Raghuvir Buildcon Private Limited vs Ketan Construction Limited

[Per : Virendra Kumar Gupta, Member (Technical)]

The facts, in brief, are that the Corporate Debtor on being awarded a contract by Government of Andhra Pradesh entered into a sub-contract with the Operational Creditor for the execution of the project on back to back basis. The agreement was entered on 27.03.2015 and the total value was 187 crores approximately. The Operational Creditor remained in the project till 25.01.2017 and raised invoices to the tune of Rs. 69.19 crores approximately for the work done by the Operational Creditor. The Operational Creditor made claims from time to time for payment of its outstanding dues which included principal sum as well as interest for the delay in payment. However, due to non-payment of its total dues, Operational Creditor filed this application u/s 9 of IBC, 2016 on 20.12.2018.

The learned senior counsel appearing on behalf of the Operational Creditor narrated these basic facts and drew our attention to the letter of award dated 27.03.2015 (copy of which is placed at page 13 to 16 of the petition). Thereafter, he referred to summary of bills raised and payments received as well as the balance amount due. The learned senior counsel further submitted that in all 14 running bills were raised out of which 13 bills were certified in toto. The amount payable of these 13 running bills after deduction of TDS and seignorage was 58.12 crores approximately against which payment of Rs. 55.89 crores approximately was made and a sum of Rs. 2.24 crores approximately was outstanding which was due and payable by the Corporate Debtor and for non repayment thereof this petition was admissible as this amount was much more than Rs. 1 Lakh being threshold limit for filing of an application u/s 9 of IBC, 2016. For this proposition, he relied on the following judicial decisions.

Thereafter, the learned senior counsel submitted that as far as running account bill no. 14 was concerned, it was raised for a sum of Rs. 9.34 crores approximately after taking into consideration the work done as well as other sums which were payable by the Corporate Debtor till that date. Learned senior counsel contended that although this bill was not certified as such but there was, in fact, no dispute even for payment of this bill and for this contention, he placed strong reliance on the certificate dated 17.04.2017 issued by the Corporate Debtor to the Operational Creditor certifying that the Operational Creditor had executed actual work of Rs. 69.19 crores approximately which included the amount of bill no. 14 as well. It was also contended that veracity of this certificate was in no doubt at all. He further contended that certificate dated 17.04.2017 also acknowledged the fact that neither any fine was imposed on the Operational Creditor nor any work had been abandoned by the Operational Creditor. Learned senior counsel further contended that the so called claim of pre-existing dispute was having no substance as these e-mails were simply of the nature of routine correspondence in the capacity of main contractor. To further buttress this point, the learned senior counsel submitted that payments of Rs. 4 crores, 1.99 crores and 1 crore approximately were made on 25.04.2017, 23.10.2017 and 16.01.2018 subsequently even after abandonment of the project on 25.01.2017. This fact also showed that there was no dispute at any point of time. Thereafter, the learned senior counsel claimed that a cheque of Rs. 50 Lakh was also given on 01.02.2017 which was, however, dishonoured but the fact of issuance of such cheque by itself was sufficient to establish that this amount was due and payable by the Corporate Debtor, hence, for this reason alone, the petition was liable to be admitted. For this proposition, he placed reliance on the following decision:

As regard to the objections raised by the Corporate Debtor for giving a false affidavit u/s 9(3)(b) of IBC, 2016, it was contended that the affidavit, in fact, referred to Demand Notice as it was clearly mentioned therein that no notice of dispute was given by the Corporate Debtor within the time as stipulated under the IBC, 2016. In this regard, he gave the chronology of events and sequence of dates relating to delivery of notice u/s 8 of IBC, 2016 and the date of receipt of reply thereto from the Corporate Debtor. It was also contended that there was no suppression of facts. In respect of his contentions, he placed reliance on the following judicial decisions.

