BKP Enterprise vs Air India Limited

Dr. Alok Srivastava, Member (Technical)]

This appeal has been filed under section 61 of the Insolvency and Bankruptcy Code, 2016 (in short ‘IBC’) by the Appellant, who is aggrieved by the order dated 02.11.2021 passed by the Adjudicating Authority (National Company Law Tribunal, New Delhi) in Interlocutory Application No. IA-3425/2021 in CP No. IB No.332/ND/2021 (hereinafter called ‘Impugned Order’).

The Appellant/Operational Creditor is aggrieved by the finding in the Impugned Order that he has failed to demonstrate “sufficient cause” for condoning the delay in filing the petition IB No. 332/ND/2021 before the Adjudicating Authority.

In brief, the case of the Appellant is that he was authorized by the principal Orbest Airlines through an authorization letter dated 29.10.2012 to ‘submit, represent and act on behalf of Orbest Airlines in connection with charter agreement dated 3.11.2012’ entered into by Orbest Airlines with Air India for carrying pilgrims between Jeddah and Medina to Gaya as per directions of Air India and Air India promised to make payments in accordance with the terms and conditions of the charter agreement to Orbest Airlines. The appellant’s contention is that he was dealing with Air India on behalf of Orbest Airlines and an amount of US $ 275,000 was due to Orbest Airlines from Air India and the Appellant was duly authorized by Orbest Airlines vide letter dated 11.3.2013 sent by the Commercial Director to receive payment amounting to US $ 275,000 from Air India on account of last payment in connection with air transportation of Haj pilgrims in the year 2012.

The Appellant has stated that despite repeated requests made by the Appellant to Air India, they did not receive the due payment, while all along between the year 2013 to 2017, the Appellant kept on pursuing the case for payment of overdue amount. He has added that Air India raised the requirement of bank guarantee and later letter of indemnity bond in order to make the said payment to the appellant, but it could not be made as formalities remained incomplete. The Appellant has further stated that he filed a writ petition before the Hon’ble High Court of Delhi in May, 2018, which was disposed of vide final order dated 28.11.2018 on the ground that the Hon’ble High Court of Delhi did not feel inclined to examine the matter under writ jurisdiction of Article 226 of the Constitution of India. He has stated that, thereafter, a demand notice dated 28.4.2021 was issued by the operational creditor BKP Enterprise to the corporate debtor Air India and later a section 9 application dated 30.6.2021 was filed by the Appellant, in which the Impugned Order came to be passed dismissing the application filed under section 5 of the Limitation Act for condoning delay in filing the section 9 application.

A perusal of the Impugned Order makes it clear that during the hearing of section 9 application by the Adjudicating Authority, it was noticed that the date of default mentioned in Part IV of section 9 application was 11.3.2013, whereas section 9 application was filed on 30.6.2021 after a delay of more than eight years. Hence, the Appellant (applicant before the Adjudicating Authority) was advised to first deal with the issue of limitation, whereupon the Appellant/Applicant filed Interlocutory Application bearing IA No. 3425/2021 on 6.8.2021 before the Adjudicating Authority. The Adjudicating Authority thereafter went on to first hear IA 3425/20212 and the Impugned Order was passed on 2.11.2021 whereby IA No. 3425/2021 was dismissed as the operational creditor had failed to demonstrate sufficient cause for condoning the delay in filing the section 9 application bearing IB-332/ND/2021.

We heard the arguments advanced by the Learned Counsels of both the parties and perused the record.

