Excel Tubes India Private Limited vs JKR Techno Engineers Private Limited

Abni Ranjan Kumar Sinha, J

The present petition is filed under Section 9 of Insolvency and Bankruptcy Code, 2016 read with Rule 6 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rule, 2016 by the Applicant/operational creditor, i.e. "M/s. Excel Tubes India Private Limited "for initiation of Corporate Insolvency Resolution Process against the Respondent/Corporate Debtor Company "M/s. JKR Techno Engineers Pvt. Ltd.".

Brief Facts of the case are as follows:

i. The Corporate Debtor had placed purchase orders upon the Operational creditor being:

a. Purchase Order dated 13.04.2015 for 510 meters of 9 different sizes of "Maharashtra Seamless" make IBR pipes, 1899 meters of 10 different sizes of "Jindal" make Ms. ERW Black Pipes and 120 meters of 3 different sizes of "Jindal" make Galvanized Pipes as per IS:1239 for its Project Site at M/s. JKR Techno Engineers Private limited, C/o Shristri Hotel Private limited, 5 Star Hotel Complex, Plot No. AALL/CBD/2, New Town Rajarhat, Kolkata-700156.

b. The Corporate Debtor has placed a Purchase Order dated 19.08.2015 for purchase of 48 meters of "Jindal" make Ms. ERW Black Pipes and 42 meters of "Jindal" make Galvanized Pipes as per IS:1239 for its Project Site at M/s. JKR Techno Engineers Private Limited, C/o Apeejay Surrendra Park Hotels Limited, 17, Park Street, Kolkata-700016.

c. Purchase Order dated 04.09.2015 for purchase of 150 meters of "Jindal" make Ms. ERW Black Pipes and 78 meters of "Jindal" make Galvanized Pipes as per IS: 1239 for its project site at M/s. JKR Techno Engineers Private Limited, C/o Apeejay Surrendra Park Hotels Limited, 17, Park Street, Kolkata-700016.

d. Purchase order dated 24.09.2015 for purchase of 108 meters of 6 different sizes of "Maharashtra Seamless" make IBR Pipes, 18 meters of 25mm size of "Jindal" make Ms. ERW Black Pipes and 18 meters of two sizes of "Jindal" make Chimney Pipes confirming to IS Standards on 24.09.2015 for its project site at M/s. JKR Techno Engineers Private Limited, C/o Apeejay Surrendra Park Hotels Limited, 17, Park Street, Kolkata-700016.

ii. The Operational Creditor raised its Invoice No. 159/B/2016 dated 21.08.2015, 181/BS/2016 dated 07.09.2015, 182/BS/2016 dated 08.09.2015, 218/BS/2016 dated 15.10.2015, 276/BS/2016 dated 05.12.2015, 282/BS/2016 dated 12.12.2015, 283/BS/2016 dated 13.12.2015 and 334/B/2016 dated 22.01.2016 for Rs. 22,777/-, Rs. 43,464/-, Rs. 41,083/-, Rs. 1,28,585/-, Rs. 4,19,395/-, Rs. 3,01,982/-, Rs. 1,37,814/- and Rs. 1,966/-.

iii. Out of the total amount of Rs. 10,97,066/-, the Corporate debtor on 08.09.2015 and 24.11.2015 made part payments amounting to Rs. 1,18,379/-

iv. The operational Creditor for non-receipt of Rs. 9,78,687/- issued several reminders to the Corporate Debtor but the said amount had not been paid by the Corporate Debtor.

v. The Ledger Accounts maintained by the Operational creditor discloses that a total principal outstanding amount is of Rs. 9,78,687/-.

vi. Demand Notice dated 16.08.2018 in Form 3 under rule 5 of the Insolvency & Bankruptcy (Application to the Adjudicating Authority) Rules, 2016 was issued by the Operational creditor demanding a principal sum of Rs. 9,78,687/- along with interest @ 18% p.a.

vii. As per delivery status report, one of the notice was not delivered to the respective address of the Corporate debtor on 28.08.2018, the tracking report of India Post shows "NOT DELIVERED UNCLAIMED" and other notices were delivered on 25.08.2018 and 29.08.2018.

viii. The Corporate Debtor replied to the Demand Notice dated 26.09.2018 stating that as per the terms and conditions of the purchase orders, the Operational Creditor had to provide Material test Certificate (IBR Certificate) to the Corporate Debtor and the same were integral part of the contract but the Operational creditor failed to provide those certificate. Since the Operational Creditor failed to provide those test certificates of the materials despite many reminders, the corporate Debtor had to rope in Advance Engineering Corporation and got those material tested and paid Rs. 1,21,155/- vide Tax Invoice No. 0415 dated 20.09.2016.

ix. The Corporate Debtor issued Cheque No. 133886/- for Rs. 4,19,133/- and Cheque No. 133887 for Rs. 4,19,134/- dated 16.03.2016 to the Operational Creditor which were dishonoured upon presentation by its banker with remarks "Funds Insufficient".

The amount claimed to be default is Rs. 9,78,687/- along with 18% p.a. interest which amounts to Rs. 4,69,126/-. The total amount due is Rs. 14,47,813/-. The above debt is due since 13.12.2015.

The Corporate debtor contended the following in its reply dated 12.10.2019:

i. The Applicant had failed to supply the material test report of the material supplied to the respondent.

ii. The present claim of the applicant is time barred as the applicant himself admittedly stated in the application that debt is due since 13.12.2015 but the present application has been filed after three years from 13.12.2015.

iii. The respondent had to incur Rs. 1,21,155/- towards test of material received from the applicant.

iv. The respondent suffered loss because of late execution of the project as no "Test report" was supplied by the applicant despite many telephonic conversations.

