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Judgment
Jarat Kumar Jain: J.
The Appellant “Yogesh Kundra” Suspended Director of the Corporate Debtor Company Gati Infrastructure Pvt. Ltd. filed the Appeal against the order dated 26.04.2021 in CP (IB) No. 227/09/HDB/2017 passed by the Adjudicating Authority (National Company Law Tribunal, Hyderabad Bench, Hyderabad) whereby admitted the Operational Creditor’s Application under Section 9 of the IBC and initiated Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor.
In this Opinion/Judgment for shake of convenience, the parties are referred in their brief names as Operational Creditor ‘SEW and Prasad. Joint Ventures Pvt. Ltd.’ as SPJV, Corporate Debtor ‘Gati Infrastructure Pvt. Ltd’ as GIPL, Amrit Jal Venture Pvt.Ltd. as AJVPL, Guarantors namely Mahendra Investment Advisors Pvt. Ltd and Mr. Mahendra Agarwal as MIAPL and MK, Arbitrators, Mr. M. Sai Ram as Arbitrator 1 and Mr. CL Rajam as Arbitrator 2.Assignee of Operational Creditor SEW Infrastructure Ltd. as SIL.
The Appeal had come before the Division Bench of this Appellate Tribunal at Chennai Bench and the Hon’ble Member (J) and Hon’ble Member (T) delivered a divergent Judgment on 18.06.2021. The Hon’ble Member (J) recorded a note on the same date asking the Registrar to place the record before the Hon’ble Acting Chairperson together with copies of the Judgments for nominating a Hon’ble Third Member to render his opinion/decision in the Appeal. The Hon’ble Acting Chairperson directed that the Appeal be placed before me for opinion. This is how the Appeal came to be placed before me on Judicial side. On 27.07.2021 at the request of Ld. Counsel for the Appellant the matter is adjourned. On 24.08.2021 I heard Ld. Counsels for the parties and reserved the matter for Judgment. Thereafter, Ld. Counsels for the parties have filed the Written Submissions.
I have gone through the Judgments of Hon’ble Members dated 18.06.2021. Hon’ble Judicial Member after considering the agreement dated 14.12.2013 (Settlement Agreement), email dated 21.01.2015 addressed by Mr. Sunil Gupta a certificate of merit issued by Corporate Debtor GIPL demand notice and its reply sent by GIPL hold that the impugned order is free from legal flaws, thus, he directed the Appeal to be dismissed.
Hon’ble Technical Member had gone through the Judgment of the Hon’ble Judicial Member and recorded his dissent Judgment on the points (i) pre-existing dispute (ii) debtor-creditor relationship between the Corporate Debtor and Operational Creditor and (iii) maintainability of the Petition against the Corporate Debtor. He has considered theall the aforesaid documents including MOU dated 20.05.2016 and held that so far as the claim of Rs. 33.98 Cr. is concerned as per agreement dated 14.12.2013 the Corporate Debtor GIPL has paid Rs. 10 Cr. and now there is no obligation to pay any amount to the Operational Creditor SPJV. Thus, there is no relationship between them as Corporate Debtor and Operational Creditor. Hon’ble Technical Member so for as the claim of Rs. 2.3 Crore is concerned after considering the various correspondences held that there is pre-existing dispute in regard to this claim, therefore, he is of the view that the Petition under Section 9 of the IBC is not maintainable and directed that the Appeal deserves to be allowed.
I have gone through the Judgments of Hon’ble Members. The Hon’ble Members have not recorded any point or points, legal or factual for referring the same to the third Member.
Ld. Counsels for the parties have cited the Opinion/Judgment in the case of R Narayanasamy Vs. Registrar of the Companies, Tamil Nadu, CA (AT) No.171 of 2020 for the purpose that when there is divergent Judgments delivered by the Members of Division Bench of this Appellate Tribunal then what is the scope of Adjudication by Third Member.
Ld. Counsel for the Appellant submitted that in R Narayanasamy’s Case (Supra) Hon’ble Third Member held that when question of law has neither been framed or referred, and it appears from the Judgments that the two Hon’ble Members have divergent views, on the basis of facts the Appeal should be dismissed by not interfering in the dismissal order of NCLT. The ratio of this judgment is not applicable in the facts of this case as the Hon’ble Member (T) in the opening para of the Judgment clearly recorded the points of dissent and they all are questions of law. Thus, the Judgment of R Narayanasamy in no manner either applicable to the present case or is a binding precedent which restricts the scope of opinion to be given by the Hon’ble Third Member in case of difference of opinion.