The Learned Counsel for the Appellant has argued that since the Appellant had an unpaid operational debt which was to be paid by the Respondent, he filed a writ petition before the Hon’ble High Court of Delhi and pursued it sincerely and with due diligence and this writ petition was finally disposed of vide order dated 28.11.2018, whereby it was dismissed. The Learned Counsel for Appellant has claimed that the operational creditor was sincerely pursuing legal remedy for recovery of the overdue amount and after the writ petition was dismissed by the Hon’ble High Court of Delhi that the Appellant issued a demand notice dated 29.4.2021 to the corporate debtor for payment of overdue amount under section 8 of the IBC. He has also claimed that the Respondent never disputed payment of the requisite amount in multiple communications which are on record, but the payment was kept pending by the Respondent as it kept on raising various requirements, including furnishing a bank guarantee and later an indemnity bond. He has claimed that the operational creditor sent a duly executed indemnity bond to Air India, whereafter Air India put forward a new requirement of authentication of a letter dated 11.3.2013 issued by the Commercial Director of Orbest Airlines.

The Learned Counsel for appellant has thus vehemently argued that the debt was at various occasions acknowledged by the corporate debtor through e-mail communication which is, inter alia, acknowledgement of the corporate debtor’s liability to pay, but it was only due to the procedural formalities of submission of bank guarantee or indemnity bond and authentication of Commercial Director’s letter dated 11.3.2013 that the final payment did not take place, but the fact is that the operational debt is in default and payable to the Appellant. He has further argued that the time spent in pursuing his writ petition before the Hon’ble Delhi High Court was done with full sincerity and therefore, the time spent in prosecuting the writ petition should be considered for exclusion out of time period when counted for the purpose of limitation.

The Learned Counsel for Respondent has argued that the appellant is not an operational creditor, since he was only authorized by its principal Orbest Airlines to ‘submit, represent and act on behalf of Orbest Airlines for the ensuing Haj operations for Air India’ and neither was he authorized to receive payment nor was the Charter Agreement novated to authorize him to receive payments on behalf of Orbest airlines and further he received the earnest money deposit made by him on behalf of Orbest Airlines, as per one-time authority dated 10.1.2013 given by Orbust Airlines. Furter, the Commercial Director of the principal, Orbest Airlines requested Air India vide letter dated 11.3.2013 to remit the remaining amount of US $ 275,000 in the account of BKP Enterprise is doubtful for which Air India has sought proper authentication by the Appellant, which has not been done. He has claimed that the Appellant has been dealing with Air India regarding Haj 2012 operations on behalf of Orbest Airlines but not authorized to receive any payment qua the Charter Agreement.

The Learned Counsel for Respondent further argued that the debt which was due for payment in 2013 has become time barred as the section 9 application was filed on 30.6.2021, and in any case the onus for delay in making the payment is on the Appellant since it did not provide requisite documents or complete necessary formalities for payment. He has contended that Orbest Airlines went into bankruptcy on 4.4.2013 and this fact was not brought to the knowledge of the Respondent by the Appellant. He has added that in view of the bankruptcy proceedings against Orbest Airlines, the Appellant was asked to submit authentication of the letter of Commercial Director of Orbest Airlines dated 11.3.2013 which was sent before Orbest airlines went into liquidation, as per advice of its legal counsel, but the same was not submitted and hence the delay of non-submission of requisite documentations has kept the payment pending. Finally, he has argued that since sufficient cause was not shown for condonation of delay that was requested in IA. No. 3425/2021, it was correctly dismissed by the Adjudicating Authority.

The issue that falls for consideration in the present appeal is whether the section 9 petition was filed within limitation and therefore it concerns IA No. 3425/2021, which is an application for condonation of delay under section 5 of the Limitation Act.

