KUMAR, MEMBER (JUDICIAL)

1. It is a CP filed under section 9 of IBC by the petitioner against the corporate debtor stating that the corporate debtor defaulted in making payment Rs. 30 crore to the petitioner basing on the consent terms arrived on 29th March, 2017, in view of the same, this company petition is filed for initiation of corporate insolvency resolution process (‘CIRP’) against the corporate debtor.
2. The case of this operational creditor/petitioner is that it has rendered services for the construction of multi-purpose berth Nos. 1 and 2 at Dighi, Maharashtra under the contract dated 1st November, 2008, by which the corporate debtor fell due to pay Rs. 4,56,18,410 for the works executed, Rs. 8,91,49,870 to be refunded as retained by the corporate debtor, Rs. 8,04,98,911 to be reimbursed for VAT paid by the petitioner on behalf of the Dighi Port Ltd., for each of the amounts fell due on different dates, the petitioner filed earlier Company Petition No.39/2017 on the file of this Bench seeking recovery of Rs. 22,41,37,054 plus interest at 24 per cent per annum, on which since the parties having entered into consent terms dated 29th March, 2017 executed between this petitioner and the corporate debtor, they having filed an application withdrawal of the company petition along with the consent terms arrived between the parties, the same has been dismissed as withdrawn. But thereafter, though this corporate debtor entered into consent terms to repay the money as stipulated and as agreed in the consent terms dated 29th March, 2017, the petitioner filed this company petition basing on the consent terms arrived at between the parties on 29th March, 2017 for initiation of CIRP for this corporate debtor again defaulted in making payment in furtherance of the consent terms arrived.
3. On looking at the consent terms arrived between the parties, both petitioner and the corporate debtor agreed to settle all disputes, differences and claims between them arising out of the work executed by the petitioner for the corporate debtor for the construction of multipurpose berths 1 and 2 at Dighi and Berth No. 3 at Agardanda, Maharashtra under the contract dated 1st November, 2008 and the Letter of Award dated 16th April, 2013 entering into the terms and conditions paraphrased as below :

   1. The corporate debtor has agreed to pay the agreed settlement amount to the petitioner aggregating to a total sum of Rs.30 crore within the period of 3 months beginning from 24th March, 2017, as follows :

   • The corporate debtor agreed to pay a sum of Rs. 21,75,00,000 to be paid by it to the petitioner in the following instalments :
     1. First instalment of Rs. 1 crore on or before 30th March, 2017 (paid late)
     2. Second instalment of Rs. 1 crore on 15th April, 2017 (part paid late)
     3. Third instalment of Rs. 5 crore on 15th May, 2017
     4. Fourth instalment of Rs. 4 crore on 31st May, 2017
     5. Fifth instalment of Rs. 5 crore on 15th June, 2017
     6. Sixth instalment of Rs. 5,75,00,000 on 30th June, 2017
   • The corporate debtor indemnifies the petitioner to the extent of Rs. 5 crore in respect of the payment made by the corporate debtor directly to the sub-contractors to the petitioner in relation to the works by pending the list of the sub-contractors to these consent terms. For having said that the corporate debtor already made payments to the sub-contractors of the petitioner, he agreed to provide proof of payment and also declaration of the payment to the sub-contractor has been made on account of works carried on DBM on or before 31st May, 2017 in favour of the petitioner from the said sub-contractors along with ledger account, failing which, the corporate debtor would pay the petitioner on or before 30th June, 2017, the sum of Rs. 5 crore or balance thereof as applicable along with and in addition to any other sums that may be due and payable in terms of clause 1(a) and/or 1(c) as applicable.
