Gandhar Oil Refinery (India) Ltd vs. City Oil Pvt. Ltd.
Company Appeal (AT) (Ins) 915 of 2022
Facts:
1.Respondent periodically placed order with the Appellant for supply of Divyol 75 and Divyol 480 (SN 500). In the month of April, 2018 and August, 2018 the Respondent placed 3 (three) purchase orders. In pursuance of purchase orders, the Appellant supplied the products to Respondent as per the terms of the purchase order, the same was accepted without any protest. The Appellant raised invoices for Rs. 73,56,627/
2.Respondent failed to pay and Appellant issued a notice dated December 31, 2019, demanding payment of outstanding amount of Rs. 73,48,542/- together with interest @ 24% per annum as per the terms and conditions agreed upon by the parties. In response to the notice, Respondent by letter dated January 28, 2019 inter alia acknowledged the debt due but pleaded inability to clear the outstanding due to the Appellant within three months from January, 2020
3.No settlement is arrived, the Appellant issued a demand notice dated 05.03.2020, claiming Rs. 73,48,542.35/- towards Principal amount Rs. 29,22,819/- towards interest calculated @ 24% per annum. Respondent paid Rs.9,50,000/- in total; the last payment of Rs. 2,00,000/- was made on 29.01.2021. As such an amount of Rs. 1,04,39,547/- is due. The Respondent had neither paid the outstanding amount nor disputed the debt within 10 days from the date or receipt of demand notice under Section 8 of IBC, 2016. Application was filed under section 9 of the code.
4.AA without considering the terms of invoice for payment of interest @ 24% on delayed payment which form part of operational debt, dismissed the application in limini. Appellant is challenging the order.
Issue: Whether AA was right in rejecting the application in limini?
Arguments:
For Appellants:
1.Appellant contended that the condition to pay interest @ 24% on the amount due, on account of delayed payment was not considered properly though interest would form part of the debt, both in the grounds of appeal and during arguments
For Respondents:
1.It contended that no opportunity was afforded to it before passing impugned order, no reply was filed to the application. However, interest is a part of invoice, the same is not accepted by signing under it, therefore, the Respondent is not under obligation to pay interest @ 24% on the delayed payment, on the other hand no date is fixed for paying of the invoice amount
2.In the absence of acceptance to such term for payment of interest @ 24%, the interest claimed by Appellant interest would not form part of debt to satisfy the threshold requirement. Hence, the Adjudicating Authority rightly dismissed the application by impugned order
Decision: AA was not right in rejecting the application in limini.
Rationale:
1.Tribunal noted that in the absence of any provision in IBC or rules, regulations as to what order or Judgment should contain, the general rules relating to contents of order or Judgment shall be followed by Adjudicating Authority. Tribunal can’t decide in question as to liability to pay interest either in the presence of contract or in the absence of contract, without affording an opportunity to file reply to the petition, in case the liability to pay interest is decided without an opportunity it would amount to denial of reasonable opportunity which is in violation of principles of natural justice.
2.It is settled law that the Court or Tribunal shall record reasons for its conclusion on the basis of merits. What an order should contain normally is not specified anywhere but the order must be reasoned.
3.The strength of a judgment lies in its reasoning and it should therefore be convincing. Clarity of exposition is always essential. Dignity, convincingness are exacting requirements but they are subservient to what, after all, is the main object of a judgment, which is not only to do but to seem to do justice.
4.The requirement of a good judgment is reason. Judgment is of value on the strength of its reasons. The weight of a judgment, its binding character or its persuasive character depends on the presentation and articulation of reasons. Reason, therefore, is the soul and spirit of a good judgment or order.
5.Even if it is an order under the provisions of the Act, still these basic requirements cannot be ignored by Courts and Tribunals. In such case, a judge is required to apply his mind and give focused consideration to rival contentions raised by both parties.
Order Copy:
