Detention Charges Come Within The Purview Of Operational Debt: NCLT Mumbai

The National Company Law Tribunal, Mumbai Bench, comprising Ms. Reeta Kohli, (Judicial Member) and Madhu Sinha (Technical Member), while adjudicating an application under Section 9 of Insolvency and Bankruptcy Code, 2016 (“IBC, 2016”) in ABC India Ltd. vs Prabhakar Engineers Pvt. Ltd. has held that Detention Charges are very much a part of the Transportation Charges and hence a part of Operational Debt. Background Facts Prabhakar Engineers Pvt. Ltd (“Corporate Debtor”) approached ABC India Ltd (“Applicant”/ “Operational Creditor”) for transportation of Cargo from Bhosari, Pune to Indian Oil Corporation, Vadodra. The Operational Creditor mailed the full terms and conditions of the offer to the Corporate Debtor. It was mentioned in the offer that Rs. 9,38,000/- would be the freight charges and the aggregate would amount to Rs. 9,50,000/- provided Detention Charges are levied. The Corporate Debtor was supposed to get 1 day for loading and 2 days for unloading as Detention Free Days. In a joint meeting between Operational Creditor, Corporate Debtor and Indian Oil Corporation, it was agreed that the Corporate Debtor would pay detention charges to the Operational Creditor and the Corporate Debtor would be reimbursed by Indian Oil Corporation. The goods were unloaded by the Operational Creditor on this issuance alone. The Operational Creditor requested the Corporate Debtor to pay detention charges by way of multiple emails. However, no payment was made by the Corporate Debtor due to which Operational Creditor was constrained to issue a Demand Notice dated 16.01.2019. It was argued by the Corporate Debtor that detention charges do not come within the purview of Operational Debt as defined under Section 5(21) of IBC. They are in the nature of penalty/damages, payable because of breach of a contractual stipulation and/or a sum payable because of a loss suffered by a party. It was further contended that there was no contract between the Operational Creditor and Corporate Debtor whereby the Corporate Debtor had agreed to pay detention charges. The charges were not agreed to be paid to the Operational Creditor before its receipt from Indian Oil Corporation. Subsequently the Corporate had to pay it to the Operational Creditor. NCLT Verdict It was observed by the tribunal that the Corporate Debtor had impliedly agreed to pay the detention charges as per the email. This email contained per day detention charges of each type of trailer beyond the detention free day. It was also observed that there was an express agreement between the three parties wherein the Corporate Debtor agreed to pay detention charges and then avail its reimbursement from Indian Oil Corporation. Thus, there was no ambiguity and the primary liability to pay the detention charges to the Operational Creditor is on the Corporate Debtor. It was also observed that the Corporate Debtor itself communicated to the Operational Creditor to depute its representative to negotiate and collect payment against detention charges. This showed privity of the contract is between Operational Creditor and the Corporate Debtor and not between the Operational Creditor and Indian Oil Corporation. It was held that “Detention Charges are very much a part of the Transportation Charges as the moment transportation services are availed of any delay on the part of the Corporate Debtor to load or unload the goods is bound to become part of the Order of Transportation”. It was held that there is a clear establishment of “Debt” and corresponding “Default”. With the aforesaid observations, the Tribunal admitted the petition. Case:ABC India Ltd. vs Prabhakar Engineers Pvt. Ltd. Case No. -C.P. No. 4216/MB/2019 Order Dated-01.05.2024 Counsels for the Applicant-Mrs. Kenny Thakkar and Mr. Deepak Aggarwal Counsels for the Respondent -Adv. Aditya Mehta Click here to Read/Download Order

Detention Charges Come Within The Purview Of Operational Debt: NCLT Mumbai

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Detention Charges Come Within The Purview Of Operational Debt: NCLT Mumbai

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