Contract determines default date by payment terms, not invoices; omission in demand notice not fatal without prejudice; amendment permissible; pre-Section 10A default unaffected by continuation.

ORDER

1. Present application has been filed under Rule 11 of the NCLT rules, 2016 seeking following reliefs:

a) To take on record the date of Default as April 5, 2019.

b) To take on record the documents annexed in the present Application; and c) Pass any such other order(s) as may be deemed fit and proper by this Hon'ble Tribunal in the facts and circumstances of the case.

Facts:

2. The facts leading to the case in hand are as follows:

i. The Applicant and the Respondent executed two contracts dated 22 October 2018 (3 rakes) and 25 October 2018 (4 rakes) for the sale of Steam (Non-Coking) Coal of 3900 MT each rake. As per Clause 7 (Payment Terms) of the both the contracts the Respondent was bound to make payments to the Applicant within 30 days from the berthing of the vessels. The contracts further stipulated that any delay beyond 30 days would attract interest @ 12% per annum. The issuance of delivery order was contingent upon receipt of payment, and there was no provision for credit sale under the contract. Clause 7 of the Contract is reproduced hereunder for ready reference:

"7. PAYMENT TERMS

An advance of Rs 25 lakhs to be paid by 26th Oct 2018 which shall be adjusted in the last transaction of the shipment Payment to be made in advance for each rake and entire payment to be made within 30 days of berthing of vessel. Delivery order shall be issued after receipt of payment by Seller.

Any delay in payment beyond 30 days shall attract interest 12% per annum.

SELLER shall arrange to issue Delivery Order and place the rake Indent 10 VGCB/Railways Immediately after receipt payment and EDRM Permission from Buyer.”

ii. It is submitted that in accordance with the above mentioned contracts, on 06.03.2019 the Applicant berth the vessel and produced Railway Receipt No. 212015710 to substantiate the delivery of the vessel. Despite the contractual obligation, the Respondent failed to make payment within 30 days i.e. on or before 05.04.2019 from the date of berthing of vessel. Consequently, the payment became due and payable on or before 05.04.2019, and upon non-payment, the default occurred on 05.04.2019.

iii. The Applicant further submits that the obligation to pay arose strictly from the contract upon berthing of the vessel and was not dependent upon the raising of invoices. The invoices, wherever issued subsequently, were raised only for accounting and audit purposes and did not determine either the due date or the date of default. It is specifically asserted that the contract did not contemplate issuance of invoices prior to payment and, in fact, invoices were to be raised only after receipt of payment.

iv. On 24.10.2019, the Respondent addressed an email to the Applicant claiming that no invoice or Railway Receipt had been received in respect of one rake and requested the same. In reply dated 30.10.2019, the Applicant clarified that the Railway Receipt had already been shared with the Respondent’s representative, reiterated that payment was contractually required within 30 days of berthing of the vessel, and categorically stated that there was no concept of credit sale under the contract. The Applicant further clarified that invoices could be raised only after payment was made or upon deposit of cheque for the receivable amount.

v. After repeated requests and non-payment by the Respondent, the Applicant raised four invoices on 02.11.2020, which included invoices for delayed lifting charges, interest on delayed payment, coal supplied against the Railway Receipt dated 06.03.2019, and rate difference. These invoices were raised subsequent to the default and did not create any fresh cause of action or alter the original date of default. The details of the 4 invoices are enumerated herein below:

vi. With reference to the invoice issued towards plot rent on account of delayed lifting beyond the stipulated period of 40 days, the Applicant has submitted that the said