This appeal challenges the National Company Law Appellate Tribunal’s (hereafter referred to as the “NCLAT”) judgment and order dated December 21, 2018, which allowed the appeal filed by respondent herein Kay bouvet. In this case, the defendant has opted to file an appeal with the Appeal Company (AT) (Insolvency) No. 582 of 2018, in defiance of an order made by the National Company Law Tribunal (hereinafter referred to as “NCLT”) on July 26, 2018, denying Application for CP (IB) 20 (MB) / 2018 Section 9 of the Insolvency and Bankruptcy Code (hereinafter referred to as “IBC”) was used by the respondent in this case. While allowing the appeal, the NCLAT referred the matter to the NCLT for assistance on admitting the respondent’s application filed under Section 9 of the IBC after giving the appellant here limited notice to resolve the claim via a writ of summons dated December 21, 2018.
Principles explored in the article
- Section-8 Insolvency resolution by operational creditor
A “Claim notification” for the purposes of this section means a notification sent by the active debtor is the business debtor demanding [payment] for operating credit to respect for what happened automatically.
- Section-9 Application for initiation of corporate insolvency resolution process by operational creditor
- If the active lender does not receive payment from the debtor or a notice of dispute within ten days of the date of delivery of the notice or an invoice required to be paid under clause (1) of Section 8[1], the active debtor may file an application before the Judicial Council of to initiate a debt default resolution in company.
- A subsection (1) application must be filed in that manner and for a fixed fee.
- A working debtor, with the request containing:
- a copy of the invoice for payment or seek notification posted by the active debtor to the business debtor; and
- A copy of the invoice for payment or seek notification posted by the active debtor to the business debtor. an affidavit notice given to the debtor by the company in dispute over unpaid working debt;
- a copy of the certificate from the finance institutions keep accounts of the active debtor guaranteeing the existence of no unpaid operating fees debt [by a creditor, if any;]
- [ a copy of any record containing the information a service that guarantees no payment for the company debtor’s unpaid operating debt, if any; and]
- [Other supporting evidence that no performance credit payment is made by the debtor or other information, as prescribed.]
- An active borrower who initiates a company Procedure for resolving nonpayment under this section may propose that a solution specialist serve as a temporary decision specialist.
- Judicial Authority, within fourteen days of receipt of the application under subsection (2), by order—
- approve the application and communicate that decision to the active lender as well as company debtors if, –
- an application made under subsection (2) is complete;
- there is no [payment] for those who have not been paid operating credit; and
- An invoice or payment notice the business debtor has received.
- no notice of dispute was received by active or inactive lender disclaimer record in information in use; and
- No disciplinary action is pending any decision proposed activity under subsection (4), if any.
- refuse the request and notify the active lender and debtor of the decision if—
- an application made under subsection (2) is incomplete;
- there must be a [payment] for unpaid working debt;
- the debtor did not deliver it invoice or payment notice to corporate borrower;
- receipt of notice of dispute active or indebted debtor disclaimer record in information in use; or
- any disciplinary action pending any proposed decision expert:
Subject to the Judicial Authority, you must give the requester notice to rectify the disability of his application within seven days of receiving that notice from the Judicial Authority before refusing an application under subsection (a) of subsection (ii).
- The debt settlement company will begin operations on the date that an application under subsection (5) for this part is accepted.
Facts of the case
- Exim Bank of India (hereinafter referred to as “Exim Bank”) has extended a USD 150 million line of credit (“LoC”) to the Republic of Sudan for the construction of the Mashkour Sugar Project in Sudan. This was divided into two sums of $25 million and 125 million USD. On January 26, 2009, the Republic of Sudan and Exim Bank made the first USD 25 million loan to finance the Mashkour Sugar Project. Mashkour Sugar Company in Sudan made a USD 149,975,000 agreement with respondent Overseas Infrastructure Alliance (India) Private Limited on October 11, 2009, to be sponsored by Exim Bank. Mashkour would be in charge of the subcontractor agreement acc., to the aforementioned agreement. On December 18, 2010, Mashkour, Overseas, and Kay Bouvet signed a Memorandum of Understanding (“MoU”) in Khartoum, Sudan.