Ld. Counsel for the Appellant submitted that Hon’ble Member (T) crystalizes the point of dissent which are clearly questions of law for proceedings under IBC. The issues for dissent are (i) Pre-existing dispute (ii) Debtor-Creditor relationship between the Corporate Debtor and the Operational Creditor (iii) Maintainability of the Petition against the Corporate Debtor. The Hon’ble Supreme Court in the matter of Shankuntala Chandrakant Shreshti Vs. Prabhakar Maruti Garvali and Anr. (2007) 11 SCC 668 held that a jurisdiction question will involve a substantial question of law. A finding of fact arrived at without there being any evidence would also give rise to a substantial question of law. Applying this principle, it is apparent that the points of dissent are the questions of law.
Ld. Counsel for the Appellant submitted that Hon’ble Supreme Court in the case of Mobilox Innovations Pvt. Ltd. Vs. Kirusa Software Pvt. Ltd. (2018) 1 SCC 353 held that three factors are required to determine the maintainability of the Application under Section 9 of IBC, which pertains to question of law, namely default of the Operational Debt, documentary evidence showing that the debt is due and payable and has not been paid and no pre-existing dispute with respect to Operational Debt. All these questions of law have been clearly stated in the points of dissent by the Hon’ble Member (T).
Per Contra, Ld. Counsel for the Respondent No. 1 Operational Creditor (SPJV) submitted that in view of the R Narayanasamy’s case hearing by a Third Judge is only on the point of law on which the division bench could not concur. There is no hearing of the appeal by third Judge where the difference of opinion is on facts. In such a situation, the third Judge is required under law to confirm the impugned order. The Appellate Court as a matter of discretion, cannot substitute its own discretion for that of the trial court, as long as the trial court’s exercise of such discretion is shown to be perverse. In this case, difference of opinion between the Members is on facts and not point of law. Therefore, in view of the R Narayanasamy’s case the impugned order may be uphold and consequently dismiss the Appeal.
After hearing Ld. Counsel for the parties. I have gone through the R Narayanasamy’s Case. In this matter, the Hon’ble Members of the Division Bench have not recorded any points, legal or factual for referring the same to the Third Member. However, third Hon’ble Member proceeded to decide the Appeal on merits. Similarly, in the present Appeal also the Hon’ble Members of the Division Bench have not recorded any points, legal or factual for referring the same to the third Member. I, therefore, proceeded to consider the Appeal on merits.
Opinion on merits.
Brief facts of the Application under Section 9 of the IBC are that the Respondent No. 1 (Operational Creditor) (SPJV) had filed an Application before the Adjudicating Authority (National Company Law Tribunal, HDB) under Section 9 of the IBC seeking to initiate CIRP in respect of the Corporate Debtor (Appellant) (GIPL). As a matter of fact, in the said application under part IV particulars of Operational Debt, total amount of debt is mentioned as Rs. 36.01 Crores i.e. (settlement amount of Rs. 33.98 Crores plus amount withheld against motorized door and restoration of land/dump yard which is Rs. 2.03 Crores). Further, it is stated that the details of the transactions on account of which debt fell due are mentioned in the agreement dated 14.12.2013. In fact, the debt of Rs. 23.98 Croreswas payable in instalments due on various dates. The first instalment due date of payment was 28.02.2014 and the last 12th instalment due date of payment was 31.01.2015 as shown in Annexure -2 (Appeal Paper Book Pg. 111). In the column No. 2 of Part IV of the Application it is stated that the amount claimed to be in default is Rs. 31,40,37,776/- (Inclusive of interest as on 03.08.2017) and further that multiple defaults had occurred in repayment of the instalments and that default in repayment of last instalment occurred on 01.02.2015.
The Corporate Debtor GIPL resisted the claim of Rs. 33.98 Crores on the ground that the as per agreement dated 14.12.2013 the GIPL had paid Rs. 10 Crores on 24.12.2013 to the Operational Creditor SPJV and remaining amount Rs. 23.98 Crores was payable in instalments by the AJVPL, thus, GIPL had no further liability or obligation regarding the agreement dated 14.12.2013.Therefore, there is no relationship between them as Corporate Debtor and Operational Creditor and the claim of Rs. 2.03 Crores resisted on the ground that there is pre-existing dispute.
In the light of the pleadings of the parties following issues arose for consideration:
Whether the claim of Rs. 33.98 Crores is an Operational Debt legally recoverable from GIPL?
Whether the claim of Rs. 2.03 Crores is an Operational Debt legally recoverable from GIPL?
The Hon’ble Members in their Judgments have elaborately mentioned the arguments of the parties and the same arguments urged before me. Therefore, it is not required to reproduce the same in my opinion.
Issue No. (i)
Whether the claim of Rs. 33.98 Crores is an Operational Debt legally recoverable from GIPL?
