EBPL Ventures Private Limited vs Gannon Dunkerley and Company Limited

The Operational Creditor submits that, the Operational Creditor and Corporate Debtor entered into an LOI dated 07.10.2015. Based on it, the Corporate Debtor has placed two Work Orders; one on its own letter head i.e. GANNON DUNKERLEY & CO., LTD. dated 11.07.2016 and second on the letter head of the consortium i.e. GANNON-FLCL CONSORTIUM dated 11.07.2016.

The revised Work Order dated 14.11.2016 was issued by the Corporate Debtor in the name of Operational Creditor.

Pursuant to the above Work Order, the Operational Creditor has raised the following invoices:

The Operational Creditor submits that, LSIS Co. Ltd., Korea through its commercial Manager vide Letter No. FS/OS-719-16060 dated 27.09.2016 advised the Corporate Debtor for new CBI system along with up-to-date control and operational system to desired level with warranty instead of modification of CBI System working at Akhara Junction Station at Bangladesh.

The Operational Creditor submits that, LSIS Co. Ltd., Korea vide its letter dated 19.10.2016 has offered quotation for supply of technical service and on-going service of CBI System for US $ 502,500, US $ 200,000 and US $ 150,000 respectively, together for amount of US $ 852,500. In acceptance of quotation the Ministry of Railways, Government of Bangladesh approved variation in Part-I and Part-II of the Schedule Item for Construction of 2^nd Titas Bridge along with approach rail lines with all other related works for an amount of Rs.14,74,06,926.

The Operational Creditor through its letter dated 27.10.2016 to Corporate Debtor requested issue of Irrevocable LC and sanction of advance for supply of signalling material for telecommunication work related to Construction of 2^nd Titas Bridge work at Akhura Junction at Bangladesh.

The ‘scope of work’ described in the Work Order required the Corporate Debtor to perform work as that of a Principal Contractor. Additionally, there were 3 irrevocable letters of Credit on 24.11.2016 for an amount of Rs,3,50,00,000/-, on 05.12.2016 for an amount of Rs.2,44,00,000/- and on 13.12.2016 for an amount of US $ 702500 to the Operational Creditor as the first beneficiary. The Letter of Credit are placed on record as follows:

letters of Credit on 24.11.2016

ii) letters of Credit on 05.12.2016

iii) letters of Credit on 13.12.2016

The work executed was jointly inspected by the Operational Creditor, Corporate Debtor and Ministry of Railways of Bangladesh and the latest Report dated 14.02.2017 was made available as Annexure A-8 at Pg. No. 49 of the Rejoinder.

As per invoice dated 10.04.2017 an amount of US $ 5,02,500 by M/s. LSIS co. Ltd in the name of Operational Creditor with the Corporate Debtor as Consignee for supply of C.B.I Equipment and its accessories were raised on dispatch from Bushan Seaport and the same were received by them at Chittagong Port.

As per letter dated 06.05.2017 and letter dated 15.05.2017, both the Operational Creditor and Corporate Debtor consented to transfer partial Credit for US $ 5,02,500/- for payment to M/s. LSIS Co. Ltd with certification that C.B.I Equipment and its accessories were received by them at Chittagong Port.

The amount in respect of system design, documentation, supervision for installation and test commissioning and project management of CBI System for an amount of US $ 200,000 was not paid, M/s. LSIS Co. Ltd vide its letter dated 05.02.2018 reminded the Operational Creditor for payment of pending dues.

As per terms of Clause 11 of LOA, stated in Work Order No. D/CE/002859 dated 11.07.2016 the Operational Creditor by its letter dated 23.02.2019 has written to the Corporate Debtor for an amicable settlement of the dispute.

The Operational Creditor submits that, the e-mails were exchanged between 20.02.2019 to 10.10.2019 for the payment of unpaid invoices of the Operational Creditor.

The Operational Creditor had issued a Demand Notice under section 8 of the Code dated 07.10.2020 to the Corporate Debtor claiming an amount payable of Rs. 8,23,71,145.79. In relation to this, the Operational Creditor submits that the Corporate Debtor has replied to the Demand Notice vide an e-mail dated 22.10.2020 denying its liability.

