NCLT Shall Not Act As A Recovery Forum: NCLT Mumbai

NCLT made it clear that the Adjudicating Authority defined under IBC would not be an Adjudicator of disputed claims.

Background Facts:

IOCL had issued work orders to SATEC for work of Pre-engineering Building & Porta Cabin at its Haldia and Bongaigaon Refinery. However, IOCL terminated the work contract awarded to SATEC on account of non-completion of work by SATEC, on the contrary SATEC issued Demand Notice claiming payment towards completion of work contract. Non-payment by IOCL led SATEC to filing of Application under Section 9 of IBC by before NCLT, Mumbai being C.P.(IB) No. 213/MB/2021 for a claim of Rs. 5,82,25,39/-.

Demand Notice was issued by IOCL to SATEC wherein SATEC was called upon to pay a sum of Rs. 1,77,19,274.47/- to IOCL on account of the claim towards Risk and Cost under Clause 7.0.9.0 of GCC, claim towards Supervision Charges under Clause 7.0.9.0 of the GCC and claim towards price adjustment under 4.4.0.0 r/w clause 7.0.9.0 of GCC. The said communication further stated that “SATEC failed to do joint measurement and as such the measurements were taken by EIL. Therefore, the measurements taken by EIL are binding upon SATEC in terms of Clause 6.1.4.0 of GCC. IOCL referred to various correspondences in relation to delay and failure to fulfil contractual obligations by SATEC. IOCL submitted that they had never issued Work Completion Certificate to SATEC as project work was not complete, instead they had issued Demand Notice demanding Rs. 1,77,19,274.47 on account of breaches of Contract terms committed by SATEC.

Observations of the Tribunal:

The NCLT from the materials on the record observed that IOCL, before issuance of Demand Notice by SATEC, had raised dispute on various occasions with SATEC regarding completion of work and had terminated work contract, which confirms pre-existence of dispute with regard to termination of work contract and payment of dues. It was further observed by NCLT that though the financial debt amounting to more than one crore may be payable by IOCL to SATEC, it cannot be held that there is default by the IOCL in payment of debt amount, as existence of such debt is itself in dispute in view of various correspondences placed on record.

NCLT Mumbai thus dismissed the Application u/s. 9 of IBC filed by SATEC seeking Corporate Insolvency Resolution Process against IOCL.

Case Title: Satec Envir Engineering (India) Private Limited v. Indian Oil Corporation Limited

Counsel For SATEC: Mr. Sameer Pandit a/w Ms. Krina Gandhi i/b Wadia Ghandy & Co., Advocates.

Advocates for IOCL: Meharia & Company (MCO Legals)