Firstly I have considered the claim of Rs. 33.98 Crores. This amount is settled vide settlement agreement dated 14.12.2013 and the agreement is an admitted document, which is reproduced as under:
“AGREEMENT
This AGREEMENT (“Agreement')is made on this 14th day of December, 2013 at Hyderabad, India, amongst:
(A)Gati Infrastructure Private Limited (erstwhile Gati Infrastructure Limited), a company incorporated under the Companies Act, 1956 and having its registered office at 1-7. 293, M.G. Road, Secunderbad 500 003, Andhra Pradesh, India (hereinafter referred to as “GIPL' which expression shall, unless the context otherwise requires, be deemed to include its permitted assigns);
(B)SEW-Prasad JV, a company incorporated under the Companies Act, 1956.and having its registered office at 6-3-871, Snehlata Building, Greenlands Road, Begumpet, Hyderabad 500016, Andhra Pradesh, India (hereinafter referred to as "SPJV” which expression shall, unless the context otherwise requires, be deemed to include its permitted assigns);
(C)Coastal Project Limited, a company incorporated under the Companies. Act, 1956 and having its registered office at 237, 2 Floor, Bapuji Nagar, Bhubaneswar, 751009, Orissa, India (hereinafter referred to as “Coastal" which expression shall, unless the context otherwise requires, be deemed to include its permitted assigns);
(D)Amrit-Jal Ventures Private Limited (AJVPL), a company incorporated, under the Companies Act, 1956 and having its registered ofice at 7-7-293, M.G. Road, Sccunderabad .500 003, Andhra Pradesh, India (hereinafter referred to as the "Promoter" which expression shall, unless the context otherwise requires, be deemed to include its permitted assigns).
(E)Mahendra Investment Advisors Private Limited, a company incorporated under the Companies Act, 1956 and having its registered office at 1-7-293, M.G. Road, Secunderabad:500.003, Andhra Pradesh (hereinafter referred to as “MIAPL" which expression shall, unless the context otherwise requires; be deemed to include its permitted assigns); and
(F)Mr. Mahendra Agarwal, Individual, Indian citizen, son of Late Mr. Prabhu Dayal Agarwal, at present residing at 2A, The Address Apartments, Road No. 4, Banjara Hills, Hyderabad 500039, Andhra Pradesh, India (referred 10 as "MK”, which expression shall, unless it is repugnant to the context, include his heirs and successors).
(MIAPL and MK collectively referred to as "Guarantors');
(G)Mr. M. Sai Ram, Individual, Indian citizen, son of Mr. M Bhaskara Rao, at present residing at D. No. 8-2-472/6, Road No. 4, Hyderabad, 500039, Andhra Pradesh, India (referred to as the Arbitrator 1", which expression shall, unless it is repugnant to the context, include his heirs and successors);
(H)Mr. C.L. Rajam, (insert designation), Indian citizen, son of Mr. Narasaiah, at present residing at Plot No. 1264/A, Road No. 63/A, Jubilee Hills, Hyderabad 500033, Andhra Pradesh, India (referred to as the "Arbitrator 2", which expression shall, -unless it is repugnant to the context, include his heirs and successors)
(Arbitrator land Arbitrator 2 collectively referred to as “Arbitrators');
(Each of the parties mentioned above, are hereinafter collectively referred to as the "Parties" and individually as a "Party'), in relation to the full and final settlement of all dues and claims of SPJV and GIPL made against each other under the contract for execution of certain civil and hydro mechanical works dated August 12, 2006 executed amongst SPJV and GIPL ("Construction Contract) ("Settlement of Claims") in relation to the 99 (ninety nine) megawatts hydro power project plus 20% (Twenty per cent) continuous overload being developed by GIPL in the cast district of Sikkim on the rivers Rangpo and Rongli ("Project").
Whereas the Promoter hereby acknowledges that as per the existing Financing documents it has an obligation to fund any cost overrun of the Project.
Whereas Coastal, a party to the Existing MoU (defined hereafter), is the subcontractor to SPJV and GIPL or AJVPL does not have any obligation or liabilities to Coastal.
Whereas in relation to its obligation as aforesaid the Promoter has agreed to fund the amounts in accordance with the terms and conditions stated hereunder.
NOW THEREFORE THIS AGREEMENT WITNESSETHAND THE PARTIES HAVE AGREED AS FOLLOWS:
1.This AGREEMENT shall supersede all previous arrangements between any and all of the Parties in relation to the Settlement of Claims and further on and from the date or this 'AGREEMENT: (i) the Memorandum of Understanding dated July 10, 2012 entered into amongst GIPL, SPJV. Arbitrators and Coastal ("Existing MoU") shall stand terminated in its entirety and no party thereto shall have any continuing rights and obligations thereunder; and (ii) this AGREEMENT shall be the only arrangement between any and all of the Parties in relation to the Settlement of Claims and shall govern all the rights and obligation of the Parties in relation to the Settlement of Claims.
