Ravi Shankar Mishra vs M/s. Indo Engineering & Constructions Pvt. Ltd. And Anr.

The present application is filed under Section 9 of Insolvency and Bankruptcy Code, 2016 (for brevity 'IBC, 20161, read with Rule 6 of the

Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 (for brevity the Rules') by Mr. Ravi Shankar Mishra, sole proprietor of

M/s. Shree Balaji Infratech (for brevity 'Applicant'), with a prayer to initiate the Corporate Insolvency Resolution Process (CIRP), against M/s. Indo

Engineering & Construction Private Limited (for brevity 'Respondent').

The Applicant, namely Mr. Ravi Shankar Mishra, is the sole proprietor of M/s. Shree Balaji Infratech, with GSTIN: 06ALLPM8270C1Z1, having

its office at G-10, Phase-I, New Palam Vihar, Gurgaon, Haryana.

The Respondent No. 1 namely, M/s. Indo Engineering & Construction Private Limited, is a company incorporated on 29.05.2013, under the

provisions of Companies Act, 2013 with CIN No. U45400DL2013PTC253060, having its registered office at 4-B, th4 Floor, A-8, Bigjos Tower,

Pitampura, New Delhi. The Authorised Share Capital of the respondent company is Rs.1,00,000/- and Paid Up Share Capital of the company is

Rs.1,00,000/- as per Master Data of the company.

The Respondent No. 2 namely, M/s. Aegis Value Homes Limited is a company incorporated on 11.05.2012, under the provisions of Companies

Act, 1956 with CIN No.U70109DL2012PLC235725, having its registered office at 55, 2nd Floor, Lane-2, Westend Marg, Saidullajab, Near Saket

Metro Station, New Delhi-110030. The Authorised Share Capital of the respondent company is Rs.9,00,00,000/- and Paid Up Share Capital of the

company is Rs.9,00,00,000/- as per Master Data of the company.

It is the case of the applicant, that it is primarily engaged in the business of taking contracts of construction of commercial and residential buildings.

In the present case the Applicant was awarded a contract for construction of multi storey commercial cum residential towers for Respondent No. 2.

The Respondent No. 2 is engaged in the business of real estate. In the present case Applicant No. 2 is the principal company, the Respondent No. 1 is

the contractor and the sister concern of Respondent No. 2, whereas the Applicant is the sub-contractor.

The Applicant states that, the Respondent No. 1 was awarded work for construction of multi storey commercial cum residential towers by

Respondent No. 2, wherein Respondent No. 1 was assigned to develop 2.675 acres land situated at Sector-32, Buddhakhera, Karnal on the basis of

work order issued to them. Thereafter, the Respondent No. 1 entered into property construction agreement with Applicant on 15th December 2016,

whereby Applicant as sub-contractor was assigned to construct tower A of the said project for Respondent No. 2, as aforementioned on item rate

contract basis. The work assigned further includes the construction of independent floors. The copy of the construction agreement has been annexed

by the Applicant along with the present application.

The Applicant states that, the work assigned to it was started in the month of January 2017, whereby, Respondent No. 1 had confirmed at the

signing Memorandum of Association that they will issue advance but subsequently, Respondent No. 1 asked the Applicant to supply the steel for the

purpose of construction first. The copy of the said letter of intent has also been annexed by the Applicant along with the present application. In

pursuance of the same the Applicant supplied steel to Respondent No. 1, in the same month of January 2017, Respondent No. 1 released advance in

the month of February 2017 and March 2017 in two installments. The Applicant started work in full fledged manner in order to complete it in stipulated

time period.

The Applicant further states that, after completing the first facet of work, he raised his first RA (Running Account) Bill on 06.03.2017, which

Respondent No. 1, after getting it verified and approved released the payment on 18.06.2017. Thereafter, Applicant continued another facet of

construction which at later stage was stopped for 60 days due to non-payment of funds. It is pertinent to note that in the month of June 2017, due to

non-payment of dues since a long time the labour of the Applicant were unable to continue work, but the Applicant was somehow managing to

convince the labour to continue work. After several reminders from the Applicant the Respondent No. 1 released the payment of Rs. 56,01,192/- in

the month of May and June 2017 in three installments.

