M/s Starworth Infrastructure & Construction Ltd vs M/s. Ozone Realtors Pvt. Ltd

Per: Manoj Kumar Dubey, Member (Technical)

The present petition is filed on 16.11.2022 under Section 9 of the Insolvency and Bankruptcy Code, 2016 (for brevity ‘IBC/Code’), r/w Rule 6 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016, by M/s Starworth Infrastructure & Construction Ltd (for brevity ‘Operational Creditor/Petitioner/OC’) inter alia seeking to initiate Corporate Insolvency Resolution Process against M/s Ozone Realtors Pvt Ltd (for brevity‘Corporate Debtor/Respondent/CD’) on the ground that the CD has committed a default for a total outstanding amount of Rs.1,38,50,178/- (Rupees One Crore Thirty Eight Fifty Thousand One Hundred and Seventy Eight Only) being the principal and interest @ 24% as per the provisions of MSME Act to be paid to the OC/Petitioner.

Brief facts of the case which are relevant to the issue in question and as narrated by the Petitioner are as follows:

It is submitted that the Petitioner has preferred the instant petition due to the failure on the part of the CD to pay the debt amount due to the petitioner despite several requests and demands.

The Respondent/Corporate Debtor vide Diary No. 2124 has filed the statement of objection on 18.04.2023 wherein the CD primarily contends that the debt amount stated to be at Rs.1,38,50,178/-owed to the Petitioner does not meet the threshold requirement of Section 4 of the Code and there is a pre-existing dispute pertaining to the operational debt between the parties i.e., the proceedings under Section 138 of the Negotiable Instrument Act.

Further, the CD has also filed the Written Submissions on 04.12.2023 vide Diary no. 6050 and Additional Written Submissions vide Diary dt.6562 on 29.12.2023 which are similar to each other. The main contention in the Written Submissions are the following:

This Tribunal vide Order dt.05.06.2023 observed that in Part IV Column No.2 of Form No.5 filed with the petition, the Petitioner has not stated the specific date of default. In response to the same, the Petitioner filed revised Form No.5 vide diary no.3119 dt.14.06.2023. Vide order dt.26.09.2023 this Tribunal noted that the date of default under the amended Form No.5 filed by the Petitioner is mentioned as 28.12.2020 which falls under the period specified by Section 10A of IBC. Thus, the petitioner was directed to file an explanation which was filed on 03.10.2023.

The Petitioner in the memo dt.03.10.2023 contends the amount in default is occasioned on account of the failure of the CD to make payment in respect of 6 invoices and the date of default in respect of each invoice is as under:

It was further submitted that “aforesaid date of default has been calculated on the basis of clause 4.3 of the LOA/Work Order dt.07.08.2020 which provides that 75% of the bill value shall be released within 20 days of submission of bill. Without prejudice it is submitted that only bills Sl.No (a) and (b) come within the period stipulated under section 10A of IBC, 2016. The total amount in default in respect of the other bills namely bills at Sl.no. (c) to (f) supra is above the threshold limit of Rs.1crores. Thus, the principal amount in default even after excluding the period under Section 10A is above the threshold limit. Further in respect of the aforesaid 4 bills falling outside the scope of Section 10A, the CD is liable to pay in an amount of Rs.25,87,249 as on 30.09.2022.” Thus, the Petitioner has now claimed different dates of default for each of the six invoices; whereas in Form no.5 filed on 14.06.2023 the same was stated to be 28.12.2020 in respect of the Petition.

In the written submissions filed by the Petitioner on 27.12.2023, it is stated that the contention of the Respondent that the mobilisation advance should be deducted from the last two Invoices and not the first two Invoices is misconceived. Referring to the earlier correspondences,it is claimed that the mobilisation advance has to be adjusted against the first two Invoices only. It is further stated that the Invoices for “idle charges” amounting to Rs. 59,00,000/- is related to Work Order No.2 only which was also admitted by the Respondent in the e-mail dated 20.12.2021 filed at Page 91 of the Company Petition. In this e-mail, the period up to August, 2021 was mentioned for the “idle charges” whereas Work Order No.1 was for the period up to March, 2019 only. Finally, it was contended that the Corporate Debtor has admitted its liability vide e-mail dated 20.12.2021 and also issued a Cheque towards first instalment, which was dishonoured due to insufficiency of the funds.

We have considered the submissions and the arguments given by the respective Parties along with the documents on record.

As per Part-IV of Form-5, the amount of debt in default was Rs.1,38,50,178. The Form-3 accompanied with the Notice u/s 8 of the Code gives the list of the Invoices along with the balance due amount in respect of each of the Invoices so as to arrive at this figure of Rs.1,38,50,178/-, which is reproduced below for ready reference:

However, the above pleadings clearly establish the fact that the first two Invoices are dated 22.12.2020 and 06.12.2021 and the date of default corresponding to these Invoices as explained by the Petitioner clearly fall under the excluded period u/s 10A of the Code. Therefore, the admission of the Petition will have to be decided on the basis of the last four Invoices which are dated 17.06.2021, 09.07.2021, 28.10.2021 and 15.02.2022, the date of defaults for which as indicated above are after the specified period u/s 10A of the Code has expired. The total amount of default as per Form-5 filed with the Petition as well as the Form-3 enclosed with the Demand Notice u/s 8 of the Code is Rs. 1,38,50,178/-. On account of exclusion of the first two Invoices as stated above, the corresponding amount which is outstanding, being Rs. 30,76,574/- &Rs. 26,97,584/- only totalling to Rs. 57,74,158/- are to be excluded. Therefore, the remaining amount of the default remains at only Rs. 80,76,020/- out of the Principal amounts of the Invoices.

It has rightly been contended by the Respondent-Corporate Debtor that there is no Agreement for charging of interest pertaining to the outstanding amount and the same has not been mentioned either in the Work Order or in the Invoices. Therefore in such a case, no interest can be allowed to be added to the amount of invoice of Rs. 80,76,020/-for which the Respondent has also referred to various Judgments mentioned in the pleading. Further, the decision of AVI Polymers Limited v. Hindustan Cables Limited, 2018 SCC OnLine NCLT 17335, has also been relied upon by the Respondent, according to which, the Petitioner cannot levy interest on the basis of provisions of the Micro, Small and Medium Enterprises Development Act, 2006 for the purposes of alleged debt under Section 9 of the Act.

In view of the above discussion, we are of the considered view that the Petitioner has failed to fulfil the threshold requirement of Rs.1 Crore prescribed u/s 4 of the Code. Therefore, the Petition u/s 9 of theCode is not maintainable. Accordingly, C.P. No. 212/BB/2022 is hereby dismissed.