2.The Parties mutually agree that pursuant to this AGREEMENT and notwithstanding anything contained in the Existing MoU, upon the execution of this AGREEMENT, the following terms shall be applicable in respect of the Settlement of Claims:
2.1All amounts (including principal or interest) that are due and payable to SPJV for the purpose of Settlement of Claims shall not exceed the aggregate of the amounts set out in Schedule 1 hereto ("Settlement Amount"'); and SPJV has agreed that payment of the Settlement Amount shall result in full and final payment and settlement of all payments as due (present & future) in respect of the Construction Contract. Nothing contained in this Agreement shall however discharge SPJVfrom its continuing obligations under the Construction Contract, including obligations in respect of provisions pertaining to defects liability in Clause 27 of the Construction Contract and SPJV shall be bound by such provisions of the Construction Contract in accordance with the terms thereof.
2.2GIPL hereby confirms that on or after the date of this Agreement, it shall not raise any claims against SPJV other than claims, if any, arising pursuant to continuing obligations under the Construction Contract of the nature described in Clause 2.1 above.
2.3Out of the aggregate Settlement Amount, GIPL shall pay an amount of Rs. 10 Crores representing RA bills due and part of interest amount to SPJV upon the signing of this Agreement. Upon payment of Rs. 10 Crores, GIPL shall have no further liability or obligation in respect of the Settlement Amount. SPJV may initiate any suit action or proceeding against only the Promoter (to the exclusion of GIPL) for recovery of such balance Settlement Amount in excess of Rs. 10 Cr. It is mutually agreed and understood amongst the Parties that GIPL shall arrange the payment of Rs.10 crores within 2/3working days of execution of this Agreement.
2.4Notwithstanding anything contained in any document/agreement/understanding, the Settlement Amount(to the exclusion of the amount set out in Clause2.3 above) shall be treated as a repayment obligation of the Promoter (to the exclusion of the GIPL) and become due and payable by the Promoter to SPJV. Such amounts shall be paid by the Promoter in 12 (twelve) equal monthly instalments (EMI) from the commercial operation date of the Project which shall be end of February, 2014 and the same shall carry no interest. However, in case of any delay/default in the payment of any EMI or in the final instalment, and such default is not remedied by the Promoter within a period of 30 (thirty) days from the date on which such amounts became due and payable, the Promoter shall pay interest on such defaulted amount for the period of delay @ 18% p.a.
2.5SPJV hereby confirms to GIPL and the Promoter that all dues relating to its Subcontractors including Coastal and dues relating to the workers engaged" by SPJV and its sub-contractors have been settled in full and remainder of dues if any payable to its sub-contractors and/or workers shall be settled in full by SPJV. SPJV hereby undertakes to, immediately on execution of this AGREEMENT and receipt of initial payment of'Rs.10 cr. from "GIPL, inform concerned department of the Government in 'Sikkim in writing of the same and withdraw any communication to the contrary that may have been sent to Government of Sikkim.
2.6Upon the Promoter paying the Settlement Amounts as set out in Clause 2.4 to SPJV, GIPL agrees that Promoters is eligible for recovering of trued up amounts, to the extent paid by them to SPJV from GIPL as a shareholder in GIPL and in the manner as is agreed upon between GIPL and Promoter in the existing shareholder agreement dated September 5, 2013 between GIPL and AJVPL:
2.7SPJV shall not demand or receive any payment; prepayment, repayment, redemption or any distribution in respect, or on account, of any Settlement Amount payable to them under this AGREEMENT other than to the extent and in the manner set out in this AGREEMENT and SPJV irrevocably agree not to take any legal action or proceedings or make any claim against the GIPL in relation to the Settlement of Claims in any circumstance, once the payment obligations of GIPL as set out in Clause. 2.3. above has been satisfied in full.
3.The Guarantors hereby undertakes to execute an (instrument/deed of Guarantee) in form and manner acceptable to SPJV wherein the Guarantors shall, inter alia, guarantee as a primary obligor, the repayment obligations of under this AGREEMENT and undertake that whenever any Settlement Amount is not paid as per the terms of this AGREEMENT as may be applicable, the Guarantors shall immediately pay that amount as if he were the principal debtor.
4.No amendment/change to this AGREEMENT shall be binding unless in writing and signed by duly authorised representatives of the Parties.
5.All disputes and differences arising out of this AGREEMENT shall be subject to the exclusive jurisdiction of the courts of Hyderabad, India.
