When Claims And Counter Claims Are Involved, Liquidator Cannot Decide The Same: NCLAT Chennai

The National Company Law Appellate Tribunal, Chennai Bench, comprising Shri Justice Venugopal M. (Judicial Member) and Shri Jatindranath Swain (Technical Member), while adjudicating an application under Section 61 of Insolvency and Bankruptcy Code, 2016 (“IBC, 2016”) in M/s. FLSmidth Private Limited vs Lanco Infratech Ltd. has held that when claim and counter claims are involved Liquidator cannot decide the same. Background Facts Lanco Infratech (“Corporate Debtor”) issued a purchase order on FLSmidth Private Limited (“Appellant”/ “Operational Creditor”) for supply of certain systems and also awarded a work order for erection, supervision, commissioning and conducting of performance guarantee test of the said systems for a total value of Rs. 95.17 crore. The letter of credit of Rs. 73.602 crores was not opened by the Corporate Debtor, the delivery of supplies was not taken and the clearance for material dispatch was not issued. The claim for Rs. 71.09 was filed to the Insolvency Resolution Professional (IRP) by the appellant against the Corporate Debtor. While Rs.13.47 crore was held to be payable, the claim of remaining Rs. 57.65 crore was rejected. Thereafter, a claim for sum of Rs. 31.71 crores was made, which too was rejected. It was contended by the Appellant that the Corporate Debtor did not perform its part of the contract from its inception and did not establish the letters of credit as contemplated. It was also argued that the Corporate Debtor did not take delivery of the materials and did not issue Material Dispatch Clearance Certificate to the Appellant. Due to the non-performance, the contract was cancelled by the end user TANGEDCO. It was also argued that the Respondent Liquidator after accepting the claim in part (Rs 13.47 crore), rejected it later saying that only a sum of Rs.1.51 crore was due and thus he failed in his duty as a Liquidator. On the other hand, it was argued by the Liquidator that the items of claim not admitted as 'due payable' are those for which no documents such as invoice / dispatch documents were available in the records of the Corporate Debtor. It was also argued that the disallowed claims due to non-performance of Corporate Debtor will require adjudication by a competent Civil Court / Arbitrator, before they can be translated into 'Dues' within the framework of IBC. NCLAT Verdict It was observed by the tribunal that the NCLT Hyderabad has already dealt with this issue in detail and it was right in accepting the submission and reasoning of the Liquidator. It was held that “They have rightly held that when claim and counter claims are involved Liquidator cannot decide the same and therefore the Liquidator rightly rejected the claim”. With the aforesaid observation, the appeal was dismissed. Case:M/s. FLSmidth Private Limited vs Lanco Infratech Ltd Case No. TA (AT) No.207/2021 (CA (AT) (Ins) No.1353/2019) Order Dated 03.05.2024 Counsels for the Appellant :Mr. T. Ravichandran, Advocate Counsels for the Respondent : Ms. Anuradha Bisani, Liquidator for R1 ClickHere To Read/Download Judgment

When Claims And Counter Claims Are Involved, Liquidator Cannot Decide The Same: NCLAT Chennai

Aditi Gupta

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