The Corporate Debtor has submitted that, it is a 96 years old construction company undertaking construction of Engineering Projects for both Public & Private Sector clients, having executed major Industrial Projects like Power, Steels, Cement, Aluminium, Sugar Textiles plant, Building projects like Industrial, Commercial and Residential buildings, Water Treatment and Effluent Treatment Plants and Infrastructures projects like Roads & Highways, Railways, Airports and Bridges and Flyover in India and abroad.

All the alleged invoices which are annexed by the Operational Creditor were raised on Consortium i.e GANNON-FLCL CONSORTIUM.

The Corporate Debtor submits that even though the Operational Creditor addressed its dispute via a letter dated 23^rd February 2019 in terms of Clause 11 of the LOA for an amicable resolution of the disputes, it failed to invoke arbitration as per the provisions of Clause 11 of the LOA when the amicable resolution mechanism failed.

The Corporate Debtor submits that, the alleged claim of the Operational Creditor in the Petition is Rs.5,17,89,760/- (principal amount) along with interest of Rs.3,08,76,523.87/- totaling to Rs.8,26,66,283.87/-. The sum total of the allegedly unpaid invoices i.e., D-1 to D-8 is coming to Rs.3,65,67,760/-. Whereas the alleged consolidated invoice (D-9) which is raised on the consortium is of principal amount of Rs.8,23,71,524.69/-. This amount is devoid of interest. As per the invoices there are three different amounts coming at three different places. There is no amount due and payable by the Corporate Debtor to the Operational Creditor.

The Corporate Debtor submits that, on 26-09-2013, Gannon-FLCL Consortium entered into a contract with Bangladesh Railway vide Agreement no. PD/DA/AGT/TITAS/3 for construction of IInd Titas Bridge Work-at Akhaura Junction along with approach rail line at Bangladesh. As per the said contract, the invoices to be submitted by the Consortium was to be certified by the officials and thereafter only certified amount was payable. The said clause is reproduced for ready reference

The Corporate Debtor submits that, the Consortium entered into a contract with the Operational Creditor on back to back basis. The LOA dated 11^th July, 2016 was for BDT 8,67,50,400/-. Thereafter there was an amendment made and as per 1^st amendment dated 14^th November, 2016 the said amount was increased to Rs. 12,00,00,000/- (Rupees Twelve crores only). The total amount 20.50% was to be deducted. The Corporate Debtor has replied to the demand notice vide advocate’s letter dated 22^nd October, 2020. The said reply was delivered to the Operational Creditor through email dated 23^rd Oct, 2020 at both the e-mail addresses mentioned in the demand notice. As per the statement annexed, nothing is due and payable from the Corporate debtor to Operational Creditor. The work quality was below par and had a lot of defects and deficiencies were also pointed out by Bangladesh Railway (letters dated 18.07.2018 and 09.01.2019 issued by the Corporate Debtor to the Operational Creditor and also that there was delay in the completion of contract by the Operational Creditor. There was apathy on the part of the Operational Creditor to take up the works since very beginning which forced the Corporate Debtor to issue a notice on 17^th September 2016 to the Operational Creditor to start the works within seven days of the receipt of the letter.

The Corporate Debtor submits that, in the BOQ attached to the contract dated 11^th July, 2016 at Item no. 15 Specific reference A5(a) Supply of CBI/SSI equipment for modification of Akhaura junction station, refurbishing and reuse of existing hardware components, operators’ console etc was certified by the Bangladesh Railway at the original BOQ amount i.e., Rs. 40,00,000/- and not at the amount raised in the invoice for Rs. 6,74,57,211/-. Since the payment under the work contract with Operational Creditor was on back to back basis, the Corporate Debtor paid the aforesaid amount.

The Corporate Debtor submits that, as per the clause 2(e) of the LOA dated 11^th of July 2016, if any new item was required to be executed as per the requirement of site condition, it was the duty of the Operational Creditor to take prior approval of client and consultant.

The Corporate Debtor submits that, as per clause 4(n) of the LOA dated 11^th of July 2016, no claim of extra items will be entertained unless agreed in writing by the Engineer in charge of the GDCL/Bangladesh Railway and the same shall be on back to back basis with client. As per the Clause 4(u) of LOA all liaison work with client / consultant and local authorities for obtaining permission / approvals required towards successful completion of the project was in the scope of the Operational Creditor.