- The contract would be governed by Sudanese law, according to the MoU. On the same day, the three parties signed a Tripartite Agreement[2], with Kay Bouvet named as subcontractors to do all of the design work, engineering, delivery, installation, construction, testing, and completion of the Mashkour Sugar Company Plant Factory for a total of USD 106.200 Million. On March 29, 2011, overseas votes by email sent to Mashkour confirmed that under the Third Amendment, Mashkour would have issued a first LoC payment in order to overseas and Overseas would also release payments to Kay Bouvet for Advance delivery Bank. The bank informed the Overseas that Rs.46.58 Crore had been transferred to its bank account.
- The distribution of the second tranche of USD 125 million in Mashkour and Overseas reached an agreement on July 24, 2013, with a balance of USD 124,975,000 to fund the final phase of the Sugar Factory Project between the Republic of Sudan and Exim Bank on February 9, 2014.
- The Sudanese ambassador to India advised the Minister of Status of Foreign Affairs of the Government of India to cancel Mashkour’s contract with the Overseas and appoint Kay Bouvet as Contractor. Sudan’s Ambassador informed Mashkour that they would sign a deal with Kay Bouvet as a direct contract for the unused portion of the LoC for USD 150 million. Kay Bouvet has also received an advance payment of Rs.47,12,10,000/ from the company. Mashkour’s initial investment of USD 25 million would be deducted from the supplies needed to complete the project.
- On June 15, 2017, Mashkour terminated the contract and the Overseas for failing to perform its functions. Prohibition Motion Notice No. 1314 of 2017 was also filed. In accordance with the order for the 27th June 2017, a petition for temporary advertising by overseas rejection was filed with the Bombay High court.
- Mashkour informed Kay Bouvet of developments and completion of the agreement via communication on 5 July 2017. Kay Bouvet was also informed that the pre-payment of Rs.47,12,10,000/ received from Overseas was an adjustment compared to Mashkour props completion of the Project. The same was reported by the Sudanese Ambassador to the Department of External News on 11 July 2017. A Notice of Demand was sent under Section 8 of the IBC over Kay Bouvet of Overseas claims the error applies under Tripartite Agreement and demanded amount of USD 10.62 Million, paid overseas by Kay Bouvet. Kay Bouvet vide the media on 6 December 2017, denied the allegations. On the 27th In December 2017, the Overseas called them “Operational the debtor”, applied under Section 9 of the IBC earlier NCLT, Mumbai to CP (IB) No. 20 (MB) / 2018. NCLT rejected the application. Overseas did the same on appeal to the Appeal Company (AT) (Insolvency) No. 582 of 2018 before NCLAT.
Conclusion
In both situations, we believe that the NCLT correctly rejected the overseas application after discovering that Kay Bouvet and the Overseas were at odds, and that the order under Section 9 of the IBC could not be made as a result. We believe that the NCLAT misread and distorted the law, and that it erred in restoring the NCLT’s order and mandating the approval of a Section 9 application.
REFERENCE
- https://www.legitquest.com/case/overseas-infrastructure-alliance-india-pvt-ltd-v-kay-bouvet-engineering-ltd/11C48F
- https://ibbi.gov.in/webadmin/pdf/order/2018/Dec/21st%20Dec%202018%20in%20the%20matter%20of%20Overseas%20Infrastructure%20Alliance%20(India)%20Pvt.%20Ltd.%20Vs.%20Kay%20Bouvet%20Engineering%20Ltd._2018-12-23%2014:16:36.pdf
- https://indiankanoon.org/doc/49414702/?type=print
EDITED BY- SRISHTI SAINI
COLLEGE- FAIRFIELD INSTITUTE OF MANAGEMENT AND TECHNOLOGY
[1] (Article I Section 8 | Constitution Annotated | Congress.gov | Library of Congress, 2021)
[2] New Horizons Global Partners. 2021. What are Tripartite Agreements? Everything You Need to Know [Definitions and Key Terms]. [online] Available at: https://nhglobalpartners.com/tripartite-agreements-definition/.