6.The provisions of this Agreement shall become effective automatically and without any further action on and from the date on which:(i) all Parties have affixed their signatures to this Agreement; and (ii) GIPL has made the payment of an amount of Rs. 10 Crores to SPJV in accordance with Clause 2.3 hereof.
7.Each of the signatories of this Agreement jointly and severally represent and warrant that they have full power and authority, as by law, to enter into this Agreement and other transaction documents arising out of this agreement and all approvals, consents and authorizations have been duly obtained.
This Agreement shall remain in full force until the date on which all settlement amounts are paid in full to the SPJV. The parties hereto set their hands to this document.
Signed.”
From bare reading of Clause 2.3 of the agreement, it is apparent that as per the aggregate Settled amount (i.e. 33.98 Crores), GIPL has to pay an amount of Rs. 10 Crores representing RA bills due and part of interest amount to SPJV upon the signing of this Agreement. Upon payment of Rs. 10 Crores, GIPL shall have no further liability or obligation in respect of the Settlement Amount. SPJV may initiate any suit, action or proceeding against the Promoter (to the exclusion of GIPL) for recovery of such balance settled amount in excess of Rs. 10 Crores. It is an admitted fact that after execution of settlement agreement GIPL had paid Rs. 10 Crores on 24.12.2013. As per clause 2.7 of the agreement, SPJV irrevocably agreed not to take any legal action or proceeding or make any claim against the GIPL in relation to the Settlement of Claims in any circumstance, once the payment obligations of GIPL as set out in Clause. 2.3. has been satisfied in full. Admittedly, GIPL has paid Rs. 10 Crores on 24.12.2013.
As per the settlement agreement the AJVPL has to pay the balance amount of Rs. 23.98 Cr. in 12instalments as shown in Annexure -2 Paper Book (Pg. 111). First instalment was due on 28.02.2014 and the last i.e. 12thinstalment was due on 31.01.2015. As per the Clause 2.4 of the agreement in case of any delay/default in the payment of any EMI or in the final instalment, and such default is not remedied by the Promoter within a period of 30 (thirty) days from the date on which such amounts became due and payable, the Promoter shall pay interest on such defaulted amount for the period of delay @ 18% p.a., subsequently AJVPL paid only Rs. 438, 62,122/- to SPJV. However, failed to make further payments as per settlement agreement dated 14.12.2013.
As per clause 3 of the agreement, the Guarantors have undertaken to execute an (instrument/deed of Guarantee) in form and manner acceptable to SPJV wherein the Guarantors shall, inter alia, guarantee as a primary obligor, the repayment obligations of under this agreement and undertaken that whenever any Settlement Amount is not paid as per the terms of this agreement as may be applicable, the Guarantors shall immediately pay that amount as if they were the principal debtor. In this agreement, MIAPL and MK are the guarantors.
Now, we have considered the email dated 21.01.2015, which is sent by Sunil Gupta to Arbitrator, CL Rajam. Which is as under:-
“From: [email protected]
Sent: Wed, Jan 21, 2015 5:13 PM
Sub: - Payment Plan
Dear sir, it was nice meeting other day, regarding payments, please note that we shall be making one crore payment every month starting with this month end. Further, we are signing long-term EPA expected in April and thereafter lenders have agreed to release funds. We have already signed minutes with PTC in this regard. Thereafter, we shall make full payment.
With warm regards. Sun sent from my iPad.”
Ld. Adjudicating Authority held that this email was sent by Sunil Gupta as Director of GIPL and this is an acknowledgement on behalf of the GIPL. Sunil Gupta has sent the aforesaid email as a director of AJVPL for this purpose, it is useful to refer the letter dated 22.03.2015 which is addressed to Sunil Gupta Director of AJVPL by SPJV it is reproduced here:
“To Mr. Sunil Gupta Director Amrit Jal Ventures Pvt.Ltd. 1-7-293, M.G Road, Secunderabad – 500 003
Dear Sir,
Sub: No objection for release the funds directly to SEW Infrastructure Ltd.
With reference to the above subject, we hereby agree to the adjustment of funds to the tune of Rs. 18 Cr. to be paid to SEW Infrastructure Ltd against the outstanding as per the full and final settlement dated 14 December, 2013. We further confirm that the total outstanding amount shall be reduced by Rs. 18 Cr. once the same is paid to SEW infrastructure Ltd.
Thanking you,
With regards
For SEW Prasad Joint Venture
Authorized Signature
With the aforesaid letter, it is clear that Sunil Gupta has sent email dated 21.01.2015 as a Director of AJVPL and not as a director of GIPL. In the aforesaid letter, SPJV requested Mr. Sunil Gupta that under the agreement dated 14.12.2013 the amount which is payable to SPJV out of that amount Rs. 18 Crores be directly paid to SEW Infrastructure Ltd. (SIL) and the same shall be adjusted towards the outstanding amounts. The Ld. Adjudicating Authority has erroneously held that the email dated 21.01.2015 is admission of debt by the Corporate Debtor GIPL.