The Corporate Debtor submits that, LSIS was a vendor / supplier of the Operational Creditor and there was no privity of contract of LSIS with the Corporate Debtor. The responsibility of making payments to LSIS was of the Operational Creditor and not of the Corporate Debtor.

With respect to the letter of award:

The Corporate Debtor in its reply denies to pay the debts but the reply simply states that since the LOA was placed by the Gannon-FLCL consortium so debt is not payable by any one party. As such, claim can be made against either of the consortium members by the Operational Creditor and the adjustment between the Consortium members is not the concern of the Operational Creditor. Therefore, there has been default at the end of the consortium and its constituents and the operational creditor is free to proceed against one or both members of the consortium.

The Operational Creditor submits that, the Letter of Award and the amendment was placed to the Operational Creditor by the Corporate Debtor under the name of the company Gannon Dunkerley & Co. Ltd. In this regard, email dated 19.11.2016 sent by one Mr. K K Khanra of the Corporate Debtor addressed to their officer Mr Somnath Pandit is relevant whereby the original copies of Work Order issued by Corporate Debtor in the name of Operational Creditor are attached. Pertinently these work orders are issued by the Corporate Debtor only. Actually, for the sake of billing abroad i.e., billing to Bangladesh Railways and for availing the Claims from the Incentive Scheme for the export of goods under the Merchandise Exports from India Scheme (MEIS) notified by the Director General of Foreign Trade (DGFT), such practices of issuance of duplicate copy of work order in the name of the Gannon-FLCL Consortium to the Operational Creditor was followed. Therefore, same work order highlighting obligations of the Corporate Debtor and the Operational Creditor, and not that of the consortium, was circulated and furnished by the Corporate Debtor. The Invoices are required to show the name of the basic supplier which in this case was the Operational Creditor. Thus, the aforesaid clarifies that the LOA was placed by the Corporate Debtor only to the Operational Creditor.

Initially the LOI was placed by the Corporate Debtor on dated 07-10-2015 stating that the Delhi office of Corporate Debtor shall release a detailed work order . The LOA dated 11-07-2016 is in fact based on a letter of Intent dated 07.10.2015 that states in details the terms of work. The said letter of intent and the Letter of Award has been issued by the Corporate Debtor alone. A copy of the LOI and LOA dated 07-10-2015 and 11.07.2016 is annexed as Annexure A-3 of the rejoinder filed by the Operational Creditor.

With respect to the Credibility of the parties:

This position of the work order in fact having been issued by the Corporate Debtor and not the consortium is admitted and again stands proved by the 1^st amendment to the said order issued by the Corporate Debtor alone. There is no mention of the consortium on this amendment to the work order whereby contract price was increased to Rs. 12 crores. Moreover, the amendment issued on 14.11.2016 refers to the initial work order as “our work order no. D/CB/002858 dated 11.07.2016”. Therefore, it stands proved and admitted that the work order was in fact issued by the Corporate Debtor only.

The Corporate Debtor has claimed that the debt is not due and payable by the Corporate Debtor alone and hence the debt being due and the default is admitted and the only issue is whether the Corporate Debtor owes it alone or along with its consortium partner. The arrangement between the Corporate Debtor and its consortium partner is an internal issue between those parties and the Operational creditor’s claim on the Corporate Debtor is perfectly valid.

Throughout the tenure of the contract Operational Creditor always remained in constant touch with the Corporate Debtor as the Signalling and Telecommunication works was getting carried out by the Corporate Debtor only in Bangladesh Railways so the question of asking Gannon-FLCL Consortium for payments never arose, as all the payments were made by Corporate Debtor till the end of the project without the consent of the Consortium. FLCL is Fedders Lloyd Corporation Ltd, the consortium partner of the Corporate Debtor. No communication was ever done with the company FLCL by the Operational Creditor throughout the tenure of the contract. The internal arrangement between the Corporate Debtor and FLCL is the concern of those parties only.

With respect to the pursuing claim against the Corporate Debtor:

The internal arrangement between the Corporate Debtor and FLCL is the concern of those parties only. As far as the Operational Creditor is concerned the LOA was issued by the Corporate Debtor and the payments were made by the Corporate Debtor. It seems that only in order to deny the liability in the present case, the theory of billing to the consortium has been evolved by the corporate debtor.