Learned senior counsel for the Corporate Debtor, at the very outset, pleaded that it was a case of pre-existing dispute. In this regard, he drew our attention to e-mails written by the Corporate Debtor to the Operational Creditor during the period from 01.02.2016 to 03.04.2017. Thereafter, he took us to the findings of the Hon'ble Supreme Court in the case of Mobilox Innovations Private Limited vs. Kirusa Software Private Limited in detail and based upon the findings of the Hon'ble Supreme Court given in the para 40 of the said order, he pleaded that it was a case of genuine pre-existing dispute between the parties which was neither feeble nor without evidence and, therefore, this application was liable to be dismissed. The learned senior counsel submitted that the scope of examination of pre-existing dispute by Adjudicating Authority has also been defined by the Hon'ble Supreme Court in that case and, therefore, the Adjudicating Authority is having limited jurisdiction just to see that there was a dispute or not and, at this stage, merits of the case were not to be examined. Thereafter, the learned senior counsel referred to para 25 of notice of dispute as well as page 318 and 319 of its reply to show that excess payment had been made by the Corporate Debtor and a sum of Rs. 2.07 crores approximately was recoverable from the Operational Creditor. Thereafter, he took us to the significant terms and conditions of the letter of award (sub-contract) dated 27.03.2015 to emphasize on the fact that the Corporate Debtor was liable to pay the Operational Creditor only after receipt of payment from end client. In this regard, he drew our attention to Clause 2(i) of the sub-contract. The learned senior counsel, thereafter, contended that this application was also liable to be rejected/dismissed for the reason that it was a case of suppression of facts i.e. reply to Demand Notice by the Corporate Debtor was not disclosed nor any e-mails which were exchanged between the parties were brought to the notice of this Authority. It was contended that that sub-contract, in fact, was of the value of Rs. 187 crores, however, it was presented as of the value of Rs. 69.19 crores. The learned senior counsel, in support of such claim, submitted that one must come with clean hands and merely on the ground of falsehood, this petition was liable to be dismissed. In support of this plea, he placed reliance on the decision of Hon'ble Supreme Court in the case of S.P Chengalvaraya Naidu (Dead) by L.Rs. vs. Jagannath (Dead) by L. Rs. and Ors. in Civil Appeal No. 994 of 1972 decided on 27.10.1993. The learned senior counsel also placed reliance on the decision of NCLT, Chennai Bench in the case of OPG Metals (P.) Ltd vs. Pavai Alloys & Steels (P.) Ltd. (taxman.com251, NCLT-Chennai) for the proposition that where affidavit filed u/s. 9(3) (b) of IBC, 2016 was wrong, the application filed u/s 9 was liable to be rejected for suppression of material fact. As regard to reliance placed by the Operational Creditor on the certificate dated 17.04.2017 and letter dated 23.10.2018, the learned senior counsel contended that the Corporate Debtor and Operational Creditor were related to each other and this certificate was issued as accommodation gesture, hence, it could not be used against the Corporate Debtor. The learned senior counsel, thereafter, again pleaded that there was pre-existing dispute much prior to the issue of Demand Notice u/s 8 of IBC, 2016, hence, such application was not maintainable. For this proposition, the learned senior counsel placed reliance on the order of Hon'ble National Company Law Appellate Tribunal (NCLAT) in the case of Karpara Projects Engg. (P.) Ltd. vs. BGR Energy Systems Ltd. taxman.com502 and in the case of BR Construction vs. G.R. Infraprojects Ltd. para 27. He also placed reliance on the decision of Hon'ble NCLAT in the case of Battula Anjaneyulu vs. DBM Geotechnics & Construction (P.) Ltd. (taxman.com403) for the proposition that e-mails exchanged between the parties could form the basis of pre-existing dispute. As regard to the conduct of the Operational Creditor, it was submitted that the project was abandoned in between 25.01.2017, however, intimation thereof was given to the Corporate Debtor on 03.03.2017, hence, approach of Operational Creditor was not ethical and resulted into delay in the execution of project.

Thereafter, learned senior counsel submitted that the case laws as regard to the issuance of cheque being an evidence or fact of outstanding dues relied on by the Operational Creditor were distinguishable on facts as there was no pre-existing dispute in those cases as compared to the present case at hand. As regard to the reliance placed by the Operational Creditor on the decision of NCLT in the case of Sangeeta Goel (supra) vs. Riodec India Chemicals Private Limited, it was contended that this decision was not correctly interpreted by the Operational Creditor as in that case it was held that affidavit u/s 9(3)(b) was not required when the notice of dispute had been sent by the Corporate Debtor whereas in the present case the issue was submission of false affidavit u/s 9(3)(b) of IBC, 2016.

In the rejoinder, the learned senior counsel mainly reiterated earlier submissions made by him and also emphasised on the point that considering the total circumstances of the case, the undisputed due amount was more than Rs. 1 Lakh, hence, this petition was liable to be admitted and also the reliance on such e-mails stood nullified by the subsequent payment made by the Corporate Debtor as well as certificate issued by the Corporate Debtor as regard to actual work done by the Operational Creditor.

We have considered the submissions of both the parties and material on record. It is noted that the Corporate Debtor was awarded contract by CAD Department, Government of Andhra Pradesh, who in turn entered into sub-contract with the Operational Creditor on 27.03.2015. The total value/price of sub contract works is approximately 187 Crores. The payments have to be made on 'item rate' basis. Such payments are to be made within seven days from the date of receipt of payment by the Corporate Debtor from the end client (Government) on the basis of Bills raised by the Corporate Debtor. As per the sub-contract, supervision and quality check of the said work i.e. sub-contract work is within the scope of main contractor i.e. Corporate Debtor. Retention money @ 5% has to be recovered which is to be released against the submission of unconditional Bank guarantee as and when the same is released to the Corporate Debtor by the client. It is noted that the Operational Creditor raised 14 RA Bills starting from 22.08.2015 till 25.01.2017. It is also noted that payments have been released by the Corporate Debtor from time to time.

It is further noted that along with all running account bills schedules/annexures of work done along with bill of quantity have been attached. It is also noted that in each running bill period of work done is also mentioned. It is also noted that stipulated scheduled date of completion of project is 26.03.2018, however, the fact is that the Operational Creditor remained part of the project only up to 25.01.2017. As per the Operational Creditor work for the value of Rs. 69.19 crores approximately was done and which has been billed in 14 running account bills. Bill No. 1 to 13 has been duly certified by the corporate Debtor and 14th running bill has not been certified. The value of the work done after excluding the running account bill no. 14, T.D.S and seignorage stands at Rs. 58.12 crores. The Corporate Debtor has paid a sum of Rs. 55.87 crores approximately against the same. Outstanding balance amount against these 13 running account bills stands at Rs. 2.24 crores approximately. The amount raised in 14th running account bill stands at Rs. 9.34 crores approximately. The total outstanding amount has been claimed at Rs. 11.59 crores excluding interest for the period of delay. The corporate debtor has also made substantial payments subsequent to parting of ways. The work execution certificate has also been issued by the corporate debtor subsequently wherein satisfaction has been shown as regard to performance of the operational creditor.

In the background of above basic facts, we shall deal with each of contentions raised by the parties. However, the contention of the Corporate Debtor that there is a case of pre-existing dispute which is based upon e-mails written by the Corporate Debtor will be dealt in the later part of the order as it relates to the scope of examination of such claims/counter claims by the Adjudicating Authority and also of the aspect of nature of the term 'dispute' itself.

The Operational Creditor has firstly claimed that cheque for Rs. 50 Lacs was issued by the Corporate Debtor which was dishonoured and returned by the Bank on 17.01.2018 and this action of the Corporate Debtor was in itself sufficient to make this application admissible as value of cheque was of more than the threshold limit of Rs. 1 lakh and issuance of this cheque was an admission of its liability to pay. Learned senior counsel for the Operational Creditor has also relied on two decisions in respect of such claim whereas the learned counsel for the Corporate Debtor has distinguished such decisions by submitting that in those cases no pre-existing dispute was involved. We are afraid this plea goes against the Corporate Debtor because if after considering the disputes, a cheque is issued which is dishonoured for insufficient funds this goes to show that the Corporate Debtor, being issuer of the cheque, issued the cheque and delivered the cheque after fully analyzing the issues that this amount was, in fact, payable in spite of such disputes. Thus, in our considered view, for this reason alone, this application is liable to be admitted.

The next contention raised by the Operational Creditor is that unqualified work done certificate was issued by the Corporate Debtor at the request of the Operational Creditor. It is noted that certificate of work experience dated 17.04.2017 stating actual cost/value of work completed at Rs. 69.19 crores approximately has been issued by the Corporate Debtor. Subsequently, the Ircon International Limited wrote a letter dated 7th/8th October, 2018 addressed to the Corporate Debtor for verification of this work certificate issued by the Corporate Debtor on 17.04.2017. The Corporate Debtor vide its reply dated 23.10.2018 confirmed that the experience certificate was issued by the Corporate Debtor to the Operational Creditor on the said date. Learned senior counsel for the Corporate Debtor tried to show that such certificate was incorrect as total amount of work done shown in the certificate was 69.19 crores approximately but the date of completion of said work was mentioned as 31.03.2016 which was not correct as this value was for work done up to 25.01.2017. However, considering all the correspondences/material on record, the claim of the Corporate Debtor is liable to be rejected as date of 31.03.2016 is an instance of typographical mistake only as even Corporate Debtor itself in subsequent letter of 23.10.2018 has mentioned such date as 25.01.2017. Further, it is noted that this certificate has been given after leaving of the project by the Operational Creditor and all e-mails written by Corporate Debtor up to 07.03.2017 which have been claimed as proof of pre-existing dispute. Confirmation of certificate has been given as late as on 23.10.2018 wherein again amount of 'actual work done and actual date of completion' has been mentioned. Further, in the certificate dated 17.04.2017, it has also been certified by Corporate Debtor that the Corporate Debtor has carried out the above work satisfactorily. Thus, considering the material which has been brought on record by the Corporate Debtor itself, there remains no substance or merit in the claims of the Corporate Debtor that it is a case of pre-existing dispute, thus, for this reason also, this petition is liable to be admitted.

One contention which has been raised by the Corporate Debtor is that the Corporate Debtor had made an excess payment to the tune of Rs. 2.07 crores approximately. The working of the same has been placed at page 385 and 386 of their reply. From the perusal of this statement, it is apparent that the deductions for defective work in structure and lining stand at Rs. 10 lacs and 3 lacs respectively. Most of other deductions are for non-submissions of documents or some charges to be recovered by the Corporate Debtor which cannot be termed as a dispute much less than pre-existing dispute for the simple reason that no back up documents have been attached nor any other evidence such as deduction for the same by end client (Government of Andhra Pradesh) from the bills of Corporate Debtor has been brought on record. It is further noted that even contractual provisions are not mentioned under which such deductions/recoveries have been made except in case of retention money. Having said so, it may not be out of place to mention that from the perusal thereof it appears that such deductions have been worked out just to justify the non-payment as no steps for the recovery of the same have been taken. Further, additional payments have been made subsequent to the e-mail of 07.03.2017 which is the basis of such deductions/recoveries, hence, differences stand resolved. It is further noteworthy that in this computation, the value of work done by the Operational Creditor has been accepted by the Corporate Debtor at Rs. 65.50 Crores which is more than the amount of work done and billed by the Operational Creditor in 13 running bills, hence, it is apparent that running account bill no. 14 has also been taken into consideration. It is also noted that amount of retention money of Rs. 3.27 crores approximately has been stated to be kept on hold and to be released on successful completion of diffeliability period of the project. Thus, this amount by no stretch of imagination can lose its character of money belonging to the Operational Creditor which is due and payable and the same cannot be an instance of dispute under any circumstances. Thus, if this amount is excluded from the recovery and deduction, the outstanding sum immediately payable by the Corporate Debtor to the Operational Creditor works out to Rs. 1.20 crores approximately i.e. difference between the amount of retention money and the amount excess paid amount work out by the Corporate Debtor 3.27crores-2.07crores (referred at page 385 and 386 of reply affidavit). Such amount is more than Rs. 1 Lac, hence, for this reason also the petition is liable to be admitted. Another factor which is of vital importance is that even if we accept all recoveries/deductions including retention money as such then also there would be money payable by the Corporate Debtor. This can be explained as follows:

The total work done by Operational Creditor as per working given at page no. 385 of affidavit in reply of the Corporate Debtor amount has been stated at Rs. 69.19 crores. The amount work certified by the Corporate Debtor has been stated at Rs. 65.50 crores. The variation between these two has been sated as 3.69 crores which becomes payable in view of the certificate of work experience dated 17.04.2017 given by the Corporate Debtor. If net excess paid amount of Rs. 2.07 crores is deducted from this amount then an undisputed amount payable to the Operational Creditor stands at Rs. 1.67 crores, being the difference between 3.69 crores and 2.07 carores. Thus, considering the facts as stated above, claim of amount excess paid by corporate debtor becomes null and void and such working of the Corporate Debtor itself leads to an inevitable conclusion that there is an undisputed outstanding balance which is payable by the Corporate Debtor to the Operational Creditor which is more than Rs. 1 Lac.