Now, I have considered the MOU dated 20.05.2016, the MOU was executed by (i) SEW Infrastructure Ltd. (ii) Amrit Jal Ventures Pvt. Ltd. (AJVPL) (iii) Intercontinental Infrastructure Ltd. (iv) SEW Pd. JV (SPJV). MOU is reproduced as under:
MEMORANDUM OF UNDERSTANDING
This Memorandum of Understanding executed at Hyderabad on this 20 Day of May, 2016 by amongst: -
1.SEW INERASTRUCTURE LIMITED, a company. Incorporated under the companies Act, 1956 and Having registered office at 6-3-871, Snehalata Greenlands Road, Begumpat Hyderabad 500016 and duly represented by its Director, Mr. V Raj Kumar (hereinafter referred as 'First party') which expression shall always include its successors and assigns etc, of the FIRST PART; and
2.Amrit Jal Ventures Private Limited a company incorporated under the companies Act, 1956 and having registered office a0 1-7-293, M.G.Road, Secunderabad-500003 and duly represented by its Director, Mr. Anil Chattár Singh Kávādiya: (hereinafter referred as "Second party”, which expression shall always Include Its successors and assigns etc., of the SECOND PART; and
3.INTERCONTINENTAL INFRASTRUCTURE LIMITED, a company. Incorporated under the companies Act, 1956 and having registered office at Plot No.1267/A Road No:63/A, Jubilee Hills, Hyderabad. 500 033 and duly represented by Its Chairman Mr.CL Rajam (hereinafter referred as 'Third party which expression shall always include Its successors and assigns etc., of the THIRD PART) and
4.SEU-Prasad JV, a Joint Venture Entry having office at 6-3-871 Snehalata Greenlands Road, Begumpet, Hyderabad 500016 and duly represented by its authorized signatory, Mr. G Ramesh (hereinafter referred as (Fourth Party) which expression shall always include its successors and assigns etc, of the Fourth Part:
Whereas
The Fourth Party had earlier executed through the First Party various civil works relating to the Chuzachen Hydro Electric Project, located at Rongli, 'East Sikkim for Gati Infrastructure Private Limited,
In respect of the said project works executed for GATI Infrastructure Private limited various amounts are due to the Fourth Party and subsequently these dues are transferred to and agreed to be paid by Amrit Jal Ventures Private Limited, the Second Party. The dues receivable by the Fourth Party have been transferred/assigned to the First Party. There are other business/ICD transactions between the First party and the Second Party.
On account on these items huge amounts are payable by the Second Party to the First party and the details of the same are available in various agreements / documents executed/exchanged between the First party, Second Party and Fourth Party, in respect of the various business/ ICD transactions between the Third Party and the first party, there are huge dues payable by the First Party to the Third party with a view to reduce the dues payable by the First Party to the Third Party, the First party has requested the Second Party to make payments to the Third party on its behalf and this request has been accepted by the Second party.
Accordingly, this Memorandum of understanding witnesseth as under:
1.Against the out-standing dues payable towards present and future liabilities to the First Party and Fourth Party (transferred to the First Party) the Second Party shall make payments up to Rs. 8:00-crores (Rupees: Eight: Crores Only) to the Third party under intimation to the First party.
2.Payments made as per above clause will be treated as payments made to first party and the first party will confirm and issue receipts to the Second Party, after obtaining confirmation from the Third Party
3.As and when amounts are received from the second party, the Third Party shall inform the same to the first party to enable it to adjust the account of the second party in its books of account and issue receipts to the Second Party,
4.As and when amounts are received from the Second Party, the Third Party shall adjust same against the amounts due from the First Party and Issue receipts to the first party.
5.Upon payment of Rs.8.00 Cr by the Second Party to the third party the obligation of all the parties under this Memorandum of Understanding stand fulfilled.
6.All the Three parties represent that they have the requisite corporate power to enter into & perform (and have taken all necessary actions to authorize the entry into and performance of) this Memorandum of Understanding and transactions contemplated by this Memorandum of Understanding and that this Memorandum of Understanding does not conflict with any of their constitutional documents or any Law applicable to them,
7.The Courts in Hyderabad alone shall have the Jurisdiction to try any dispute or difference arising out of this Memorandum of Understanding.
IN WITNESS WHERE OF the parties have executed this Memorandum of Understanding on the day, month and year first above written.