That the verification of quantity measurements, quality of work and the amount of bills as per agreed rates were regularly done by Respondent

No.1, at each stage (RA Bill No. 1 to 8 Final Bill) and were certified thereafter, by complete chain of officers at site and at head office level of

Applicant before the payments/adjustment were made. The Respondent No. 1 after observing the quality of work done by Applicant, made request to

get shuttering and steel reinforcement binding done for slab/roof of the basement, the Applicant successfully completed his work and made all

preparations for casting of the slab/roof for the basement. After completion of the work upto the above mentioned stage, the Respondent No. 1

suddenly changed his attitude towards the Applicant and asked the Applicant to shut the work of non availability of funds.

The Applicant further states that, in the month of January 2018, the Respondent No. 1, while back filling the earth along the basement retaining

wall in a very unprofessional manner mixed the building material of the Applicant, along the earth thus causing significant loss to the Applicant. In

agreement dated 15.12.2016, serial No. 10 under heading ""period of honoring bill"", it is clearly mentioned that monthly all payments shall be made.

Further, ""serial No. 11"" under the heading ""schedule of payment"" it is mentioned that payment shall be made within 60 days after submission of the

bills. That despite clear terms and conditions the Respondent No. 1 miserably failed to clear the bill of the Applicant. The Applicant successfully

completed the assigned task as mentioned in the agreement as sub-contract.

As per the submissions of the Applicant, it successfully completed the assigned task, as mentioned in the agreement, as sub-contractor up to the

stage where the work was stopped by the Respondent No. 1, due to non-availability of funds. The work executed by the Applicant at the site was

carefully inspected for quality and quantity measurements were done jointly by Applicant and Respondent No. 1. The Respondent No. 1 was more

than satisfied from the quality of work executed by the Operational Creditor.

It has further been stated that, even after inspection of the quality of the work executed by Applicant, the two cheques vide cheque no. 166886

and 166889 dated 10.04.2018 and 25.04.2018, respectively, of only Rs. 5,00,000/- each were given to the Applicant. However, when these cheques

were deposited by the Applicant with his banker, the same were returned, with an endorsement ""Funds Insufficient"" vide memo dated 11.04.2018 and

03.05.2018 for cheque no. 166886 and 166889 respectively. The original memos have been annexed along with the application.

It has further been stated that, the work was stopped on instructions of Respondent No. 1 and the final bill dated 06.06.2018, amounting to Rs.

61,24,066/- based on the work executed till that time was issued. Subsequently, the quantity measurements, quality of work and the amount of bills as

per the agreed rates were duly verified and cross checked by a complete chain of officers at site and at head office level of Respondent No. 1 before

the payments/adjustments were made. Despite the same Respondent No. 1 later showed his inability and incompetence to clear the said final bills of

Applicant. The copy of final bill raised by Applicant, dated 06.06.2018, amounting to Rs. 61,24,066/- has been annexed along with the application by

the Applicant.

The applicant states that subsequently, Respondent No. 1 in lieu of clearing the final bill, offered him two flats in the project of Respondent No. 2,

namely, M/s Aegis Value Homes. The Applicant accepted the offer made to him. The Applicant thereafter, entered into two builder buyer

agreements with Respondent No. 2. That vide first builder buyer agreement dated 09.06.2018, the Applicant lawfully purchased floor no. 42, floor type

2nd floor, in the project of Respondent No. 2. The total consideration of the said flat was Rs. 39,00,000/-. However, it will be relevant to mention

herein that it was clearly mentioned in the builder buyer agreements clause 2.b under the heading booking/registration amount that; out of total

consideration of Rs. 39,00,000/- an amount of Rs. 38,43,480/- is against the payment bill from Shree Balaji Infratech/ Applicant for civil work of Rs.

74,43,480/-, which stands that amount of Rs. 38,43,480/- paid by the purchaser to the developer (paid by Operational Creditor to Respondent No. 2).

The clause 2b of builder buyer agreement has been reproduced below:

2.b. Booking/ registration Amount:

Out of the total consideration, an amount of Rs. 38,43,480/-(Rs. Thirty Eight Lakhs Forty Three Thousand Four Hundred & Eighty Only) is

against the Payment Bill From Shree BAlaji Infratech for the Civil Work of Rs. 74,43,480/-, Which stands that amount of Rs. 38,43,480/-

Paid by the Purchaser to the Developer.

The original copy of the builder buyer agreement dated 09.06.2018 is annexed along with the application.

The Second builder buyer agreement executed on 09.06.2018, whereby, the Operational Creditor had purchased another flat, i.e., floor no. 42,

floor type 2nd in the project of Respondent No. 2, it was clearly stated in clause 2.b under the heading booking/registration amount that; total

consideration of Rs. 36,00,000/-, of the said floor is against the payment of bill from Shree Balaji Infratech/ Operational Creditor for civil work of Rs.