Next line of defence was taken that the Operational Creditor abandoned the project in between even without informing the Corporate Debtor on 25.01.2017 as mail written on 03.03.2017. However, we are unable to accept this fact that Corporate Debtor had no knowledge of such abandonment until it received such mail for the reason that Corporate Debtor is Principal Contractor and it is supervising, coordinating, monitoring and controlling the project. Further, Corporate Debtor after such abandonment has made substantial payments to the Operational Creditor, issued work done certificate as well and did not file any claim for damages, penalties etc. against the Operational Creditor, hence, its plea that it resulted into adverse consequences remains shallow. Further, abandonment as such has no bearing on the admissibility of this application, because what is claimed by the Operational Creditor is the amount due and payable in respect of work done by the Operational Creditor and consequences of such abandonment, if any, have to be dealt in accordance with the terms and conditions of the contract between the parties and, as stated earlier so, no material has been brought on record to show that any action has been taken by the Corporate Debtor against the Operational Creditor on this score. Thus, such plea has got no bearing on the present proceedings.

Another defence was taken that the payment was to be released by the Corporate Debtor to the Operational Creditor within the seven days from the receipt of payment from the Government of Andhra Pradesh. During the course of hearing, the fact of receipt of payment from Government was admitted, however, details of such payments have not been brought on record. Further, there is no bar in the contract that the Corporate Debtor cannot make payment to the Operational Creditor from its own resources. As such modus operandi of the payment to be released only after receipt of payment has been provided for proper cash flow management. Apart from this, it has not been disputed by the Corporate Debtor that it has not received the payments from the Government of Andhra Pradesh for the milestones of working completed and achieved by Operational Creditor which has been subject of billing and invoicing in all 14 running account bills raised by the Operational Creditor. Thus, this plea also has got no bearing on the admissibility of the application filed by the Operational Creditor.

As stated earlier, now we shall deal with the aspect of pre-existing dispute. It may not be out of place to state that first core aspect of admission of an application u/s 9 is prima facie whether there is any dispute or otherwise. If it is shown that there exists a dispute between the Operational Creditor and Corporate Debtor prior to service of notice u/s 8 of IBC, 2016 then the Adjudicating Authority may reject the Application filed u/s 9 of Insolvency and Bankruptcy Code, 2016. The term 'dispute' is defined u/s 5(6) of IBC, 2016 as under:

From the perusal of above, it noted that it is an inclusive definition. It is further noted that three situations of dispute covered above may be subject matter of a suit or arbitration proceedings. Thus, dispute may have various dimensions/ aspects which may not related to above three situations only. For example, in case of Mobilox, breach of term relating to non-disclosure agreement was considered as dispute. Further, disputes relating to situations mentioned in clause (a), (b) and (c) of Section 5(6) may not be in the form of suit of arbitration only as such disputes though existing in reality might not have been referred for such process as yet. However, a reference to a suit or arbitration in Section 5 (6) certainly indicates that dispute is something more than a disagreement or difference of opinion or conflict. Even otherwise every disagreement or conflict may also not reach to the stage of dispute necessarily.

Before we proceed further, it is considered necessary to reproduce the findings of Hon'ble Supreme Court in the case of Mobilox in Para 40, 45 and 46 as under:

Thus, the parameter to ascertain as to whether there is a dispute or otherwise can be summarized as under:

The extent of ascertainment/examination of such parameters defines the scope of exercise of jurisdiction by Adjudicating Authority. It has been pleaded that Adjudicating Authority has limited jurisdiction as compared to a Trial Court and Civil Court. We do not have any quarrel or dispute with this proposition. However, intensity of the examination would depend upon the facts and documentary evidences produced by each of the parties in support of their claims. Having said so, it would also be an endeavor of the Corporate Debtor to prove that there is pre-existing dispute to avoid its obligation. The Hon'ble Supreme Court has said that such defense should not be feeble legal argument or an assertion of fact unsupported by evidence. Further, such defence should not be spurious or merely bluster, frivolous or vexatious. It should not be a made to believe story. However, merits of the case need not to be a factor to decide the matter. These observations itself define the scope that the Adjudicating Authority has to look into the material produced before it and to analyze the same to reach some conclusion. It can neither be precluded from doing so nor it is precluded by these observations, hence, the Adjudicating Authority is well within its jurisdiction when it analyzes the accounting records, correspondences, contract etc. as produced by the parties to arrive at a conclusion as regard to nature and existence of dispute. This exercise may require some deep analysis in some case or in some cases it may be a very minor examination based upon the facts of each case and material produced by the parties. In cases, in our considered view, where greater analysis is required then in that situation, such analysis would not amount to roving inquires or exercise beyond jurisdiction as it would be the demand of the situation.