   • The corporate debtor agreed that it shall approach IL&FS Engg. & Construction Co. Ltd. (‘IECCL’)/IL&FS Maritime Infrastructure Co. Ltd. (‘IMICL’) to corroborate from their books of account, to determine whether or not a sum of Rs. 3,25,00,000 has in fact been paid/reimbursed by IECCL/IMICL to the petitioner towards the cost of material for berth No. 4 at Agardanda, Maharashtra. If the said sum of Rs. 3,25,00,000 was in fact has been paid or reimbursed, by IECCL/IMICL to the petitioner, then proof of such payment shall be submitted by the corporate debtor to the petitioner and the petitioner shall make no claim against the corporate debtor for the said amount. If the petitioner has not been paid by IECCL/IMICL, then the corporate debtor agrees to pay the petitioner on or before 30th June, 2017 the said amount of Rs. 3,25,00,000 along with and in addition to any other sum that may be due and payable in terms of clause 1(a)/1(b) as applicable.
4. This payment or discharge of agreed settlement amount by the corporate debtor to the petitioner shall be the consideration for full and final settlement of all disputes, differences and claims between both the parties in relation to the work done by the petitioner, the agreed settlement amount of Rs. 30 crore shall be reduced to the extent required to be paid if at all any compliances has been made as stated in clause No. 1(b) and 1(c) above.
5. It has been categorically mentioned that each instance of the corporate debtor failure to pay any of the amount set out in clause 1 hereinabove; in default of any of the timelines stipulated hereinabove, would be an event of default. It has also been mentioned, in the event of default, the petitioner would be entitled to file a fresh insolvency petition before this Bench making it clear that the corporate debtor agreed that there is and shall be no dispute (as defined in the Code) in relation to the corporate debtor liability to pay to the petitioner the balance outstanding of the agreed settlement amount of Rs. 30 crore. One more clause has been included in this Consent Terms stating that arbitration invocation notice dated 23rd March, 2017 addressed by the corporate debtor through its attorneys is to be construed as withdrawn.
6. When this corporate debtor has not made payment to the petitioner as envisaged in the above consent terms, the petitioner filed this company petition claiming Rs. 27,60,00,000 plus interest at 9 per cent par annum from 29th March, 2017 till date. The petitioner says that this debt fell due on 15th June, 2017, however, the consent terms entered between the parties discloses that whenever this corporate debtor has failed to pay any of the amount set out in clause 1, in default of timelines stipulated in the consent terms, it would be an event of default. It has been categorically mentioned that the corporate debtor paid only Rs. 2,60,00,000 and having failed to pay the remaining instalments, the petitioner filed this company petition for the corporate debtor defaulted in making payment in compliance of consent terms arrived at between them.
7. To which the reply argument of the corporate debtor counsel is that the aforesaid part payment was inadvertently made to the petitioner by the department of the corporate debtor, the corporate debtor through its competent officer issued direction to its department not to make any further payment to this petitioner because the petitioner filed this application without any proper authority of the Board of directors of the petitioner. The counsel says that the project was left incomplete by the petitioner and there was no certification to the effect by the engineers in terms of the contract and huge amount of expenses was incurred by the corporate debtor by making direct payment to the sub-contractors of the petitioner which itself shows the existence of dispute between the petitioner and the corporate debtor.
8. The counsel of the corporate debtor says that one of the shareholders of the petitioner having 36 per cent shares in the petitioner raised an objection by way of the letter dated 24th March, 2017 to the applicant with a copy marked to the corporate debtor, in view thereof, the counsel says that the petitioner company is not competent to enter into consent terms with the corporate debtor whereby the consent terms itself has to be declared as null and void. The counsel says since the petitioner has entered into consent terms without authority, it has to be treated as the petitioner played fraud against this court in dismissing the earlier petition looking at the consent terms arrived between the parties. He has gone ahead saying that consent terms dated 29th March, 2017 pursuant to which the earlier company petition came to be withdrawn is an agreement only between the parties to the petition but not on consent terms approved by the Tribunal, therefore, the said consent terms shall not be to be taken into consideration as consent terms arrived at before this Bench. The counsel says, for the corporate debtor sent a letter on 28th August, 2017 terminating the entire contract in respect of berth Nos. 1, 2 and 3, the petitioner in turn to pay Rs. 44,61,54,552 together with interest at 185 per cent par anum for breach of date of material supply, date of payment to contractors and date of payment. The corporate debtor says, if such payment is not made to the corporate debtor by the petitioner, the corporate debtor would initiate legal proceedings against the petitioner.