74,43,480/-, which stands that total consideration amount as mentioned in point 2.a in agreement is paid by purchaser to the developer (paid by

Operational Creditor to Respondent No. 2). The clause 2b of builder buyer agreement has been reproduced below:

2.b. Booking/ registration Amount:

Total Consideration of the said Floor is against the Payment Bill From Shree Balaji Infratech for Civil Work of Rs. 74,43,480/-, Which

stands that Total Consideration amount (mentioned in Point 2.a in the agreement) Paid by the Purchaser to the Developer.

The original copy of the second builder buyer agreement dated 09.06.2018 has been annexed along with the application.

It has been stated by the Applicant, that much of the work executed by Operational Creditor including shuttering, steel reinforcement binding for

basement roof slab & columns etc. was illegally removed from site & shifted to other sites of the Respondent No. 1 and Respondent No. 2, without

giving any sort of information to the Operational Creditor. The Operational Creditor's material kept on site was also illegally stolen and shifted to their

other site by the Respondent No. 2 and Respondent No.1 . The Operational Creditor has suffered losses of Rs. 15,00,000/- due to criminal theft of

their tool & material by them.

Further, Respondent No.2 refused to fulfil the builder buyer agreement and thus, Respondent No. 1 & Respondent No. 2 with ill intent sent a legal

notice just before the proposed date of possession and title transfer (Registry of the adjusted flats) dates 18.09.2018 and another legal notice dated

05.10.2018 with the sole aim to mentally pressurize the Operational Creditor and to ensure that he forgoes his legal claim amount to a sum of Rs.

74,43,480/-. The copies of legal notices have been annexed along with the application.

The Respondent No. 1 regularly deducted TDS from each payment being made to the Operational Creditor, however, no amount for financial year

2017-18 has been deposited till date to the Income Tax Department. As per the work order dated 15.12.2016, the approximate cost of work, Rs. 4.5

Cr was to be allotted to the Operational Creditor. Keeping the same in mind the Operational Creditor had set up his entire office and had also taken

loan from the market of around Rs. 20 Lacs and had also rejected various smaller project that came in his way in order to ensure that he is able to

give his best to the work order as would be put forward by the Respondent.

As per the Applicant, to complete the construction work for this project the Operational Creditor had borrowed a total amount of Rs. 20,40,000/-,

vide cheque no. 225268 dated 11.02.2017 of Rs. 15,00,000/-, cheque no. 912502 and 9312503 of Rs. 2,40,000 and Rs. 3,00,000/- ( which was

deposited by the Operational Creditor on 23.07.2018 and 21.08.2018 respectively in his bank account) as loan from a financier @,10% per annum,

interest in February 2017. Due to the non-payment of the dues by the Respondent No. 1, the Operational Creditor is unable to pay back the said loan

and the interest liability is rising each day. The original loan agreement dated 10.02.2017 along with the copy of bank statements of the Operational

Creditor have been annexed along with the application.

On failure to pay the outstanding dues by the Respondents, the applicant sent a demand notice dated 19.03.2019, under Section 8 of the Insolvency

and Bankruptcy Code, 2016 to the respondent asking them to make the entire payment of Rs. 74,43,480/-(Rupees Seventy Four Lakhs Forty Three

Thousand Four Hundred Eighty), plus interest @ 24% per annum, plus also the interest @ 10% on amount of Rs. 20,40,000/-, within 10 days from

receipt of the notice, failing which the applicant shall initiate the Corporate Insolvency Resolution process against the Respondent.

After the delivery of the demand notice sent under Section 8 of the Code, the Respondents have replied to the said notice by way of notice of

dispute dated 04.04.2019, stating that it had already sent a legal notice dated 05.09.2018 rising a dispute of fraud and cheating played by the Applicant

along with certain other persons. As no payment was coming, hence this application, seeking to unfold the process of CIRP.

The applicant has stated that total debt due and payable is Rs. 74,43,480/-(Rupees Seventy Four Lakhs Forty Three Thousand Four Hundred

Eighty), plus interest @ 24% per annum, plus also the interest @ 10% on amount of Rs. 20,40,000/-. The date of default as stated by the Applicant is

when the final bill was sent dated 06.06.2018.

The applicant has also filed affidavit of service wherein he states that the respondent has been served dasti on 10.05.2019, through email on

17.05.2019. Records also reveal that the Respondents were served an advance copy through speed post on 26.04.2019. The dasti receiving along with

the copy of email has been annexed along with the affidavit of service and the postal receipt is annexed along with the application.