In the aforesaid MOU, it is admitted by the SPJV that SPJV had executed through SIL various civil works relating to the Chuzachen Hydro Electric Project for GIPL and various amounts are due to SPJV and subsequently these dues are transferred to and agreed to be paid by AJVPL. This MOU also provides that the dues receivable by SPJV have been transferred/assigned to SEW Infrastructure Ltd. (SIL) first party of the MOU.
Thus, the MOU again confirmed the terms of the agreement dated 14.12.2013 that the amounts which are due to SPJV from GIPL are transferred to AJVPL. That is why SPJV has sent a letter on 22.03.2015 to Sunil Gupta director of AJVPL that they have no objection to release funds directly to SEW Infrastructure Ltd.
Hon’ble Member (J) in his Judgment consider the clause 2.6 of the agreement dated 14.12.2013. GIPL is one of the subsidiary of AJVPL. The clause 2.6 provides that upon the promoter paying the settlement amounts as set out in clause 2.4 to SPJV, GIPL agrees that promoter is eligible for recovering of trued up amounts, to the extend paid by the them to SPJV, from GIPL as a shareholder. It means the holding company AJVPL after paying the balance amount i.e. Rs. 23.98 Crores to SPJV can recover the trued up amount from GIPL. This clause does not create any liability of GIPL towards SPJV.
With the aforesaid discussion, I am of the view that in the Application under Section 9 of the IBC for the amount i.e. Rs. 33.98 Crores in which, admittedly Rs. 10 Crores has been paid by the GIPL and the remaining amount is to be paid by AJVPL and in case they failed to pay the amount, the Operational Creditor (SPJV) can recover the amount from AJVPL and the guarantors i.e. MIAPL and MK. However, the SPJV cannot recover any amount under the agreement dated 14.12.2013 from the GIPL. Thus, I hold that for the purpose of this amount, there is no relationship between them as Operational Creditor (SPJV) and Corporate Debtor (GIPL).
Issue No. (ii)
Whether the claim of Rs. 2.03 Crores is an Operational Debt legally recoverable from GIPL?
As per the Application Rs. 2.03 Crores withheld against the motorised door and restoration of land/dump yards by the GIPL. According to the GIPL the SPJV have not completed the work as per satisfaction of the GIPL. Therefore, this amount was withheld. According to the GIPL, this is a pre-existing dispute. On the other hand, as per SPJV they have completed the work to the satisfaction of GIPL and they have issued completion certificate on 24.09.2015. According to GIPL, completion certificate is issued at the request of SPJV that they have to submit the certificate to other clients.
To resolve the controversy, it is useful to refer the correspondence between the parties:
Whether certificate of merit is a certificate of completion of work?
On 29.05.2014 SIL sent an email to GIPL as under:-
Dear Mr. Rajesh Sharma,
As directed by Shri Sanjeev Upadhaya Saab, we are here with enclosing the format of work completion certificate and work done certificate. We request you to kindly issue the certificate at the earliest, as we require the same for submission to other clients for PQ purpose.
Thanking you sir.
With regards
Ramesh
SEW Infrastructure Ltd.
This email is not disputed by the SIL or SPJV. Therefore, GIPL issued certificate of merit even without completion of the work only because SIL has to submit certificate of merit to his other client.
It is also useful to refer the letter dated 23.05.2017 (At Pg. 189) which is reproduced here:
“To, MS GATI Infrastructure Pvt. Ltd. 268, UdyogVihar Phase-IV, Gurgaon - 122 016 Kind Attention: SriSanjeev Upadhyay, President (Hydro)
Dear Sir,
Sub: Execution of various Civil Works of Chuzachen. Hydro Electric Project, Request for Release for withheldamount.
Ref:
1)Agreement dated. 14 December, 2013
2)Our Ir. Ref: SEW/TW/F.CHEP-GIL (SR-0649, Dated 12th July 2104.
3)Your Ir. Ref: No, GIL/CHEP/HQ/SPJV/14-15/002 Dated 25 July,2014
4)Our Ir. Ref: SEW/TW/F.CHEP GIL/SR-0677, Dated 25 July 2104.
5)Our Ir. Ref. No.: SEW/CHEP/005/14-15, Dated 22nd August 2014.
6)Our Ir. Ref: SPJV/F.CHEP/SR-0044 Dated 23rd January 2015
with reference to above subject, this is to inform you the pending works relating to cleaning of areas utilised by us have been complete long back and the project is successfully running for the last few years. You are well aware of the fact that an amount of Rs. 2,00,00,000/- (Rupees Two Crores only) was withheld for completing above works. Out of the above mentioned amount Rs. 5,00,000/ (Rupees Five Lakhs Only) was released till now and the balance is still pending to be released. We have made several requests in vain. Hence we once again request you to kindly release the balance amount of Rs. 1,95,00,000/- (Rupees One Crore Ninety-Five Lakh only) Immediately.
