s terms & conditions due to performance failure and non-compliance with delivery timeline.
Email dated 22.08.2013 from the Corporate Debtor to the Petitioner wherein the Corporate Debtor complained that there is no work being done in the field and complained that 32,000 modems committed to start communicating by 20.08.2013 were not communicating.
Email dated 22.01.2015 from the Corporate Debtor to the Petitioner wherein the Corporate Debtor complained that there is scarcity of manpower, mismanagement and misplacement of sim cards and also, denied payment to the Petitioner stating that 50% of the modems delivered have not communicated at least once.
Email dated 14.09.2015 from the Corporate Debtor to the Petitioner wherein the Corporate Debtor complained that the Petitioner has not replaced 6100 defective modems taken from the Corporate Debtor.
e. The Corporate Debtor also enclosed certain email communications received from their customers regarding the poor project performance.
f. The Corporate Debtor contended that the claim is barred by limitation. It is submitted that, if limitation is calculated on the basis of work done, based on the documents relied upon by the Petitioner, work done has been recorded in the terms of certificate issued by the Corporate Debtor. According to the Corporate Debtor, the last such certificate was issued on 05.02.2015 and the limitation ended on 06.02.2018 and since this Petition is filed on 26.06.2019, three years after the issue of certificate, the claim is time barred. It is further submitted that if the limitation is calculated on the basis of invoices raised by the Petitioner, the last invoice was raised on 10.03.2015 and the limitation comes to an end on 10.03.2018 and this Petition filed on 26.06.2019, after a lapse of three years from the last invoice, this Petition is barred by limitation.
The Petitioner in their rejoinder submitted as below:
a. Despite encountering issues with the Corporate Debtor relating to payment, non-cooperation, the Petitioner performed its task to the satisfaction of the Corporate Debtor and finally constrained to withdraw from both the projects (Gujarat and Andhra Pradesh).
b. The Corporate Debtor between 2012 and 2014 issued several certificates in the name of the Petitioner.
c. The DISCOMS to whom the Petitioner supplied AMRs were also certified the performance of the Petitioner.
d. In view of the above, the stand now taken by the Corporate Debtor is to wriggle out of its liabilities to make payment to the Petitioner.
e. The disputes raised by the Corporate Debtor are only issues that have arisen between the parties in the normal course of business.
f. A perusal of the email trail of the August 2017 shows that the default occurred in August 2017 and therefore, the claim is within time.
This Bench, on hearing the respective counsel and on analyzing the pleadings, is of the view that there are pre-existing disputes which squarely falls under Section 5(6) of the Code, as revealed from the followings:
a. The Corporate Debtor enclosed a record of notes of review meeting of Power Finance Corporation with the representative of the Corporate Debtor, at page no. 297 of the Petition, which shows that poor data communication from the modems to the data centre, delay in installing new modems and attending the problems and the non-functioning of modems were discussed.
b. Email communication dated 27.03.2012 from the Petitioner to the Corporate Debtor:
c. Email communication dated 28.03.2012 from a representative of the Corporate Debtor sent to another person on the side of the Corporate Debtor itself with a copy to the Petitioner:
d. Email communications dated 14.03.2012 from the Corporate Debtor to the Petitioner:
e. Email communication dated 27.10.2012 from the Corporate Debtor to the Petitioner:
f. Email communication dated 02.11.2012 from the Corporate Debtor to the Petitioner:
g. Email communication dated 27.10.2012 from the Corporate Debtor to the Petitioner:
h. Email communication dated 17.06.2013 from the Corporate Debtor to the Petitioner:
The contention of the Petitioner that the above issues between the parties are in the normal course of business which were given go-by the Corporate Debtor by the email of August 2017 is devoid of any merit. The emails of July-August 2017 between the parties only shows that reconciliation of accounts is sought but that does not mean that the disputes raised by the Corporate Debtor were wiped out. It also reveals that some of the invoices were only partly paid.
j. In view of the above stated position, the reliance of the Petitioner on the judgment of Mobilox Innovations Private Ltd v Kirusa Software Private Ltd AIR 2017 SC 4532 is wholly misplaced and the said judgment is in fact is against the Petitioner.
k. Hence the Petition is hit by Section 5(6) of the Code which provides as below:
"dispute" includes a suit or arbitration proceedings relating to— (a) the existence of the amount of debt; (b) the quality of goods or service; or (c) the breach of a representation or warranty;”
The next issue raised by the Corporate Debtor is relating to limitation and let us examine that also, despite a finding that the Petition is hit by Section 5(6) of the Code.
a. The Counsel for the Petitioner relies on the following reply email communication dated 21.08.2017, sent by the Corporate Debtor in response to email dated 19.07.2017 and submits that it is an acknowledgement of liability and hence they are well within the limitation:
“Dear Sharma, Request you to kindly confirm balance confirmation is for period “31.03.2017 or 31.05.2017”, as period mentioned in below mail trail is different from the period mentioned in subject line. Also request you to kindly provide invoice wise breakup for the balance outstanding amount mentioned in below mail trail for reconciliations.”
b. Per contra the Counsel for the Corporate Debtor submits that in the above email dated 21.08.2017, the Corporate Debtor only seeks clarification as to the subject line of the email and an invoice wise breakup of the attachment received and in response the petitioner sends an email attaching the invoice wise details of the purported balance.
c. Ongoing through the above email, this bench is of the view that there is no acknowledgement of the liability on the part of the Corporate Debtor. The above emails only seek certain clarifications regarding the accounts and this cannot be an acknowledgement of liability as contemplated under Section 18 of the Limitation Act,1963.
d. The Petitioner contended that the default occurred in August, 2017 when the Corporate Debtor for the first time denied the Petitioner’s entitlement under the purchase orders and since the Petition was filed in June, 2019, the same is within limitation. It is to be seen that the last invoice was raised on 28.03.2014 and the purchase order issued by the Corporate Debtor shows that 100% payment is to be made within 15 days of receipt of invoice for the quantity of modems that are commissioned in that month. In view of this, the limitation period starts 15 days after 28.03.2014, i.e., on 12.04.2014, and ended on 11.04.2017 and since the last payment was made on 10.03.2015, the limitation gets extended upto 09.03.2018. Since, this Petition was filed in June, 2019, the Petition is barred by limitation. The contention of the Petitioner that the default will start when the Corporate Debtor denied the liability is totally misconceived. The default starts on the date of invoice itself unless otherwise some time period is given for making the payment either in the purchase order or invoice. In this case, the purchase order is very clear that the payment is to be made within 15 days of receipt of invoice.
e. The reliance of the Petitioner on the judgements of Shango Technologies Pvt. Ltd. Vs. Chemplast Sanmar Ltd. (MANU/TN/1715/2018) and Manjit Kaur Sran vs. Tricolite Electrical Industries Ltd. (Company Appeal (AT) (Insolvency) No. 894 of 2019) is not of avail to the Petitioner in view of the judgement of the Hon’ble Supreme Court in the case of B. K. Educational Services Pvt. Ltd. Vs. Parag Gupta and Associates (2018 SCC OnLine SC 1921) wherein at para no. 48 held as below:
“It is thus clear that since the Limitation Act is applicable to applications filed Under Sections 7 and 9 of the Code from the inception of the Code, Article 137 of the Limitation Act gets attracted. "The right to sue", therefore, accrues when a default occurs. If the default has occurred over three years prior to the date of filing of the application, the application would be barred under Article 137 of the Limitation Act, save and except in those cases where, in the facts of the case, Section 5 of the Limitation Act may be applied to condone the delay in filing such application.”
In view of the above discussion, the Petition is dismissed. No cost.