Apart from the above legal position, the question which comes to our mind is that in what circumstances a fact situation can be categorized as dispute i.e. when does a disagreement or difference of opinion become a dispute. As observed earlier that the term 'dispute' has been defined inclusively in IBC, 2016, however, basic meaning of the term 'dispute' has not defined, hence, we would have to look for the meaning of this term as per law dictionaries/other legal forums.

The Black's Law Dictionary defines the term 'dispute' as under:

West's Encyclopedia of American Law, edition 2 describes the term "dispute" as under:

The term 'dispute' as per U.S Legal.com is described as under:

Thus, at a glance itself, it can be said that a threshold or stage is to be crossed to convert a difference/disagreement into dispute. In other words, normally commercial/legal differences per se are not dispute unless such differences are ascertained into a claim on which both the parties have opposite/different views and want to settle the same through some legal process or otherwise. Thus, in our view, routine correspondence in commercial relationship cannot automatically or necessarily be considered and admitted as dispute unless such stage is reached.

In the above academic background, we will examine this process in the context of running contracts. In large construction projects spanning over a period of 2, 3 years where milestones are based upon the progressive performance or the completion of units, such type of correspondences generally take place. Such projects also provide significant scope for various disagreements arising between the sub-contractor and the contractor. Thus, in the course of execution of the projects/works such coordination exercise is essential one and any such communication between the parties as such cannot be termed as dispute, particularly, when bills relating to such works are cleared and whatever settlement/recovery/deduction is to be made is mutually made. Thus, in such situation, there remains no dispute by mutual process adopted by the parties. In our view, terms and conditions of the contract are also a big factor to determine when a disagreement constitutes a dispute and resolution thereof by way of specified mechanism. Thus, the mere fact of notifying a claim does not automatically and immediately gives rise to a dispute. A dispute does not arise unless and until it emerges with the claim which is not admitted. We do not hesitate to state that litigation has not generated any hard and fast universally applicable legal rules as to what is a dispute and it merely offers some guidance. We may also add that legal framework under which proceedings are being considered would also have a bearing. For example, proceedings u/s 9 of IBC, 2016 are liable to be admitted or rejected based upon the fact of pre-existing dispute, hence, aspect of dispute needs to be examined in this background. Thus, in our view, to consider every commercial correspondence pointing out some deficiency as dispute or pre-existing dispute would result into situation where Corporate Debtor may evade its legal obligation and which would be against provisions of I & B Code, 2016 and also against the basic structure of IBC, 2016 i.e. creditor centric regime with a view to promote entrepreneurship and credit culture. Having said so, we also put a rider that Operational Creditor would have to justify its claim by adducing sufficient documentary evidence that all issues had been resolved and in spite of that payment was not made by the Corporate Debtor which led to filing of proceedings IBC, 2016.

