R S Infra vs R P Infraventure Pvt. Ltd.

That no payment is due and payable by the corporate debtor towards the applicant as per the terms of work order dated 1st August, 2014.

The brief facts of the case is:

❖ That the employer of the project was Agra Development Authority (ADA) who had appointed H.G. Infra Engineering Pvt. Ltd., as the main contractor, who thereafter appointed applicant as the sub-contractor for the purpose of excavation, loading, transportation and unloading of soil (from borrow area) at the site with all lead and lifts as per work order dated 1st August 2014 for a total value of Rs. 5,40,00,000/-. ❖ That during the course of hearing it came to the notice of the Adjudicating Authority, that applicant has failed to enclose all the invoices on the basis of which the alleged debt fell due. The same was recorded vide order dated 28th July 2021, after which direction were passed to file all invoices. In compliance of the said order the applicant submitted that total 5 invoices had been raised and the net payable amount is Rs. 1,48,77,388.16 (Rupees One Crore Forty Eight Lakh Seventy Seven Thousand Three Hundred Eighty Eight and Sixteen Paise Only). It is also stated that as on date the corporate debtor has paid a total amount of 4,19,00,000/- ❖ That as per the payment terms under clause 17 of the work order dated 1st August, 2014, it is clearly mentioned that the payment will be released by the Respondent Company within 10 days after receiving corresponding payment form the employer. The final payment shall be subject to the “Taking over certificate” for the works. The corporate debtor contended that as per the terms of the said clause no amount is due and payable by the corporate debtor to the applicant.

- ❖ That there exists a pending dispute regarding the quality of work done by the applicant, which resulted in non-payment by the Employer i.e. Agra Development Authority to the main contractor H.G. Infra Engineering Pvt. Ltd., who in turn failed to make payment to the applicant. The issue between the employer and the main contractor was also referred to a sole Arbitrator and an application under Section 34 of the Arbitration and Conciliation Act, 1996 was filed against which an award dated 9th November 2019 was obtained. That the said award was challenged and is pending before the Hon’ble Delhi High Court. Further stated that disputes including quality issues related to work done by the applicant which has resulted in non-payment to the main contractor and hence to the corporate debtor.

The corporate debtor stated that applicant was well aware of the quality issues and disputes in the said projects and therefore did not pursue any payment after 18^th April 2018, the corporate Debtor also issued a debit note of Rs. 1,24,12,236.20/- on 31^st March, 2020 against the quality issues and communicated the same through WhatsApp on 20^th July 2020 to the applicant. On 23^rd July 2020, the applicant replied to the said message and stated “why after work completion of more than 2 years the debit note is to be issued without prior intimation regarding quality of good” also threatened the corporate debtor of legal action and issued a demand notice dated 30^th July 2020.

Corporate debtor submits that the demand notice dated (30^{\text{th}}) July 2020 is defective and illegal and without any merits as the applicant has failed to annex invoices and other documents in support of the alleged claim.

It is the contention of the corporate debtor that the Applicant is claiming the disputed amount of Rs. 1,58,36,583/-, which includes the security amount of Rs. 35,24,347/- and the security amount is not due and payable by the Corporate Debtor in terms of Clause 16 of the work order dated (1^{\text{st}}) August 2014.

The Corporate Debtor further contends that the present application is not maintainable in terms of Section 10A of the Insolvency and Bankruptcy Code, 2016, as the WhatsApp messages were exchanged on (20^{\text{th}}) July 2020 and the effectiveness of the debit note started from (31^{\text{st}}) March, 2020 which falls within the period barred by the code, therefore CIRP could not have been initiated against the Corporate Debtor for alleged default during this period.

The Applicant has placed on record the Balance Sheet and Profit and Loss accounts for the financial years 2016-17 and 2017-18 along with the application. On perusal of Balance Sheet, it is depicted that no amount is outstanding from the corporate debtor under the head sundry debtors. Further the statement also reflects that monthly contractor wages for alleged work done by the Applicant has been booked during the period October 2014 to May 2016, which makes it clear that the present application has been filed after a delay of more than 4 years.

The applicant failed to follow up or recovered its dues even after 4 years of the alleged completion of work. That TDS under section 194C of the Income Tax Act, 1961 is required to be deducted at the time of credit of such sum of account or at the time of payment. It does not imply acknowledgment of specific amount outstanding to the Corporate Debtor.

The Corporate Debtor highlighted that as per clause 18 of the work order dated 1^st August, 2014, notice for any claim shall be submitted within 14 days of the date of occurrence of the event. Further as per clause 20 of the work order dated 1^st August, 2014, all disputes arising out of the contract have to be referred to a sole arbitrator. The award of the Arbitrator shall be final, conclusive and binding on all the parties to this work order.