We have heard the Learned Counsel appearing for the Applicant as well as the Respondent and perused the averments made in the application and the documents enclosed with the application and reply.

Learned Counsel appeared for the applicant in course of his arguments submitted that on the basis of the purchase order issued by the respondent which are from page 27 to 34 of the paper book, the Operational Creditor has raised the invoices, which are from page 35 to 50 and he further submitted that out of total amount of Rs. 10,97,066/-, the Corporate Debtor on 8th September 2015 and 24th November 2015 made part payment of Rs. 1,18,379/.

He further submitted that since Rs. 9,78,687 remains unpaid, therefore, the Operational Creditor has made several requests and sent several reminders and he further submitted that thereafter Corporate Debtor issued cheques in order to discharge the liability and same were duly presented before the bank but both the cheques were dishonoured, on 16th March, 2016 and the concerned documents are from page 53 to 56. He further submitted that thereafter the Operational Creditor delivered the demand notice dated 16 August, 2018 and the Corporate Debtor has sent a reply on 26th September, 2018 within 10 days of the receipt of the demand notice and in the reply, the Corporate Debtor, for the first time, has raised that there are terms and conditions of the purchase order.

He further submitted that prior to the delivery of demand notice, no such dispute was raised. He further submitted that although the Corporate Debtor appeared and filed reply but no such document was produced by the Corporate Debtor to show that prior to the delivery of the demand notice any dispute was ever raised.

He further submitted that since the default amount is more than one (01) lakh, therefore, a CIRP may be initiated against the Corporate Debtor.

On the other hand, Learned Counsel appeared for the Corporate Debtor submitted that the claim is barred by limitation and the Corporate Debtor has raised the disputes in respect of the amount claimed by the applicant.

He further submitted that the applicant had failed to supply the material test certificate/report of the material supplied to the respondent and this has been raised in the reply to the demand notice, so the present application is liable to the dismissed.

Considering the submissions made on behalf of the parties on perusal of the averments made in the application as well as the reply filed on behalf of the Corporate Debtor, we find that although the Corporate Debtor has sent the reply to the demand notice within times and raised the disputes by stating that according to the terms and conditions of the purchase order, the Operational Creditor was required to submit the material test certificate but the Operational Creditor fails to provide the same and therefore, the Corporate Debtor got the material tested and paid Rs. 1,21,155 by tax invoice number 0415 dated 20th September, 2016 and claimed that amount be repaid by the Operational Creditor and on this ground, he holds the payment.

And at page 11 of the reply dated 16.07.2019, he annexed the tax invoice showing Rs. 1,24,150/- was paid by the Corporate Debtor to Advanced Engineering Corporation. The materials laboratory test certificate was required to be submitted by the Operational Creditor, which would be evident from the document enclosed at page 34 of the application on the basis of which the applicant claimed that the Operational Creditor has supplied the materials and raised the invoices.

We further find that the in para-1 of the reply and reply to the demand notice which is at page 68 of the application, it is specifically mentioned that as per the terms and conditions of the purchase order, the Operational Creditor was required to furnish the material test certificate but nowhere in the application, the Operational Creditor has whispered even the single word, as per the terms and conditions of the purchase order, he was not required to submit the material test certificate, even no rejoinder to the reply is filed on behalf of the Operational Creditor to controvert the statement on the basis of which the Respondent/Corporate Debtor claimed that prior to the issuance of the demand notice, he has paid Rs. 1,21,155 for material test certificate, which is the condition of the purchase order.

Therefore, on the basis of the aforesaid facts, we find that although the Operational Creditor has claimed that he raised the invoice on the basis of purchase order issued by the respondent but at the same time, we find, he has violated the terms and conditions of the purchase order because nowhere he claimed that he has presented the material test certificate, which was subsequently, issued by the concerned authority and the payment was made by the Corporate Debtor, which would be evident from annexure R-1 at page 11 of the reply and on the basis of that, the Corporate Debtor claimed that he withhold the amount. Since this document shows that it is prior to the issuance of the demand notice, therefore, on the basis of that we are of the considered view that the Operational Creditor has not fulfilled the terms and conditions of the purchase order i.e. he fails to get the material examined by the concerned department and also fails to obtain the material test certificate from the concerned department, which are subsequently done by the Corporate Debtor on his own cost and that is the reason, he withhold the amount, since these are the disputes, which are required to be considered by the Court of Competent Jurisdiction, therefore, we are of the considered view that the Corporate Debtor within a period of 10 days of the receipt of the demand notice raised the existence of disputes and the documents enclosed with the reply show that this dispute was prior to the issuance of the demand notice.

Hence, in view of Section 9(5)(ii) since the notice of disputes has been received by the Operational Creditor and the documents enclosed with the reply shows that there is record of disputes, prior to the issuance of demand notice.

Under such circumstances, we are of the considered view that the present application is not liable to be admitted. Accordingly, we have no option but to reject the application under Section 9(5)(ii), accordingly, we hereby reject the prayer of the applicant to initiate the CIRP against the Corporate Debtor. Hence, this application is dismissed.

So far, the point of the limitation raised by the Corporate Debtor (sic) since we have dismissed the application on the point of existence of disputes, therefore, we have not discussed the issue of limitation.