The LOA dated 11-07-2016 is entirely based on a letter of intent dated-07-10-2015, which was issued by the Corporate Debtor alone.

The Clause 1 of the LOA states that while expenses of the scope of work are to be borne by the Operational creditor the VAT is to be borne by the Corporate Debtor, not the consortium. Similarly, under clause 2, custom duty and other taxes as applicable in Bangladesh were to be paid by the Corporate Debtor , not the Consortium. Under clause 4 of the LOA detailed BOQ and drawings etc were to be submitted by the Operational Creditor to the Corporate Debtor and not the Consortium. Under clause 4(h) world was to be performed in good quality manner subject to the approval of the Corporate Debtor. Clause 4(k) further makes it clear that the work was being got done by the Corporate Debtor only as this clause gives power to the Corporate Debtor to get work done through other agencies.

Further clause 9 again unequivocally states that all plant and equipments, material, staff, labour, etc. brought at site by the Sub contractor shall be working under the banner M/s GDCL, i.e., the Corporate Debtor (not the Consortium).

Lastly, the dispute resolution clause i.e., clause 11 also only refers to the managing directors of GDCL (Corporate Debtor) and EBPL (Operational Creditors) are empowered to resolve disputes.

Therefore, it is abundantly clear that the contract is in effect a real contract between the Corporate Debtor and the Operational Creditor only. And the arrangement between the Corporate Debtor and its consortium partner is an internal issue between those two.

This position of the work order in fact having been issued by the Corporate Debtor and not the consortium is admitted and stands proved by the LOI, LOA & the 1^st amendment to the said order issued by the Corporate Debtor alone. There is no mention of the consortium on these documents including the amendment to the work order whereby contract price was increased to Rs. 12 crore. Moreover the amendment issued on 14.11.2016 refers to the initial work order as “our work order no. D/CB/002859 dated 11.07.2016”.

With respect to email dated 23.02.2019, it is submitted that mere issuance of a letter noting no payment is not a notice of “dispute” under the IBC. The Operational creditor in fact followed the contractual remedy and informed the Corporate Debtor vide letter dated 23.02.2019 that it had not received its payment. As laid down by the Hon’ble Supreme Court, a dispute is one where a plausible legal contention is raised. Merely raising issue of non-payment is not a dispute and thus is consistent with the Operational creditor availing remedy under the IBC for debt and default.

As Corporate Debtor was not responding to the requests of the Operational Creditor therefore Operational Creditor submitted the final bill along with dispute settlement request, if any, on 23.02.2019 . However the Operational never pursued the matter nor did the Corporate Debtor reply to the letter as there were actually no disputes between them.

It is relevant to note that the completion certificates of the works were issued by the Consortium, Bangladesh Railways and the Consultant M/s STUP Consultants Pvt. Ltd. A copy of the completion certificates is annexed as Annexure A5 to the Re-joinder.

With respect to the Limitation:

Additionally it is submitted that the debits were regularly getting done and accounted under the consent from the Operational Creditor by the Corporate Debtor till the date of 13.11.2018 and the final debit statement was issued by the Corporate Debtor . A copy of the final debit statement issued by the Corporate Debtor is annexed as Annexure A-6 of the rejoinder. Even on the basis of this admission the petition is within limitation period of 3 years.

Moreover, the Hon’ble Supreme Court in suo moto writ petition has suspended limitation from 24.03.2020 onwards in view of the Covid 19 pandemic. Hence, the invoices are within limitation and payable by the Corporate Debtor.

With respect to reply to Demand Notice:

any past letters issued with respect to work to be completed/repairs are irrelevant as final completion has been issued by Bangladesh Railway and all work stands finally completed. It is denied that the Corporate Debtor has paid the entire amount. As far as the communications to the letters of the Corporate Debtor are concerned for dates 17.09.2016 , 18.07.2018 & 09.01.2019, prompt replies to the e-mail of the Corporate Debtor had been given by the Operational Creditor One such ‘Deficiency clearance letter’ is contained in e-mail dated 14.11.2018 which was acknowledged by the Manager Mr Humayun Kabir, of the Corporate Debtor, and is annexed as Annexure A-7 of the Rejoinder.