Coming to the facts of the case, it is noted that in this case the Corporate Debtor is a principal contractor who has given the sub-contract or practically assigned contract on back to back basis to the Operational Creditor. The Operational Creditor would bear the liquidated damages, penalties and could face other legal actions which can be imposed on the Corporate Debtor for the failure of Operational Creditor. Thus, the risk and rewards are shared and, therefore, it may not be out of place to mention that Operational Creditor, being sub-contractor face severe consequences for non-performance. However, the corporate debtor is responsible for execution of contract which also provides for supervision, coordination, monitoring and control for efficient execution of the project by the Corporate Debtor. Therefore, the principal contractor is obliged to discharge such functions and in doing so correspondences/communications either orally or through e-mail or by meetings happen. Such communication generally indicates situations which require corrective course of action by the sub-contractor and failing which recovery/costs/penalty/damages etc. may occur. From the perusal of the e-mail exchanged as provided by the Corporate Debtor, it is noted that almost all e-mails of this nature only wherein issues have been raised, corrective course of action has been suggested. Consequences of non-compliance have also been indicated. It has also been mentioned by the Corporate Debtor in the chart of such e-mails that what action had been taken and by whom. It is particularly to be noted that these correspondences are in relation to the work done by the Operational Creditor for which running bills have been raised by the Operational Creditor and which have duly been certified and payments have also been released. Last e-mail has been written on 07.03.2017 after the Operational Creditor had already left the project. Even in this mail amounts to be withheld have not been indicated. In earlier e-mails only three mails mentioned the amount which could be recovered from the Operational Creditor that too is meager as compared to work done. Further, response of Operational Creditor has not been provided. These Bills have raised from 22.08.2015 to 25.02.2017. These are 14(fourteen) in numbers. Strangely, no documentary evidence has been brought on record to the effect that Government of Andhra Pradesh also made recovery from Corporate Debtor, wherever applicable. It has also not been established that any payment had been withheld by the Government in respect of work done by Operational Creditor. Further, if these facts are considered with work experience certificate issued by the Corporate Debtor and subsequent payments made by the Corporate Debtor then it can be safely concluded that difference which existed earlier had already been resolved and only outstanding amount due to Operational Creditor remained pending for payment. Thus, the basis of this application is, in fact, non-payment of such amount.

We further find that the Operational Creditor has written number of e-mails to the Corporate Debtor demanding payments of its interest on 06.03.2017, 01.07.2017, 04.08.2017, 05.09.2017, 12.10.2017 and 08.11.2017 (copy placed in paper book at pages 191-202). These e-mails (demand notices) are subsequent to the mails written by the Corporate Debtor on 07.03.2017 except first mail which was written on 06.03.2017. These mails have not been disputed by Corporate Debtor by adducing any material on record except that in the belated reply to notice of demand served by the Operational Creditor u/s 8 of IBC, 2016 these have been disputed but no cognizance of the same can be taken as it is after the delivery of notice of demand u/s 8 of IBC, 2016 by the Operational Creditor.

Now, we will deal with the rests of the contentions raised by the Corporate Debtor. One such contention is that in this case, the Operational Creditor has suppressed the facts by not disclosing such e-mails or bringing fact of existence of such e-mails to the notice of this Authority. We do not find any substance in this plea as this is an obligation on the part of the corporate debtor as per the provisions of Section 8(2)(a) of IBC, 2016. As per Form 3 the Operational Creditor required the Corporate Debtor to bring the notice of dispute or Court case, if any, or the payment has been made to the notice of the Operational Creditor. The Corporate Debtor has relied on the decision of NCLT in the case of OPG Metals (P.) Ltd. vs. Pavai Alloys & Steels (P) Ltd. We are of the humble view, that this case does not help the cause of Corporate Debtor as in that case in spite of notice of dispute being raised by the Corporate Debtor in time, fact of the same was not disclosed in affidavit filed u/s 9(3)(b) of IBC, 2016 which is not the case here. As far as contents of the affidavit filed by the Operational Creditor u/s 9(3)(b) of the IBC, 2016 are concerned, the Operational Creditor has categorically stated that he had received notice of dispute but not within stipulated time. Thus, there is no misstatement by the Operational Creditor as the Corporate Debtor has itself admitted that such notice was delivered beyond 10 days from the date of receipt of notice of demand u/s 8 of IBC, 2016.

