Applicability of the BACK-TO-BACK payment clause does not negate the liability of a corporate debtor to pay operational debts to creditors when debts are established under the Insolvency and Bankruptcy Code, 2016.

ORDER

Pronounced on 28.03.2024 (Hybrid Mode)

[Per: Justice Sharad Kumar Sharma; Member (Judicial)] :

1) Briefly, stated facts are that the Appellant herein, in this Company Appeal preferred under Section 61 of the Insolvency and Bankruptcy Code, 2016 (herein after to be called as ‘Code of 2016’), pleads his grievances as against the Impugned Order dated 19.04.2022 as it has been rendered by the Learned Adjudicating Authority, Hyderabad Bench in CP(IB) No. 493/9/HDB/2018, consequential by virtue of the Impugned Order rendered the Application preferred by the Respondent/Operational Creditor under Section 9 of the Code of 2016 has been admitted, to be proceeded with further as per law.

2) The Appellant who claims himself as to be the Shareholder, Promoter and erstwhile Director of M/s Bevcon Wayors Pvt. Ltd., the Corporate Debtor. He has submitted that initially in the year of 2012, the Corporate Debtor, Operational Creditor and a Company called as M/s. GTL Limited had entered into Consortium Agreement dated 10.04.2012, which was later further sought to be qualified by Addendum Consortium Agreement dated 11.04.2012. It was submitted, that a tender was awarded by one M/s. GVK Coal (Tokisud) Company Pvt. Ltd. to the Consortium for the purposes of planning, designing, engineering, procuring, construction, fabrication, supply, erection and commissioning of the processing plant and consequent to this, a contract agreement bearing number GVK/Tokisud Coal/CHP/CA No.004 and dated 05.09.2012 was entered between the aforesaid concern M/s. GVK Coal (Tokisud) Company Pvt. Ltd. and the partners of the Consortium.

3) The Appellant further submits that in the aforesaid Consortium, the Corporate Debtor i.e., M/s. Bevcon Wayors Pvt. Ltd., became the lead member of the Consortium because owing to certain developments M/s. GTL Ltd. had opted to withdraw itself from the Consortium and as such M/s. GVK Coal (Tokisud) Company Pvt. Ltd. had given the entire contract to the Corporate Debtor being the lead Member for an amount of Rs. 26.46 crores. The aforesaid order was subdivided between the partners to be utilized into various parts of area of Operation of the Consortium i.e., supply of machinery, erection, commissioning and Construction of Civil Works, etc.

4) As per the Consortium Agreement, the Appellant (M/s. Bevcon Wayors Pvt. Ltd.) had issued a Purchase Order on 01.11.2012 and 01.12.2012 to the Respondent No. 1 (Operational Creditor) for supply of items as detailed in the Purchase Order for a sum of Rs. 5,62,00,000/- which was later on revised by the subsequent Purchase Order dated 22.03.2014 for a sum of Rs. 5,18,20,000/. It is contended by the Appellant, that the Purchase Order of 01.11.2012 and the revised Purchase Order dated 22.03.2014, provided for BACK-TO-BACK payment transaction with M/s. GVK Coals (Tokisud) Company Pvt. Ltd. In order to substantiate his argument, the Counsel for the Appellant heavily relies upon the aforesaid Purchase Order, and contends that as per the terms of payment, there is BACK-TO-BACK payment arrangement between the Corporate Debtor and the Operational Creditor. In other words, it means to say that it was rather the Appellant’s case, that the Corporate Debtor would make the payment of balance dues to the Operational Creditor only after the receipt of payment from the aforesaid M/s. GVK Coal, against the equipment supplied. It was contended that accordingly based upon the aforesaid arrangement of BACK-TO-BACK payment, the Corporate Debtor used to make the payments to the Operational Creditor, imm