The detailed chart showing the balance for Rs.8,23,71,145.79/- is final & interest portion is Rs.3,08,76,523.87/-. The same may be read as final and Correct.

The final bill has been raised as per the final variation signed. After the completion of the works, the Final Variation Statement was then signed by Mr Humayun Kabir the Manager (Signal and Telecom) of Corporate Debtor along with the Signal Engineer Md. Khalequazzaman of the EIC( Engineer In Charge) ie., M/s Stup Consultants Pvt. Ltd. in Bangladesh. The E-mail was also went to the Operational Creditor on dated 15-01-2018 by Mr Humayun Kabir the Manager(Signal and Telecom) of the Corporate debtor confirming the details of the Final Variation Statement ( Copy of e-mail is attached with the rejoinder). The Signal Engineer of the Consultant M/s STUP Consultants Pvt. Ltd. also signed and verified the final variation statement who was the authorised representative of the Engineer In Charge (EIC) of the Project appointed by the Bangladesh Railways as per the Contract Agreement no-PD/DA/AGT/TITAS/3 DT 26-09-2013. Therefore, it was never expected that the Corporate Debtor at the later date shall avoid making due payments to the Operational Creditor.

Supply of new CBI/SSI equipment installed by LSIS has been later on certified by the Consultant as well as the officer of the Corporate Debtor Mr Humayun Kabir. Copy of final variation statement sent in email to the Operational Creditor on 15.01.2018 is attached as Annexure A-9 of the rejoinder. Hence the variation amount so increased due to the installation of the CBI equipments and other items were duly certified for making the balance payments to the Operational Creditor.

With respect to the role of LSIS:

The Work order issued to LSIS by Operational Creditor clearly mentions that the payments for the equipments shall be made by Corporate Debtor through Operational Creditor by LC as Transferrable LC wherein the first beneficiary shall be the Operational Creditor and the Second beneficiary shall be LSIS. Copy of Work order of Operational Creditor and LC is attached as Annexure A-11 of the Rejoinder.

The Corporate Debtor submits that, the alleged debt was payable by 2 legal entities. However, the Operational creditor chose to file the present Petition against one legal entity. Once the bills were raised by the Operational Creditor on the consortium, the Operational creditor could not have filed the present Petition against the Corporate Debtor as per the Operational creditor’s whims and fancies.

The e-mail dated 19.11.2016 is sent by Mr. Somnath Pandit to Mr. Khanra and not by Mr. Khanra. The initiator of the mail was the Operational Creditor on 14.11.2016 (page 18 of the Affidavit-in rejoinder) with two attachments, viz., the draft letter for issuance of Transferrable L.C. to the Operational Creditor and the sample Transferrable LC of the IDBI Bank for the reference and the understanding of the Corporate Debtor.

In LOI dated 07.10.2015, it is clearly stated that, “This work shall be executed based on the terms, conditions, specifications, etc. complete on back to back basis on contract between GDCL – Lloyd (JV) and Bangladesh Railway @10% less than our BOQ rates.” In the Amendment dated 14.11.2016, it is stated that, “All other terms and conditions of the original order shall remain unchanged.”. The Corporate Debtor issued the said LOI and Amendment on its own letter head, it was made clear in writing that the terms and conditions of the Contract between the Consortium and Bangladesh Railway and the Original Work Order would prevail. The Operational Creditor afterwards raised bills to Consortium, which clearly shows the understanding of the Operational Creditor that payment was to be made by the Consortium.

The Operational Creditor in its rejoinder has contended and also quoted that it was the responsibility of the Corporate Debtor to open LCs for making payments against supplies of major materials, it has not brought on record that all LC charges including second beneficiary were to be borne by the Operational Creditor itself. As per clause 2 of the Amendment dated 14.11.2016, though payment for supplies of major materials from eminent manufacturer were to be made through LC to be opened by the Corporate Debtor, the Operational Creditor had to bear all charges for the same including that of the second beneficiary. It was only because the Operational Creditor didn’t have the monetary resources to fund the supplies of such costly items, the Corporate Debtor agreed to its request to open LCs.

