Kay Bouvet Engineering Ltd. vs Overseas Infrastructure Alliance (India) Private Limited

HELD: 1.1 Perusal of the ss. 8 and 9 of the Insolvency and Bankruptcy Code, 2016 would reveal that an “Operational Creditor”, on the occurrence of default, is required to deliver a “Demand Notice” of unpaid “Operational Debt” or a copy of invoice, demanding payment of amount involved in the default to the “Corporate Debtor” in such form and manner as may be prescribed. Within 10 days of the receipt of such “Demand Notice” or copy of invoice, the “Corporate Debtor” is required to either bring to the notice of the “Operational Creditor” “existence of a dispute” or to make the payment of unpaid “Operational Debt” in the manner as may be prescribed. Thereafter, as per the provisions of Section 9 of the IBC, after the expiry of the period of 10 days from the date of delivery of notice or invoice demanding payment under sub-section (1) of Section 8 and if the “Operational Creditor” does not receive payment from the “Corporate Debtor” or notice of the dispute under sub-section (2) of Section 8 of the IBC, the “Operational Creditor” is entitled to file an application before the adjudicating authority for initiating the Corporate Insolvency Resolution Process. [Para 13][120-B-E]

1.2 It is clear that once the “Operational Creditor” has filed an application which is otherwise complete, the adjudicating authority has to reject the application under Section 9(5)(ii)(d) of IBC, if a notice has been received by “Operational Creditor” or if there is a record of dispute in the information utility. What is required is that the notice by the “Corporate Debtor” must bring to the notice of “Operational Creditor” the existence of a dispute or the fact that a suit or arbitration proceedings relating to a dispute is pending between the parties. All that the adjudicating authority is required 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 reject a spurious defence which is a mere bluster. However, at this stage, the Court is not required to be satisfied as to whether the defence is likely to succeed or not. The Court also cannot go into the merits of the dispute except to the extent indicated hereinabove. So long as a dispute truly exists in fact and is not spurious, hypothetical or illusory, the adjudicating authority has no other option but to reject the application. [Para 17][126-E-H; 127-A-B]

1.3 It can be seen that the claim of the respondent Company is that in the reply filed to its Notice of Motion by appellant Company, it has admitted that M Company has, as a replacement of Overseas, appointed appellant as the Contractor. As such, the Tripartite Agreement dated 18th December 2010, stands vitiated and superseded. As such, appellant cannot perform under the said Tripartite Agreement. According to appellant, thus, in view of the admission in the reply, appellant is liable to refund the advance amount forthwith. [Para 20][128-C-E]

1.4 It can be seen that in reply addressed by appellant to the respondents, the appellant has clearly stated that the said amount of Rs.47,12,10,000/- was received as advance money on behalf of M Company. It has been specifically stated that in the agreement entered into between M Company and the appellant on 5th July 2017, the said advance payment of

has

been duly considered. It is stated that the execution of the fresh contract in favour of appellant in no manner creates an automatic liability on appellant. As such, appellant has pressed into service the “existence of dispute” for opposing the demand made by respondents. [Para 22][129-D-F]

1.5 A perusal thereof would clearly reveal that M Company was to release payment of two invoices of respondent’s for USD

10.5 Million (USD 9.00 Million + USD 1.50 Million). It would further reveal that respondent was to release payment of USD

10.62 Million to appellant on submission of Advance Bank Guarantee and Performance Bank Guarantee to M Company and its confirmation and acceptance by M Company. [Para 25][130F-G]

1.6 It is abundantly clear that the case of appellant that the amount of Rs.47,12,10,000/- which was paid to it by respondent’s, was paid on behalf of M Company from the funds released to respondent by Exim Bank on behalf of M Company, cannot be said to be a dispute which is spurious, illusory or not supported by the evidence placed on record. The material placed on record amply clarifies that the initial payment which was made to appellant as a sub-Contractor by respondent who was a Contractor, was made on behalf of M Company and from the funds received by respondent from M Company. It will also be clear that when a new contract was entered into between M Company and appellant directly, M Company had directed the said amount of Rs.47,12,10,000/- to be adjusted against the supplies to be made to M Company for the purpose of completing the Project. On the contrary, the documents clarified that the termination of the contract with respondents would not absolve respondents of any liability for the balance of the LoC 1st tranche of 25 Million disbursed to them other than USD 10.62 paid to Kay Bouvet. [Para 31][134-C-F]

1.7 In these circumstances, the NCLT had rightly rejected the application of respondents after finding that there existed a dispute between the appellant and the respondents and as such, an order under Section 9 of the IBC would not have been passed. NCLAT has patently misinterpreted the factual as well as legal position and erred in reversing the order of NCLT and directing admission of petition under Section 9 of the Code. [Para 32][134F-G] Mobilox Innovations Private Limited v. Kirusa Software Private Limited (2018) 1 SCC 353 : [2017] 10 SCR 1006 – relied on.