Dharani Geotech Engineers vs Shivam Condev Private Limited

Per: Satya Ranjan Prasad, Member (Technical)

The applicant/Operational Creditor i.e., Dharani Geotech Engineers is represented by Mr. K. Jayavel. This application is filed under Section 9 of Insolvency and Bankruptcy Code, 2016 (for brevity 'IBC') for initiation of Corporate Insolvency Resolution Process of respondent/Corporate Debtor i.e., Shivam Condev Private Limited on the basis of an alleged Operational debt of ₹ 1,42,19,252/-.

The respondent/Corporate Debtor is Shivam Condev Private Limited registered under Companies Act, 1956 having CIN: U45201OR2013PTC016934. The registered office to the respondent/Corporate Debtor is within the state of Odisha, hence, this Adjudicating Authority has jurisdiction.

The Applicant/Operational Creditor submits that the Corporate Debtor was awarded with some Government of Odisha Contracts for providing services of soil nailing and allied activities which was outsourced to the Operational Creditor on the basis of specific work orders as back-to-back contract. After completion of work by the operational creditor to the satisfaction of the Government of Odisha, the Corporate Debtor received entire payment but in turn they failed to pay the invoices raised by the operational creditor despite several written demands and reminders.

Details of the invoices raised by the Operational Creditor is as follows:

It is stated that against the abovesaid invoices a total of ₹1,42,19,251/- is outstanding and not paid by the Corporate Debtor. The Corporate Debtor has deducted and paid TDS on the said invoices but not settled the amount. The Corporate Debtor has not disputed the liability at any point of time rather they had agreed to pay ₹80.00 lakhs as one time settlement. This prima facie suggests existence of debt.

The Corporate Debtor submits that, a Settlement Agreement dated 04.04.2019 was finalized between the parties against the settlement of dispute against the aforesaid amounts. The said Settlement Agreement was made in view of the fact that there were certain disputes and differences and that the Applicant had allegedly raised inflated invoices. The Operational Creditor allegedly accepted the settlement terms and has acted upon the same by performing the Settlement Agreement wherein the Corporate Debtor was to pay ₹80,00,000/- towards full and final payment.

The Corporate Debtor further submits that several subsequent emails have been exchanged wherein the Operational Creditor on various occasions has also acknowledged the Settlement Agreement through E-mail and thereupon the Corporate Debtor has also paid an amount of ₹20 Lakh towards the Settlement Agreement which has been duly accepted by the Operational Creditor without any demur (averred at Para 9 of Reply). Reference in this regard is made to emails by Operational Creditor dated 22.05.2019 and 02.06.2019 (at Pg. 18 of Reply). Furthermore, on 19.06.2019 by way of another Email (at Pg. 17 of Reply), the Operational Creditor admitted to have waived about (50%) of its outstanding amount to maintain good business relationship with the Corporate Debtor. The Corporate Debtor subsequently paid ₹20.00 lakh to the operational creditor, which has been accepted by Corporate Debtor. Moreover, Corporate Debtor has also agreed to make payment of ₹60 Lakhs before this Tribunal towards the remaining amount as per the Settlement Agreement (at Para 12 of Reply). However, from the records it is evident that the remaining amount has not been paid.

Corporate Debtor submits that as per Section 62 of the Indian Contract Act, 1872, if the parties to a contract agree to substitute a new contract for it, the original contract need not be performed. Further, it is also a settled law that Section 63 of the Contract Act applies when a creditor or a promise by his unilateral act discharges or partly discharges the promisor. Thus, the Settlement Agreement between the Operational Creditor and Corporate Debtor has superseded the original contracts between them, and the Operational Creditor has expressly waived 50% of its previous claim. The Operational Creditor cannot now turn back the clock and resile unilaterally from the Settlement Agreement. The Operational Creditor cannot approach this Tribunal with a claim for an amount which was admittedly, unilaterally claimed by the Operational Creditor on the basis of inflated invoices under the contractual arrangements which have been superseded (Para 14 & 15 of Reply).

Corporate debtor further submits that there is a pre-existing dispute –

The Corporate Debtor admits that pursuant to the alleged settlement agreement with the Operational Creditor only dues remaining is ₹60 Lacs, which arises from the Settlement Agreement which has been accepted by Operational Creditor and has superseded all previous arrangements. Though the Corporate Debtor has offered to deposit the same before this Tribunal, however, a default of instalment of Settlement Agreement does not come within the definition of operational debt u/S. 5 (21) IBC.

The Operational Creditor has stated that the alleged Settlement Agreement was not accepted by them and they have refused to sign it. They have issued demand notice as stipulated under IBC on 13.09.2019 enclosing therewith statutory Form 3, Work Orders, Invoices and ledger Account etc. Further, the rate at which the work order was given to the operational creditor is ₹15,850/- as against the rate of ₹21,868/- charged by the Corporate Debtor to the client. The tender rate for the work as per the Government of Odisha (client) is ₹24,850/-. Therefore, the corporate debtor is allegedly raising a false dispute, as the Corporate Debtor has not raised any dispute earlier on the invoice raised by the Operational Creditor. Rather, the Corporate Debtor has paid Tax Deduction at source for 2017 till March 2019, which is evident from the Form 26 AS. Similarly, the Corporate Debtor has utilized the GST paid by the Operational Creditor.

It is noted that the Corporate Debtor has relied on the alleged Settlement Agreement to establish dispute, which states that “The parties have decided to mutually and amicably resolve the above-mentioned disputes and differences and have agreed to fully settle the matter….”. However, it is apparent that the said settlement was not agreed upon by the Financial Creditor and they have not signed it. Accepting payment of ₹20.00 lakh towards their outstanding invoices does not in any manner indicate that the Financial Creditor has consented for the aforesaid settlement agreement.

The Hon'ble Supreme Court has held that existence of undisputed debt is sine qua non of initiating Corporate Insolvency Resolution Process (CIRP) in Civil Appeal No. 9597 of 2018, Transmission Corporation of Andhra Pradesh Limited Vs. Equipment Conductors Cables Limited vide Order dated 23.10.2018 is as follows –

Based on the facts and circumstances of the case and the material on record it cannot be established that there was a pre-existing dispute. The Corporate Debtor paying TDS and utilizing GST on the invoices weaken their stand that there were pre-existing disputes or the bills were inflated. Admittedly, there are unpaid dues exceeding Rs.1.00 lakh on the date of application. Therefore, we are inclined to admit this application.

The applicant/Operational Creditor has proposed IRP Mr. Vinod Radhakrishnan Nair, having Registration No.: IBBI/IPA-001/IP/P-01352/2018-19/12083 and E-mail Id: vinod@nairca.com residence of A 108, Om Rachna, Sector 17, Vashi, Navi Mumbai- 400706. There is no disciplinary action against him that is pending.

Accordingly, we admit the petition and pass the following