The Operational Creditor has stated in its Rejoinder that pursuant to the Work Order issued to LSIS by Operational Creditor, payments for the equipment shall be made by the Corporate Debtor through Operational Creditor by way of LCs. It is submitted that the said Work Order does not bear the signature of the Corporate Debtor. Therefore, the Corporate Debtor was not a party to the Work Order and as such there is no privity of contract of the Corporate Debtor with LSIS.

Mr. Humayun Kabir (staff of the Corporate Debtor) vide email dated 20^th Feb, 2019 (page 121 of the Petition) had categorically told Mr. Ajay Agarwal of the Operational Creditor that final bill submitted by the Operational Creditor had been certified for an amount of BDT 15,14,50,000/- and all payments would be released to the Operational Creditor on back to back basis and that the extra claims submitted by the Operational Creditor beyond the contractual terms were not acceptable.

a. Letter of Intent dated 07.10.2015:

b. Work order dated 11.07.2016:

c. Letter of Amendment dated 14.11.2016 in the Work Order dated 11.07.2016:

d. Completion Certificate dated 02.07.2018:

e. E-mail dated 14.11.2018; and

f. E-mail dated 20.02.2019.

The Petition bearing CP(IB) 1/MB-IV/2021 by EBPL Ventures Private Limited, (“the Operational Creditor”), [CIN: U60200CT200PTC020033] seeking to initiate Corporate Insolvency Resolution Process (CIRP) against Gannon Dunkerley & Company Limited (“the Corporate Debtor”), [CIN: U51109MH924PLC001107] is admitted.

There shall be a moratorium under section 14 of the IBC, in regard to the following:

The institution of suits or continuation of pending suits or proceedings against the Corporate Debtor including execution of any judgment, decree or order in any court of law, tribunal, arbitration panel or other authority;

Transferring, encumbering, alienating or disposing of by the Corporate Debtor any of its assets or any legal right or beneficial interest therein;

Any action to foreclose, recover or enforce any security interest created by the Corporate Debtor in respect of its property including any action under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002;

The recovery of any property by an owner or lessor where such property is occupied by or in possession of the Corporate Debtor.

Notwithstanding the above, during the period of moratorium, -

The supply of essential goods or services to the corporate debtor, if continuing, shall not be terminated or suspended or interrupted during the moratorium period;

That the provisions of sub-section (1) of section 14 of the IBC shall not apply to such transactions as may be notified by the Central Government in consultation with any sectoral regulator;

The moratorium shall have effect from the date of this order till the completion of the CIRP or until this Tribunal approves the resolution plan under sub-section (1) of section 31 of the IBC or passes an order for liquidation of Corporate Debtor under section 33 of the IBC, as the case may be.

Public announcement of the CIRP shall be made immediately as specified under section 13 of the IBC read with regulation 6 of the Insolvency & Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016.

Mr. Navjit Singh an Insolvency Professional registered with Indian Institute of Insolvency Professionals of ICAI having registration number IBBI/IPA-001/IP-P00314/2017-18/10578 is hereby appointed as Interim Resolution Professional to carry out the functions as mentioned under IBC, the fee payable to IRP/RP shall comply with the IBBI Regulations/Circulars/Directions issued in this regard. The IRP shall carry out functions as contemplated by sections 15,17,18,19,20 & 21 of the IBC.

During the CIRP Period, the management of the Corporate Debtor shall vest in the IRP or, as the case may be, the RP in terms of section 17 of the IBC. The officers and managers of the Corporate Debtor shall provide all documents in their possession and furnish every information in their knowledge to the IRP within a period of one week from the date of receipt of this Order, in default of which coercive steps will follow.

The Operational Creditor shall deposit a sum of Rs.5,00,000/-(Rupees five lakh only) with the IRP to meet the expenses arising out of issuing public notice and inviting claims. These expenses are subject to approval by the Committee of Creditors (CoC).

The Registry is directed to communicate this Order to the Operational Creditor, the Corporate Debtor and the IRP by Speed Post and email immediately, and in any case, not later than two days from the date of this Order.

A copy of this Order be sent to the Registrar of Companies, Maharashtra, Mumbai, for updating the Master Data of the Corporate Debtor. The said Registrar of Companies shall send a compliance report in this regard to the Registry of this Court within seven days from the date of receipt of a copy of this order.