The documents of the corporate debtor who had granted the work order for Rs. 5,40,00,000/- had crossed the contract amount of Rs. 8,70,43,936/- and there is no document filed by the Corporate Debtor to support the said enhancement of contract amount to such large amount by Rs. 3,30,43,936/-.

Further stated that arbitration proceeding the corporate debtor is referring to pertaining to quality issue was subsisting when the notice under Section 8 of IBC was served. However, the corporate debtor never replied to the said notice nor informed them about the same and is now raising the plea about arbitration proceedings to show pre-existing dispute. Further no dispute was raised by the corporate debtor vis a vis performance of the contract by the applicant, in spite of receiving a notice under Section 8 if the IBC.

The applicant stated that it had never mentioned about the proceedings u/Section 34 of Arbitration and Conciliation Act bearing No. OMP(Comm) 373/2020 pending before the Hon'ble Delhi High Court. Further also stated that till date the applicant has not received any notice from with the corporate debtor or HG Infra Engineering Ltd. Or Ld. Arbitrator or Hon'ble Delhi High Court in the said Arbitration filed by H.G. Infra Engineering Ltd. against Agra Development Authority. That there is no bonafide in mentioning about the arbitration proceedings about the dispute as the operational creditor was not granted any project of construction activity. Moreover, the quality issued raised by Agra Development Authority has nowhere been detailed by the Corporate Debtor.

The Corporate debtor has raised objection with regards the Section 8 being defective, however, if the said notice was defective, the corporate debtor should have filed reply and raised dispute stating the pending arbitration proceedings. But the corporate debtor failed to file any reply and raised objections only after the present petition was filed.

The denial of the corporate debtor regarding it own bills is contrary to its records. Further the calculation sheet submitted by the corporate debtor is incomplete and manipulated as the debit note finds no mention in the ledger statement of account. As per law the debit note should have been in accordance with the law in force i.e. UP VAT for the years 2014-17 and thereafter as per the GST Act, the act also prescribes as to what should be the contents and how it should be made.

The applicant states that if it was not perusing its huge outstanding debt then why would it issue the WhatsApp communication for the debit note issued on 31.03.2020. The corporate debtor also failed to place on record the WhatsApp conversation exchanged between the parties nor placed on record the alleged debit note. The Corporate Debtor after repeated follow ups paid a sum of Rs. 10,00,000/- via RTGS on 13.04.2018 and 18.04.2018 each. Also promised to pay the remaining amount at the earliest. Moreover, there is no mention of the debut note even in the GST returns.

As regards the maintainability issue with respect to Section 10A of the IBC, 2016 it is stated that it does not apply in the present case as unilateral issuance of debit note without any basis cannot be considered as arising of fresh cause of action. Further the debit note in question is itself uncertain, as the same has not been placed on record. The last payment was made on 18.04.2018 and default is continuing since then, in such a case in order to delay the payment without any basis the corporate debtor has chosen a whimsical date by issuing a false and fabricated debit note dated 31.03.2020 which was communicated to the applicant on 20.07.2020 without any attachment.

The corporate debtor is solely relying upon the work order dated 01.08.2014 for work order granted to the applicant for a total value of Rs. 5,40,00,000/-, further emphasis is placed on Clause 17 of the work order which mentions that the payment will be released by the Respondent Company within 10 (ten) days after receiving corresponding payment from the employer. Further the corporate debtor stated that he has not received the full payment from the main contractor and therefore no payment is due and payable by the corporate debtor towards the applicant. The corporate debtor has also relied upon the Clause 18 of the work order which states that notice of any claim must be submitted within 14 days of the occurrence of the event.

The corporate debtor stated that applicant was well aware of the quality issue and disputes in the project and therefore the applicant did not pursue the payment after 18th April 2018. Therefore on 20.07.2020, the corporate debtor issued a debit note and communicated the same through WhatsApp to the applicant.

That the demand notice under Section 8 IBC was incomplete as the applicant has not annexed all invoices along with the demand notice. Further no affidavit except Section 9(3)(b) has been annexed with the applicant. Moreover, in spite of directions the applicant failed to annex all the invoices.

That the certificate from the NeSL evidencing a default on part of the corporate debtor has been filed with the application. The corporate debtor failed to respond to or dispute the said default therefore it is deemed to be authenticated.

The deductions of TDS on invoice clearly proves that though the operational creditor has failed to file certain invoices but all the invoices have been admitted by the corporate debtor due to which the TDS has been deducted.