Corporate Debtor Can't Deny Transaction For Which It Earlier Gave Approval: NCLT Delhi

The National Company Law Tribunal Bench of Shri Mahendra Khandelwal (Judicial Member) and Shri Atul Chaturvedi (Technical Member) upheld a Section 9 petition filed under the Insolvency & Bankruptcy Code, 2016 (“the Code”) stating that if the Corporate Debtor has given its approval for an amendment in the wage structure, it can't deny it later. Background Facts: M/s. Liberium Global Resources Private Limited (Operational Creditor) initiated insolvency proceedings under Section 9 of the Insolvency and Bankruptcy Code, 2016, against M/s. Amritsar MSW Limited (Corporate Debtor), alleging default in the payment of dues as per the Concession agreement. The Concession Agreement was entered into between the Municipal Corporation of Amritsar ("Concessioning Authority"), Amritsar MSW Limited ("Concessionaire"), Essel Infraprojects Limited ("Selected Bidder") and the Department of Local Punjab Government, Punjab. The Concessioning Authority entered into a sale agreement with the Corporate debtor for establishing a suitable mechanism to manage the the collection, transportation processing and disposal of municipal solid waste generated from residential and other areas with a view to meet environmental regulations and for health and hygiene. Later, in June 2020, Averda Waste Management Investments India Pvt. Ltd., took over Corporate Debtor's ownership and management through a Supplemental Concession Agreement and took responsibility for the Corporate Debtor's ownership, management, and control of the concessionaire and/ or the projects. In November 2021 a notification was issued by the Punjab Government revising minimum wages Act. After which, the Operational Creditor sent the revised salary structure to Averda as per the revised structure and sought confirmation. Responding to it, Averda accepted the revised salary structure and asked the Operational Creditor to proceed with the revised salary structure. However, when Operational Creditor submitted the salary register of January 2022, Averda refused to give the salary as per the revised structure and stated that they will continue with the old wages as the matter regarding minimum wage notification has been challenged in the Panjab and Haryana High Court. Despite regular follow ups by the Operational Creditor, Averda refused to release payments or process the invoices. He also unilaterally terminated the Sale Agreement in March 2022. There was no stay on the wage notification issued by the Panjab & Haryana High Court, still Averda denied to release payments, even though it had earlier accepted to pay. Thereafter, a demand notice dated 28th July 2023 was issued, which included invoices billed directly to Averda under a Confidential Agreement. Later a fresh demand notice under Section 8 of the Code was issued, confined to invoices raised solely on the Corporate Debtor under the governing Agreements. In its reply, the Corporate Debtor denied the operational debt stating that the Confidential Agreement was not relevant to the debt claimed as the claim is for unpaid invoices arising from services duly rendered under the Concession Agreement, Supply Agreement and the Supplementary Concession Agreement. Thus, a sum of ₹2,28,65,774 remains unpaid by the Corporate Debtor to the Operational Creditor. Contentions of the Corporate Debtor: The Corporate Debtor submitted that it had entered into a Sale Agreement with the Operational Creditor for the purchase of municipal solid waste for the purpose of setting up a plant for converting waste into electricity. As per the agreement, monthly invoices were raised by the Operational Creditor for monthly targets of waste picked up. It further stated that, a total of 18 invoices amounting to ₹8,97,69,008/- were raised from January to December, 2021 and payments for those were already released. There were excess payments of ₹9,00,87,241/- made which were adjusted in the coming billing cycle. It emphasized on the fact that no agreement except for the Sale Agreement existed between the parties, and only this Agreement constitutes the entire contractual framework of the parties. It was further argued that the claim of Operational Creditor claim is largely based on actions and representations of Averda Waste Management Investments India Pvt. Ltd., which is not a party in this case. So, In the absence of a tripartite or amended agreement, commitments Averda can't bind the Corporate Debtor. Additionally, the Corporate Debtor also pointed out procedural deficiencies in the application of Operational Creditor, stating that it did not file the debt with any Information Utility as required under the Code. Findings: The Tribunal observed that Clause 5 of the Concession Agreement inflicted responsibility on the Corporate Debtor to comply with all applicable laws relating to labour and employment, that included...

Corporate Debtor Can't Deny Transaction For Which It Earlier Gave Approval: NCLT Delhi

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Corporate Debtor Can't Deny Transaction For Which It Earlier Gave Approval: NCLT Delhi

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