A perusal of pleadings made in section 5 application under Limitation Act shows that the operational creditor has admitted that the last acknowledgment by the corporate debtor was on 21.11.2017 through an e-mail from corporate debtor to Mr. Bruno Claeys, former Commercial Director of the ex Orbest Airlines which was actually to check the authenticity of letter dated 11.3.2013 and also enquiring whether the said letter was signed by him in his capacity as Commercial Director of Orbit Airlines. Clearly this e-mail is checking on the authenticity of his signature in letter dated 11.3.2013 and cannot be considered as acknowledgment of the operational debt by the corporate debtor. We note that an earlier e-mail dated 7.11.2017 sent by Director (Finance) of the corporate debtor requesting that an Indemnity Bond may be submitted by the operational creditor. A perusal and reading of this e-mail shows that the corporate debtor was not certain that the amount of US $ 275,000 as claimed by the Appellant is even due to the corporate debtor, which was taken under liquidation on 4.4.2013 and whose liquidation was finalized on 21.1.2014.  Again since the matter as to whether payment of the operational dues to the Appellant would be proper and in order, and not be appropriate as Orbest Airlines had been liquidated, the corporate debtor took the views of ASG, a senior law officer, which opinion was communicated to the operational creditor/Appellant vide e-mail dated 7.6.2017 (attached at pg. 184 of the appeal paperbook, Vol. II).  In this e-mail, the issue of authenticity of the letter issued by the ex-Commercial Director of ex-Orbest Airlines was raised by the corporate debtor. This view is extracted in the said e-mail, which is as follows:-

“Air India would have to undertake the exercise of verifying the authenticity of the said letter in the light of the certificate issued by the Spanish Lawyers. It would be unwise on the part of the organization such as Air India to straight away proceed to make payment without first establishing the authenticity and veracity of the said letter. More so, the amounts involved are huge sums and therefore, due caution and care in such matters is essential……”

As a follow up, to checking on the authenticity of letter dated 11.3.2012, subsequently an e-mail was sent to Mr. Bruno Claeys, ex-Commercial Director of former Orbest Airlines, who replied vide e-mail dated 28.11.2017 (attached at pg. 206 of appeal paperbook, Vol.II) that the signature on the letter dated 11.3.2013 was not his i.e. of Mr. Bruno Claeys. Therefore, the letter dated 11.3.2013 (attached at pg. 165 of the appeal paperbook, Vol.II) by which Mr. Bruno Claeys has purportedly asked Air India Ltd. to make payment of US $ 275,000 to BKP Enterprise is doubtful regarding its authenticity. Significantly the clarification sent by Mr. Bruno Claeys through e-mail dated 28.11.2017 (attached at pg. 206 of appeal paperbook, Vol.II) has been sent at a time when Mr. Bruno Claeys was no longer working with the successor body of Orbest Airlines which had been liquidated.

Thus we find that in the light of ASG’s opinion seeking to establish authenticity of the letter issued by the ex-Commercial Director Mr. Bruno Claeys’ letter dated 11.3.2013, there is a clear doubt about the authenticity of the letter, which the Appellant has not clarified though he was asked to do so. We also note that after liquidation of Orbest Airlines, a certification issued on 11.11.2016 (attached at pg.178, Appeal Paperbook, Vol.II) by Mr. Macros Andreu Bleckmann, a Spanish Lawyer registered in the Bar Association of Madrid to say that the company Iverworld Airlines SA (DBA Orbest Airlines)/official liquidator has no claim against the company Air India Ltd.

Thus it is clear that Orbest Airlines went into liquidation on 21.1.2014, and that in the event of Mr. Bruno Claeys refusing to accept that the signature on the letter dated 11.3.2013 was not in his hand-writing, it is not established that so-called operational debt is due and payable to the Appellant. We have also looked at the Charter Agreement between Air India and Orbest Airlines (attached at pp.148-159 of the appeal paperbook, Vol.II) wherein there is no mention of BKP Enterprise to act and collect payment on behalf of the original operational creditor Orbest Airlines. Significantly, vide a letter dated 28.11.2012, Mr. Sohil B. Zaveri and Mr. Bharat N. Zaveri of BKP Enterprise were authorized to reconcile the Orbest accounts with Air India in respect of the Haj operation undertaken in the year 2012.

We also note that the Hon’ble High Court of Delhi in WP (C-5823/2018 and CM No. 4698/2018 qua which BKP Enterprise had prayed for issuing a writ of mandamus against Air India for outstanding payment of US$ 22,537 together with interest accrued thereon @ 18% p.a. from 11.3.2013, the Hon’ble High Court of Delhi while dismissing the writ petition noted as follows:-

“4. This court is of the view that controversy involved in the present case raises a disputed question of fact and it would not be apposite to examine the same in these proceedings. In view of the above , the present petition is disposed of, leaving it open for the petitioner to institute proper action for recovery, if so advised, in accordance with law.”