9. The debtor counsel further says that this claim of the petitioner is bereft of elements of operational debt because this claim is based on consent terms arrived between the parties not based on claims mentioned in the earlier company petition, whereby this company petition is liable to be dismissed. Apart from this, the counsel has also stated that there is a pre-existing dispute in respect to this claim because the petitioner already filed an Arbitration Application No.81/2016 under section 11 or Arbitration and Conciliation Act before hon’ble High Court of Bombay, therefore, for having already raised disputes by the petitioner and the same having remained pending as on the date consent terms arrived between the parties, it has to be construed that dispute has been in pre-existence though the arbitration proceeding was withdrawn on 14th September, 2017 by the applicant soon after the notice of dispute dated 16th June, 2017 was served by the corporate debtor on the petitioner realising the pendency would tantamount to an existing dispute because the withdrawal came late after reply notice has been issued by the corporate debtor.
10. The counsel relied upon Mobilox Innovations (P.) Ltd. v. Kirusa Software (P.) Ltd. [2017] 140 CLA 123 (SC) /[2017] 144 SCL 37 (SC) to say that when dispute is in pre-existence, IBC proceeding cannot be invoked and decide the petition on merit ignoring the existence of dispute.
11. On hearing on the submissions of either side, the points for consideration are as to – Whether entering into consent terms over an operational debt for dismissal of earlier company petition will change the nature of the claim that has been made by the petitioner before this Bench or not And whether the petitioner, qua this case, withdrawing arbitration proceedings subsequent to issuing of notice will amount to existence of dispute prior to giving section 8 notice or not
12. It is a fact that this petitioner filed a company petition stating that it has rendered services to the corporate debtor for the construction of multi-purpose Berth Nos. 1 and 2 at Dighi, Maharashtra, under the contract dated 1st November, 2008. On having the services rendered and the corporate debtor having not paid, when the petitioner’s side ready to argue the case, the corporate debtor entered into consent terms with the petitioner on 29th March, 2017 agreeing as mentioned before by stating that the petitioner is entitled to file fresh company petition under IB Code in the event payment has not been made as mentioned in the consent terms and also by saying that the arbitration proceedings pending before the hon’ble High Court would be treated as withdrawn in view of the consent terms arrived between the parties. For these consent terms have been entered into comprehensively dealing not only with the payments in relation to Berth Nos. 1 and 2 at Dighi but also in respect to Berth No. 3 at Agardanda, Maharashtra, a clause has been inserted that the arbitration application filed by the petitioner in respect to Berth No. 3 would be treated as withdrawn by saying that arbitration proceedings stood as withdrawn in view of the consent terms arrived between the parties in respect to Berth No. 3 as well.
13. So by seeing these consent terms, it is vividly clear that whatever disputes either in relation to the services given by the petitioner or in relation to any of the arbitration proceedings, it has to be understood that the parties arrived into an understanding that whatever disputes were there before entering into consent terms in respect to Berth No. 3 would also be merged (doctrine of merger) as part of the consent terms, today the corporate debtor counsel could not say that there is a pre-existing dispute in respect to Berth No. 3, therefore, this claim cannot be construed as hit by pre-existing disputes. When the parties arrived to a settlement or consent terms, whatever disputes that were in existence before execution of the consent terms, have to be treated as resolved by the consent terms subsequently arrived at.
14. For having the parties principally agreed that the arbitration proceedings pending or a notice issued under Arbitration Act being treated as withdrawn, it is merely a technical objection to say that arbitration proceeding has been withdrawn subsequent to the notice under section 8. Therefore, we don’t find any merit in the argument saying that arbitration proceedings were withdrawn subsequent to issue of notice under section 8 of the Code.
