Transmission Corporation Of Andhra ... vs Equipment Conductors And Cables ...

The order of the National Company Law Appellate Tribunal, New Delhi (for short, ‘NCLAT) dated September 04, 2018 is the subject matter of challenge in the present proceedings. It is a short order, which is reproduced herein its entirety.

2. Though, in the first brush, it appears that matter is still at the stage of admission and the aforesaid order is an interim order, a careful reading thereof would clearly bring out that the NCLAT perceives that the appellant herein owes money to the respondent and for this reason a chance is given to the appellant to settle the claim of the respondent, otherwise order would be passed initiating Corporate Insolvency Resolution Process (for short, ‘CIRP’). According to the appellant, no amount is payable and the order in question is causing serious prejudice to the appellant which is asked to settle the purported claim, failing which, to face insolvency proceedings. It may also be recorded at this stage itself that the appeal pending before NCLAT is filed by the respondent herein which is against the Orders dated April 09, 2018 passed by the National Company Law Tribunal (for short, ‘NCLT’), Hyderabad. By the said order, the NCLT has Civil Appeal No. 9597 of 2018 Page 2 of 19 dismissed the petition filed by the respondent herein under Section 9 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as the ‘IBC’). To put it briefly at this stage, the NCLT, after detailed deliberations, has come to the conclusion that the Company Petition filed by the respondent was not maintainable as the claims which were preferred by the respondent against the appellant and on the basis of which respondent asserts that it has to receive monies from the appellant are not tenable and in any case these are not disputed claims. This assertion is based on the fact that these very claims of the respondent were subject matter of arbitration and the award was passed rejecting these claims as time barred. Moreover, the company petition itself suffers various fundamental defects. On that basis, NCLT held that there is a valid dispute, rather no dispute as issue in question was substantially dealt with by various courts as mentioned in the order passed by NCLT.

3. Before going into the details of the said order passed by NCLT it would be appropriate to refer to some important events in chronological order, which have a bearing on the present case.

4. The appellant is a Transmission Corporation of Andhra Pradesh Government and is successor of Andhra Pradesh State Electricity Board (for short, ‘APSEB’) and is in the activities relating to Civil Appeal No. 9597 of 2018 Page 3 of 19 transmission of electricity. It had awarded certain contracts to the respondent herein for supply of goods and services. Some disputes arose and the respondent initiated arbitration proceedings. As many as 82 claims were filed by the respondent before Haryana Micro and Small Enterprises Facilitation Council (hereinafter referred to as ‘Arbitral Council'). These proceedings culminated into Award dated June 21, 2010. The Arbitral Council came to the conclusion that the claims made on the basis of Invoice Nos. 1-57 were barred by law of limitation and, therefore, no amount could be awarded against the said claims. In respect of Invoice Nos. 58-82, the award was passed in favour of the respondent. In these proceedings, we are not concerned with the award in respect of Invoice Nos. 58-82.

6. It may be mentioned at this stage that when the appeal was pending before the High Court, the respondent had moved an application for clarification/review of order dated August 28, 2014. This application was, however, dismissed on August 27, 2015. It may also be mentioned that insofar as order dated January 29, 2016 of the Punjab and Haryana High Court setting aside the order of the Additional District Judge remanding back the matter to the Arbitral Council is concerned, the appellant herein had filed an application for clarification of the said order under Section 151 of the Civil Procedure Code. That application was, however, dismissed by the High Court.

8. When the things rested at that, the respondent approached the NCLT by means of a Company Petition under Section 9 of IBC, 2016 read with Rule 6 of Insolvency and Bankruptcy (AAA) Rules, 2016. In this petition, the respondent stated that it had served demand notice dated October 14, 2017 upon the appellant under the provisions of the IBC, thereby claiming the amount of Rs. 45,69,31,233/- which was not paid by the appellant. As mentioned above, this petition was dismissed by the NCLT vide its order dated April 09, 2018. Against this order, the respondent has filed Civil Appeal No. 9597 of 2018 Page 7 of 19 appeal before the NCLAT in which impugned orders dated September 04, 2018 have been passed.

12. Here, the matter was taken up before the Arbitral Council insofar as claim under Invoice Nos. 1-53 is concerned, the same was specifically rejected by the Arbitral Council on the ground that it had become time barred. The respondent challenged the said part of the award of the Arbitral Council, but was not successful. On the basis of certain observations made by the High Court of Punjab and Haryana in its decision dated January 29, 2016, the respondent attempted to recover the amount by filing execution petition before the Civil Court, Hyderabad. However, that attempt of the respondent was also unsuccessful inasmuch as the High Civil Appeal No. 9597 of 2018 Page 11 of 19 Court of Judicature at Hyderabad categorically held that since that particular amount was not payable under the award, execution was not maintainable. After failing to recover the amount in the aforesaid manner, the respondent issued notice to the appellant under Section 8 of the IBC treating itself as the operational creditor and appellant as the corporate debtor. The appellant specifically refuted this claim. In spite thereof, application under Section 9 was filed before the NCLT, Hyderabad which was dismissed by it vide order dated April 09, 2018. It is in appeal against the said order, the NCLAT has now passed the impugned order.

13. The NCLAT has not discussed the merits of the case and also not stated how the amount is payable to the respondent in spite of the aforesaid events which were noted by the NCLT as well. Notwithstanding, it has given wielded threat to the appellant by giving a one chance, 'to settle the claim with the appellant (respondent herein), failing which this Appellate Tribunal may pass appropriate orders on merit'. It has also stated that though the matter is posted for admission on the next date, the appeal would be disposed of at the stage of admission itself. There is a clear message in the aforesaid order directing the appellant to Civil Appeal No. 9597 of 2018 Page 12 of 19 pay the amount to the respondent, failing which CIRP shall be initiated against the appellant.

Civil Appeal No. 9597 of 2018 Page 15 of 19

xx xx xx

42. This being the case, is it not open to the adjudicating authority to then go into whether a dispute does or does not exist?

Continued being as a living creature, life, esp. under adverse conditions.

Something that exists; an entity, a being. All that exists. (P. 894, Oxford English Dictionary)” xx xx xx

Civil Appeal No. 9597 of 2018 Page 18 of 19 The aforesaid principle squarely applied to the present case.

16. As a result, we allow this appeal and set aside the impugned order dated September 04, 2018 passed by the NCLAT. In a normal course, the matter should have been remanded back to the NCLAT for deciding the appeal of the respondent herein filed before the NCLAT, on merits. However, as this Court has gone into merits and found that order of the NCLT is justified, no purpose would be served in remanding the case back to the NCLAT. Consequence would be to dismiss the Company Appeal (80) (Insolvency) No. 366 of 2018 and miscellaneous applications filed by the respondent before the NCLAT. No order as to costs.

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