PRS Packtech Systems Pvt. Ltd vs Subros Ltd

Ina Malhotra, J

Based on a claim of an unpaid Operational Debt, the Petitioner has invoked the provisions of the Insolvency & Bankruptcy Code praying for initiation of the Corporate Insolvency Resolution Process of the Corporate Debtor.

As per averments, the Corporate Debtor is engaged in the business of auto cooling machines and components. They had entered into an agreement with the Operational Creditor for packaging their finished products. The said agreement was entered into on 8th July, 2006 and invoices were raised periodically for the work executed. The Operational Creditor has claimed an outstanding amount of Rs. 1,77,65,355/- from the Corporate Debtor. A demand notice dated 17.01.2019 under Section 8 of the Code was issued calling upon the Corporate Debtor to pay which was replied to by the Corporate Debtor, repudiating any outstanding liability and adverting to a pre-existing dispute.

As per submissions made by the Operational Creditor, the Corporate Debtor is in default of paying the principal amount of Rs. 40,40,057/12 outstanding from 2009. A sum of Rs. 71,80,763/92 is claimed towards interest on delay in remittances in addition to retention of the WCT of Rs. 42,32,165/- and other charges due to manpower/lashing etc. for Rs. 23,42,369/-, cumulating to Rs. 1,77,65,355/04. Since the aforesaid amount was not remitted, despite the demand notice under Section 8 of the Code, the Operational Creditor has filed the present petition.

The Corporate Debtor on entering appearance has filed its reply repudiating the entire claim on various grounds, inter alia, the claim being time barred, demand notice being defective since it was not accompanied with the invoices, no liability under the Work Contract Tax and the claim for interest being unsustainable and not covered under the definition of an "operational debt". Ld. Sr. Counsel for the Corporate Debtor has taken this Bench through the agreement dated 8th July, 2006. It is pointed out that the tenure of the agreement was for a period of 3 years to be renewed on mutually agreed terms. It is submitted that upon expiry of the tenure, the agreement was never renewed and orders were placed on the Operational Creditor against each purchase order for which individual invoice was raised. Payments were made invoice wise and no running account was maintained. Therefore, each purchase order constituted a separate contract. It is pointed out that since payments were made as per individual invoices, many of the alleged unpaid invoices are patently time barred and only those claims which are within the period of limitation can be the subject matter of any demand. Since the present petition was filed on 18th March, 2019, therefore invoices w.e.f. 19th March, 2016 alone fall within limitation.

A perusal of the statement of account filed by the Operational Creditor 2009 w.e.f. onwards makes it abundantly clear that bills were paid as per invoices raised. This statement also includes interest for delay in receiving the payments, even if there was a delay of a few days. A claim of Rs. 71,80,763/- has been made on this count for the period of 2009 onwards. As per the Corporate Debtor, demands prior to 19th March, 2016 are barred by limitation. During the pendency of the petition, without prejudice to their rights and contentions raised in their reply, the Corporate Debtor has tendered a sum of Rs. 29,24,394/- being the principal amount due under invoices which were within limitation. It is submitted by the ld. Sr. Counsel that this amount has been paid in order to avoid any controversy, which leaves only the claim towards interest thereon. It is submitted that notwithstanding the fact that the Insolvency proceedings cannot be invoked on grounds of default in payment of interest, there was no agreement in respect of payment of any interest. Merely because the condition of payment of interest is printed on some of the invoices, they are not liable to pay the same. Ld. Sr. Counsel has taken us through the purchase orders, each constituting a separate agreement, which does not provide for payment of any interest on account of delay in remittance. Furthermore, all invoices do not provide for payment of interest. It is argued that the demand for payment of interest on the said invoices are erratic in terms of the rates claimed, which in any event was never agreed to.

With respect to other claims made towards WCT and charges towards manpower deployment, it is submitted on behalf of the Corporate Debtor, that no bills or invoices on account of manpower deployment have been raised on them for which a claim for Rs. 23,42,369/- has been made in the present proceedings. The claim for Rs. 42,32,165/- towards WCT was a statutory deduction. This amount was deposited with the department and a certificate for the same had been provided by the Corporate Debtor, and the Operational Creditor has availed the credit from the concerned department. Ld. Sr. Counsel for the Corporate Debtor submits that with tender of more than Rs. 29 lakhs towards the principal amount, the only liability outstanding as per the statement of accounts maintained by the Operational Creditor is towards interest for the bills which are within limitation, i.e. Rs. 1.06 lakhs, which cannot be the basis of initiating a Resolution Process of the Corporate Debtor. It is submitted that the turnover of the Corporate Debtor is more than Rs. 2,000 crores per year and they are fully solvent company and have employed more than 2500 employees. It is also pointed out that the present proceeding has been filed has a counter blast to a suit filed against a group company of the Operational Creditor which has a common management. The said proceedings CA(Comm) No. 13/2018 entitled Surbos Ltd. Vs. Sehgal Consultant, is pending in the Court of the Ld. Distt. Judge Patiala House, New Delhi.

Upon hearing the ld. Counsels for the parties and perusing the documents on record, we find that the claim made towards the principal amount and the interest on the payments received, even after a few days, is from the year 2009 onwards. It is evident from the accounts that payment was received invoice wise. As such, the Operational Creditor's contention that a running account was maintained is erroneous. We therefore agree with the Corporate Debtor's submission that each purchase order constitutes a fresh cause of action, and only those claims which fall within the period of limitation can be enforced. As the principal amount of Rs. 29,24,394/-, being the amount under invoices within the period of limitation has been remitted during the pendency of this petition, the claim for interest thereon is a meagre amount of Rs. 1.06 lakhs. In view of the facts put forth before us, we have no hesitation in coming to the conclusion that an operational debt would not include interest. A perusal of the provision of the Code makes it abundantly clear that while a "financial debt" would include a claim with interest, if any, the same is not so in respect of an "operational debt". Moreover, there is no agreement to pay interest on the outstanding liability in terms of the purchase orders. There has been no previous history of payment of interest. Therefore, a unilateral demand based on a printed condition on some of the invoices would not make the Corporate Debtor liable to pay interest. The decision of the Hon'ble High Court of Delhi in the matter of Vijay Mittal Vs. Bajaj Products 2015 SCC DEL 2210 has been relied upon, wherein it was observed that there cannot be an agreement between the parties to pay interest simply and merely because it was printed on the bill/invoice that interest would be payable on the balance due. A unilateral statement of one party cannot be taken as an agreement arising on the other party. Without prejudice, the Corporate Debtor has made a payment of Rs. 29,24,394/- as the principal outstanding liability under invoices raised in the last 3 years preceding institution of the present proceeding. Further there is no cogent repudiation of the Corporate Debtor's reply in respect of the claim for WCT being deposited or the credit being claimed by the Operational Creditor. Similarly, we do not find any invoice on account of manpower charges as claimed in the petition. With respect to the interest on account of delay in making payment on the bills within limitation, this Bench is of the opinion that it cannot be considered as an "operational debt" and certainly cannot be the basis of initiating the Corporate Insolvency Resolution of the Corporate Debtor.

Given the facts of the case, this petition under Section 9 of the Code is Rejected.