15. Moreover, the corporate debtor having made two instalments subsequent to execution of the consent terms, how could it be understood that dispute is in existence after execution of the consent terms This argument of saying that the petitioner side has no authority to enter into the consent terms is only a ruse to avoid answering to this claim. If at all it is an issue, it is an issue within the company of the petitioner, not related to the corporate debtor. The corporate debtor is bound by it; in fact he is estopped from retracting from the consent terms arrived at. Even today also, nobody has come before this Bench from the petitioner-company raising an objection either to the consent terms arrived in between the petitioner and corporate debtor or in filing this company petition before this Bench. Moreover, we don’t believe that the petitioner has no authority because no objection come from any corner stating that the petitioner has no authority to file this company petition basing on the consent terms arrived between the party, therefore, we have not found any merit in the argument saying that the petitioner has no authority to file this company petition.
16. Merely because consent terms arrived between the parties will never change the nature of the claim, here the claim is the petitioner rendered services to which money was not paid, upon which company petition was filed since the corporate debtor entered into consent terms putting the petitioner under belief that he would pay money to the petitioner as agreed in the consent terms, the petitioner withdrew the company petition believing that the corporate debtor would make payment as agreed in the consent terms. But on the contrary, instead of making payment, the corporate debtor has now taken a U-turn stating that it may not pay any money to the petitioner for having the corporate debtor already terminated the consent terms as well as the agreement dated 1st November, 2008, therefore, the corporate debtor says the petitioner in turn to pay money for having not provided services as agreed between them. All these issues should have been there when earlier company petition was filed, that time; this corporate debtor did not raise any of these issues except entering into consent terms with the petitioner. When a party got an opportunity to raise a dispute and if such dispute did not raise in the earlier proceedings, under law, the said party is estopped from raising the same dispute in the subsequent proceedings, especially after consent terms arrived between the parties.
17. In view of the reasons mentioned above, it can be safely inferred that merely entering into consent terms, operational debt neither will become financial debt nor something else, the nature of the claim is same, it has to be treated as operational debt in view of the same for having the petitioner filed consent terms and the corporate debtor having defaulted in making payment as stated in the consent terms and there being no dispute in respect to the corporate debtor executing consent terms and filing the same before this Bench, there cannot be any argument saying that dispute is in existence in respect to the services provided by the petitioner, whereby this company petition is hereby admitted with the following reliefs.
    1. That this Bench hereby prohibits the institution of suits or continuation of pending suits or proceedings against the corporate debtor including execution of any judgment, decree or order in any court of law, tribunal, arbitration panel or other authority; transferring, encumbering, alienating or disposing of by the corporate debtor any of its assets or any legal right or beneficial interest therein; any action to foreclose, recover or enforce any security interest created by the corporate debtor in respect of its property including any action under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 ; the recovery of any property by an owner or lessor where such property is occupied by or in the possession of the corporate debtor.
    2. That the supply of essential goods or services to the corporate debtor, if continuing, shall not be terminated or suspended or interrupted during moratorium period.
    3. That the provisions of sub-section (1) of section 14 shall not apply to such transactions as may be notified by the Central Government in consultation with any financial sector regulator.
    4. That the order of moratorium shall have effect from 5th April, 2018 till the completion of the corporate insolvency resolution process or until this Bench approves the resolution plan under sub-section (1) of section 31 or passes an order for liquidation of corporate debtor under section 33, as the case may be.
    5. That the public announcement of the corporate insolvency resolution process shall be made immediately as specified under section 13 of the Code.
    6. That this Bench hereby appoints Ms. Purnima Dhiraj Shetty, Registration No. IBBI/IPA-002/IP-N00394/2017-18/11197, DX-6, Om Woods, Plot No. 144, Nr. D Mart, Sector 21, Nerul East, Navi Mumbai-400706, as Interim Resolution Professional to carry the functions as mentioned under Insolvency and Bankruptcy Code.
18. Accordingly, this petition is admitted.
19. The Registry is hereby directed to communicate this order to the operational creditor and the corporate debtor.