This factual situation, however, leads to another dimension. In the case of operational debt, the proceedings for initiation of CIRP u/s 9 are materially different from proceedings u/s 7 of IBC, 2016 as in the case of claims of Operational Creditor delivery of notice of demand u/s 8 of IBC, 2016 to the Corporate Debtor before filing of application is a must. It is an incurable defect. Thus, an application filed u/s 9 of IBC, 2016 without delivery of notice of demand u/s 8 of IBC, 2016 on the Corporate Debtor then such application is liable to be rejected at the very outset. . The Petitioner/Applicant cannot be allowed to serve such notice after the filing of application u/s 9 under any circumstances. Correspondingly, the Corporate Debtor is under an obligation as per provisions of Section 8(2) r.w. Section 8(2)(a) of IBC, 2016 to reply to such notice of Operational Creditor within a period of 10 days from the date of receipt of such notice. It is also an incurable defect. Both the parties have to be kept at par. Thus, in our view, just an application u/s 9 is liable to be rejected without delivery of notice u/s 8 prior to filing of such application and correspondingly an application in the absence of notice of dispute/existence of dispute being brought to the notice of the operational creditor within a period of 10 days by the corporate debtor is liable to be admitted and corporate debtor cannot be allowed to raise the issue of pre-existing dispute later on because having regard to the drastic consequences of initiation of CIRP against the Corporate Debtor, such mechanism has been provided which not only gives a window /opportunity to the Corporate Debtor to establish fact of bona fide dispute but also to settle the matter before an application u/s 9 is filled but also saves Corporate Debtor from stripping off with the management of the company. Law is absolutely clear in this regard and, therefore, corporate debtor on subsequent stage cannot take shelter even of Rule 11 of NCLT Rules, 2016. We are further of the view that if the requirement of reply to notice u/s 8 within the stipulated time is waived then provisions of Section 9(5)(ii)(c) r.w. Section 8(2) would become redundant. In this regard, we draw strength from the observations of the Hon'ble Supreme Court in the case of Mobilox Innovations Private Limited vs. Kirusa Software Private Limited wherein the Court has held that time lines prescribed under the Act are sacrosanct and must be adhered to. The relevant findings of the Hon'ble Supreme Court in para 24, 25, 26, 27 are reproduced hereunder:

Further, findings of Hon'ble Supreme Court in the case of Innovative Industries Ltd. Vs. ICICI Bank and Ors held in para 29 are reproduced as under:

Thereafter, Hon'ble Supreme Court in the case of Swiss Ribbons Pvt. Ltd. and Ors. vs. Union of India and Ors held as under:

Thus, the Hon'ble Supreme Court has reiterated time and again that adherence to the time line of 10 days for reply to demand notice is a must. Thus, any reply beyond the period of 10 days will not save the Corporate Debtor from the consequences as mentioned in Section 9(5)(ii)(c) of IBC, 2016.

Now, we shall briefly deal with the case laws relied on by the Corporate Debtor. In the case of B.R. Construction vs. G.R. Infraprojects Ltd. the undisputed fact is that engineer chief had not certified the work done, however, in the present case no such claim has been made nor any documentary evidence has been produced to show that work done by the Operational Creditor has not been approved by the Government of Andhra Pradesh. Further, in that case, an FIR had also been lodged which was an evidence of misappropriation of funds by the Operational Creditor. Thus, facts of that case are completely different, hence, ratio of this case is not applicable to the present case. In the case of Karpara Project Engineering Pvt. Ltd vs. BGR Energy Systems Ltd., there was a specific claim for liquidated damages payable for extension of time which is not the case here. Hence, ratio of this decision is also not applicable. In the case of Battula Anjaneyulu vs. DBM Geotechnics & Construction (P.) Ltd., the Corporate Debtor had already filed a legal suit in the Mumbai High Court which is not the case here. There were several others issues of imposition of liquidated damages, termination, forfeiture of security deposits, earnest money, balance payment, invocation of bank guarantee, blacklisting etc which is not the case here. Thus, this decision also does not help the cause of Corporate Debtor.

The Operational Creditor has proposed the name of Interim Resolution Professional (IRP) i.e. CS Mr. Arvind Gaudana having its registered number IP Reg. No. IBBI/IPA-002/IP-N00283/2017-18/10841 who has given his consent and no disciplinary proceeding are pending against him. Hence, we can appoint such person as IRP. The application is otherwise complete and defect free and it also complies with other requirements of IBC, 2016 r.w. regulations made there under.

IA 102 of 2020 has been filed by the Corporate Debtor regarding service of reply to the demand notice on 11.12.2018. In the said application the plea of suppression of fact has been made. Both these facts have already been considered as contentions made by the Corporate Debtor and have mentioned in the earlier part of this order. In view of this, the present application stands disposed of as considered while disposal of main petition.

IA 123 of 2020 has been filed by the Corporate Debtor to produce documents i.e. letter of Ircon International Limited dated 7/8th October, 2018, are written by the Corporate Debtor on 23.10.2018 to the Ircon International Limited and certificate of work experience dated 17.04.2017. All these documents have been considered in the main arguments made by the Corporate Debtor as well as Operational Creditor. Hence, this IA stands deposed of as considered in the course of disposal of main petition.

We admit this application and order as under:

List the matter on 28.09.2020 for the filing of the progress report.

Certified copy of the order may be issued to al the concerned parties, if applied for, upon compliance with all requisite formalities.