After the service of said notice, the respondents have caused appearance in the matter and have filed their reply, in its reply to the present section

9 application, the respondent states that there is no default on the part of respondent, no amount is payable to applicant. Through acts of fraud,

collusion and cheating, the applicant has induced the Respondent to make excess payment of huge scale and extent. The Respondent has every right

to recover all the excess payments from the Applicant along with interest @ 24% per annum.

The Respondent in its reply also states that, the Applicant has fraudulently raised bills to the tune of Rs. 1,72,58,104/-. On account of discrepancies

found in the bills raised by the Applicant, the Respondent commissioned a renowned agency in the construction and real estate space, to conduct a

quantity evaluation by evaluating the overall quantity of material already used as per drawings and actual site inspection and compare the same against

the Applicant's bill. A detailed audit report has revealed the active fraud played by the Applicant in collusion with Mr. Deepak Suthar (General

Manager), Mr. K.S. Rathi (Asst. General Manager) and Mr. Jitender Kumar (Billing Engineer), in the aforementioned bills.

A detailed audit report reveals that an excessive amount of Rs. 92,35,718/- out of total billed amount of Rs. 1,72,58,104/- has been claimed and

collected by the Applicant in a in a fraudulent manner,the copy of audit report has been annexed by the Respondent along with its reply. Accordingly,

the Respondent is liable to recover the excess payment made to the Applicant to the tune of Rs. 15,84,663/-. The claim of Applicant has, therefore,

already been rejected by the Respondent and no petition can be filed on the basis of false claim.

It is further submitted by the Respondent, that it has filed a police complaint dated 21.09.2018, under Section 384, 406, 417, 420, 468, 469, 471, 506

and 1201B, read with Section 34 of the Indian Penal Code Code, 1860 against the Applicant and its co-conspirators in terms of the fraud and cheating

perpetrated by the Applicant on Respondent with respect to inflated bills and overcharging amounts.

Further the Honble Supreme of India in Mobilox Innovations Private Limited vs. KirusaSortware Private limited has observed that-

The adjudicating authority, when examining an application under Section 9 of the Act will have to determine:

(i) Whether there is an ""operational debt"" as defined exceeding Rs. 1 lakh? (See Section 4 of the Act)

(ii) Whether the documentary evidence furnished with the application shows that the aforesaid debt is due and payable and has not yet been

paid? and

(iii) Whether there is existence of a dispute between the parties or the record of the pendency of a suit or arbitration proceeding filed before

the receipt of the demand notice of the unpaid operational debt in relation to such dispute?

If any one of the aforesaid conditions is lacking, the application would have to be rejected.

Apart from the above, the adjudicating authority must follow the mandate of Section 9, as outlined above, and in particular the mandate of

Section 9(5) of the Act, and admit or reject the application, as the case may be, depending upon the factors mentioned in Section 9(5) of the

Act.

As per the reply filed by the Corporate Debtor, it can be inferred & concluded that there is a pre existing dispute between the Corporate Debtor and

Operational Creditor, with regard to the quality of service provided and falls well within the definition of 'Dispute' as per Section 5(6)which is

reproduced below:

Dispute"" includes a suit or arbitration proceedings relating toâ€"(a) the existence of the amount of debt; (b) the quality of goods or service; or (c) the

breach of arepresentation or warranty.

It is further seen that the demand notice in the present case was issued under Section 8 (1) of the Code on 19.03.2019, Respondents in their reply

to the said demand notice have placed their earlier notice dated 05.09.2018, raising issues with respect to the fraud and cheating perpetrated by the

Applicant along with certain other persons and also the filing of police complaint dated 21.09.2018, under Section 384, 406, 417, 420, 468, 469, 471, 506

and 120B, read with Section 34 of the Indian Penal Code Code, 1860 against the Applicant and its co-conspirators in terms of the fraud and cheating

perpetrated by the Applicant on Respondent with respect to inflated bills and overcharging amounts. It is thus seen that the dispute was brought to the

notice of the applicant prior to the issuance of the demand notice dated 19.03.2019 issued under Section 8 (1) of the Code.

The registered office of respondent is situated in New Delhi and therefore this Tribunal has jurisdiction to entertain and try this application.

The present application is within the prescribed limitation period.

As a sequel to the above discussion, this application fails and the same is hereby rejected and dismissed.

It is made clear that any observations made in this order shall not be construed as an expression of opinion on the merit of the controversy and the

right of the applicant before any other forum shall not be prejudiced on account of dismissal of the instant application.

Let the copy of the order be served to the parties.