Thanking You, Sir
With Regards,
For SEW Prasad Joint Venture
G. Ramesh).
Authorised Signatory.”
This letter is sent by SPJV to GIPL on 23.05.2017 i.e after issuance of certificate of merit dated 24.09.2015. However, in this letter there is no reference of completion certificate. On the other hand, it is admitted that Rs. 2 Crores was withheld for completing work. Thus, it can be inferred that the certificate of merit is not actual certificate of completion of work, but it is only issued to facilitate the SPJV that he can submit the same to their other clients.
Now, I have considered whether the SPJV has actually completed the work to the satisfaction of GIPL? SPJV has not placed on record any certificate of completion of work, there is a dispute between them in regard to completion of work. For this purpose, it is useful to refer the letter dated 21.07.2014 addressed to SPJV by GIPL at (Pg. 185) in this letter GIPL stated that the payment against whole amount of Rs. 2.03 Crores shall be made after completion of work to the satisfaction of GIPL and it is also requested to speed up the pace of the work and complete the pending work at side. On 23.01.2015 SPJV has sent a letter to GIPL and requested that they have almost all the pending works completed except shifting of equipment and machinery and they have requested to release at least 1 Crores from the pending dues at (Pg. 187). On 10.08.2017, the GIPL has sent a letter to SPJV and stated that they have not completed the project construction despite lapse of more than ten years, the incomplete work and deficiencies, defect and shortcoming are shown in the letter. It is stated that the work has not been completed, therefore, certain amount withheld by them. It is true that the letter dated 10.08.2017 has been sent to SPJV after receiving notice under Section 8 of the IBC.
With the aforesaid correspondence, it is clear that SPJV has not completed the work to the satisfaction of GIPL and therefore, they have withheld Rs. 2.03 Crores and subsequently, released Rs. 5 Lacs and no completion certificate was issued in favour of SPJV. With these facts, I am of the view that there is a pre-existing dispute between the parties, therefore, Section 9 Application is not maintainable.
Hon’ble Supreme Court in the case of Mobilox Innovations Pvt. Ltd. Vs. Kirusa Software Pvt. Ltd. (2018) 1 SCC 353 held that:-
51.It is clear, therefore, that once the operational creditor has filed an application, which is otherwise complete, the adjudicating authority must reject the application under Section 9(5)(2)(d) if notice of dispute has been received by the operational creditor or there is a record of dispute in the information utility. It is clear that such notice must bring to the notice of the operational creditor the “existence” of a dispute or the fact that a suit or arbitration proceeding relating to a dispute is pending between the parties. Therefore, all that the adjudicating authority is to see at this stage is whether there is a plausible contention which requires further investigation and that the “dispute” is not a patently feeble legal argument or an assertion of fact unsupported by evidence. It is important to separate the grain from the chaff and to reject a spurious defence which is mere bluster. However, in doing so, the Court does not need to be satisfied that the defence is likely to succeed. The Court does not at this stage examine the merits of the dispute except to the extent indicated above. So long as a dispute truly exists in fact and is not spurious, hypothetical or illusory, the adjudicating authority has to reject the application. ………………..
56.Going by the aforesaid test of “existence of a dispute”, it is clear that without going into the merits of the dispute, the appellant has raised a plausible contention requiring further investigation which is not a patently feeble legal argument or an assertion of facts unsupported by evidence. The defense is not spurious, mere bluster, plainly frivolous or vexatious. A dispute does truly exist in fact between the parties, which may or may not ultimately succeed, and the Appellate Tribunal was wholly incorrect in characterizing the defense as vague, got-up and motivated to evade liability.
Hon’ble Supreme Court has held that the Adjudicating Authority is to see at the time of admitting or rejecting the Application whether there is plausible contention which requires further investigation and that the dispute is not patently feeble legal argument or an assertion of fact unsupported by evidence. Therefore, so long dispute exist in fact and it is not spurious hypothetical or imaginary, Adjudicating Authority has to reject the Application. Moreover, the existence of dispute must be pre-existing i.e. it must exit before the receipt of demand notice or invoice.
In the present case, there is a pre-existing dispute, therefore, the Application under Section 9 of the IBC is liable to be dismissed. However, Ld. Adjudicating Authority has admitted the Application and initiated CIRP without considering aforesaid documents.
With the aforesaid discussion, I have recorded my opinion with regard to merits of the Appeal. I am of the view that the Appeal deserves to be allowed as has been recorded by the Hon’ble Member (T).
It is directed that the Opinion/Judgment may be placed before the Division Bench, which recorded the divergent views, for passing orders with regard to disposal of the Appeal.