Thus, it is clear from the above noted order of Hon’ble High Court of Delhi that there was a dispute about payment of the claimed amount of operational debt. Further the issue whether the said pending amount of alleged operational debt is due and payable to the operational debtor is also a doubtful matter in view of the e-mail dated 28.11.2017 of Mr. Bruno Claeys, ex-Commercial Director of Orbest Airlines, wherein he has not accepted that the letter has his signature. It is also quite clear from the Charter Agreement entered into between Air India and Orbest airlines regarding Haj Operation 2012 that BKP Enterprise was  given  the  authority  to  collect  payment  from  the  corporate debtor a fact that Air India has also raised in its arguments.

We thus find that the e-mails that have been cited by the Appellant in his application IA No. 3425/2021 for condonation of delay do not provide clear and unequivocal acknowledgment of debt that is due to be paid to the Appellant. These e-mails only allude  to  the  fact  that  there  was  no  clarity  between  whether payment should be made to BKP Enterprise and moreover, Orbest airlines after liquidation certified that no payment was due to be received from Air India.

We peruse the judgment of the Hon’ble Supreme Court in the matter of Assets Reconstruction Company (India) Limited vs. Bishal Jaiswal ( 2021 SCC OnLine SC 321) wherein Hon’ble Supreme Court has observed as follows:-

“…….. The statement on which a plea of acknowledgement is based must relate to a present subsisting liability though the exact nature or the specific character of the said liability may not be indicated in words. Words used in the acknowledgement must, however, indicate the existence of jural relationship between the parties such as that of debtor and creditor, and it must appear that the statement is made with the intention to admit such jural relationship. Such intention can be inferred by implication from the nature of the admission, and need not be expressed in words. If the statement is fairly clear then the intention to admit jural relationship may be implied from it. The admission in question need not be expressed but must be made in circumstances and in words from which the court can reasonably infer that the person making the admission intended to refer to a subsisting liability as at the date of the statement………”

From the above stated observations of Hon’ble Supreme Court in the matter of Assets Reconstruction Company (India) Limited vs. Bishal Jaiswal (supra), it is quite clear that a jural relationship should be established between the parties, which should be in existence and thereafter the said liability can be acknowledged. In the e-mails that the Appellant has mentioned in his section 5 application under Limitation Act, no jural relationship as operational creditor and corporate debtor has been established between the Appellant and Respondent, and therefore the e-mail communications of Air India do not constitute acknowledgment of the debt.

We have noted in previous paragraph that the status of BKP Enterprise as operational creditor is not established and hence the debt is not due and payable to the appellant. The application IA 3425/2021 lists e-mail communication starting from 7/3/2013 to 21/11/2017 as acknowledging the operational debt. The period between 23.3.2018 to 28.11.2018, which is the time when the Appellant pursued writ petition before the Hon’ble Delhi High Court, is stated by Appellant as spent in bonafide pursuit of legal remedy. This pursuit of legal remedy before Hon’ble Delhi High Court to obtain writ of mandamus against Air India was dismissed as the matter involved disputes and was not found appropriate for consideration in writ proceedings. IBC came into force in December, 2016 and the Appellant has chosen to file section 9 application on 30.6.2021. Pursuing a legal remedy before Hon’ble High Court of Delhi and failing to get a favourable order on merits cannot be taken as sufficient cause for condonation of delay. Further the order of Hon’ble High Court of Delhi was passed on 28.11.2018 and Section 9 Application has been filed on 30.1.2021, no sufficient cause has been shown for such long delay.

Thus, it is quite clear that the application for condonation of delay does not contain sufficient cause and has, therefore, been correctly dismissed by the Adjudicating Authority. We do not find any error in the order of Adjudicating Authority and consequently dismiss the appeal.

There is no order as to costs.