Corporate Debtor Can't Deny Transaction For Which It Earlier Gave Approval: NCLT Delhi
The National Company Law Tribunal Bench of Shri Mahendra Khandelwal (Judicial Member) and Shri Atul Chaturvedi (Technical Member) upheld a Section 9 petition filed under the Insolvency & Bankruptcy Code, 2016 (“the Code”) stating that if the Corporate Debtor has given its approval for an amendment in the wage structure, it can't deny it later. Background...
The National Company Law Tribunal Bench of Shri Mahendra Khandelwal (Judicial Member) and Shri Atul Chaturvedi (Technical Member) upheld a Section 9 petition filed under the Insolvency & Bankruptcy Code, 2016 (“the Code”) stating that if the Corporate Debtor has given its approval for an amendment in the wage structure, it can't deny it later.
Background Facts:
M/s. Liberium Global Resources Private Limited (Operational Creditor) initiated insolvency proceedings under Section 9 of the Insolvency and Bankruptcy Code, 2016, against M/s. Amritsar MSW Limited (Corporate Debtor), alleging default in the payment of dues as per the Concession agreement.
The Concession Agreement was entered into between the Municipal Corporation of Amritsar ("Concessioning Authority"), Amritsar MSW Limited ("Concessionaire"), Essel Infraprojects Limited ("Selected Bidder") and the Department of Local Punjab Government, Punjab.
The Concessioning Authority entered into a sale agreement with the Corporate debtor for establishing a suitable mechanism to manage the the collection, transportation processing and disposal of municipal solid waste generated from residential and other areas with a view to meet environmental regulations and for health and hygiene.
Later, in June 2020, Averda Waste Management Investments India Pvt. Ltd., took over Corporate Debtor's ownership and management through a Supplemental Concession Agreement and took responsibility for the Corporate Debtor's ownership, management, and control of the concessionaire and/ or the projects.
In November 2021 a notification was issued by the Punjab Government revising minimum wages Act. After which, the Operational Creditor sent the revised salary structure to Averda as per the revised structure and sought confirmation. Responding to it, Averda accepted the revised salary structure and asked the Operational Creditor to proceed with the revised salary structure.
However, when Operational Creditor submitted the salary register of January 2022, Averda refused to give the salary as per the revised structure and stated that they will continue with the old wages as the matter regarding minimum wage notification has been challenged in the Panjab and Haryana High Court.
Despite regular follow ups by the Operational Creditor, Averda refused to release payments or process the invoices. He also unilaterally terminated the Sale Agreement in March 2022.
There was no stay on the wage notification issued by the Panjab & Haryana High Court, still Averda denied to release payments, even though it had earlier accepted to pay. Thereafter, a demand notice dated 28th July 2023 was issued, which included invoices billed directly to Averda under a Confidential Agreement.
Later a fresh demand notice under Section 8 of the Code was issued, confined to invoices raised solely on the Corporate Debtor under the governing Agreements.
In its reply, the Corporate Debtor denied the operational debt stating that the Confidential Agreement was not relevant to the debt claimed as the claim is for unpaid invoices arising from services duly rendered under the Concession Agreement, Supply Agreement and the Supplementary Concession Agreement.
Thus, a sum of ₹2,28,65,774 remains unpaid by the Corporate Debtor to the Operational Creditor.
Contentions of the Corporate Debtor:
The Corporate Debtor submitted that it had entered into a Sale Agreement with the Operational Creditor for the purchase of municipal solid waste for the purpose of setting up a plant for converting waste into electricity. As per the agreement, monthly invoices were raised by the Operational Creditor for monthly targets of waste picked up.
It further stated that, a total of 18 invoices amounting to ₹8,97,69,008/- were raised from January to December, 2021 and payments for those were already released. There were excess payments of ₹9,00,87,241/- made which were adjusted in the coming billing cycle.
It emphasized on the fact that no agreement except for the Sale Agreement existed between the parties, and only this Agreement constitutes the entire contractual framework of the parties.
It was further argued that the claim of Operational Creditor claim is largely based on actions and representations of Averda Waste Management Investments India Pvt. Ltd., which is not a party in this case. So, In the absence of a tripartite or amended agreement, commitments Averda can't bind the Corporate Debtor.
Additionally, the Corporate Debtor also pointed out procedural deficiencies in the application of Operational Creditor, stating that it did not file the debt with any Information Utility as required under the Code.
Findings:
The Tribunal observed that Clause 5 of the Concession Agreement inflicted responsibility on the Corporate Debtor to comply with all applicable laws relating to labour and employment, that included statutory wage requirements, even after termination or expiry of the agreement.
Further, Clause 8 of the Agreement defined “Change in Law” which included the modification or re-enactment of existing Indian law, which, in this case, covered the amendment to the Minimum Wages Act, 1948 by the Punjab Government. Therefore, the Tribunal held that the Corporate Debtor was liable to pay the revised minimum wages to the people engaged in the waste management project.
The Corporate Debtor, through its managing entity Averda Waste Management Investments India Pvt. Ltd., had approved the revised wage structure proposed by the Operational Creditor in December 2021 and permitted the Operational Creditor to implement the revised wages in the salary structure.
In compliance, the invoice for December 2021, which included the revised wages, was fully paid by the Corporate Debtor. The Tribunal noted that this demonstrated the initial acceptance of revised wage structure.
However, in 2022 the Corporate Debtor denied to pay as per the revised wage structure, stating that the wage notification had been challenged before the Punjab and Haryana High Court and that it would continue to process payments as per the old wage structure.
With respect to the challenging of the notification, the Tribunal noted that, Neither the Operational Creditor nor the Corporate Debtor were parties to the proceedings challenging the wage notification. Also, No stay order was passed by the High Court on the wage notification. The pendency of the case, is no excuse for not complying with an amendement in the absence of a stay or injunction.
Hence, the Tribunal found that the Corporate Debtor's refusal to pay the revised wages was not legally sustainable.
The Tribunal noted that as per the email correspondences, there appeared to be no objection raised by the Corporate Debtor regarding the invoices until a demand notice was served under Section 8 of the Code.
In Union of India v. N. Murugesan & Ors. 2022, the Supreme Court held that “a party cannot accept the transaction to obtain advantage and later refute it to gain some other advantage”. It stated that no party can be allowed to accept and reject the same thing, and and upheld the principle of approbate and reprobate.
The Tribunal held that the Corporate Debtor after accepting the December 2021 invoice with revised wages, could not later turn around and challenge the applicability of those same wage terms for subsequent months.
Thus, the Tribunal upheld the Section 9 petition and Concluded that the operational debt of ₹2,28,65,774 was due and payable to the Operational Creditor.
Case Title: M/s Liberium Global Resources Private Limited V/s Amritsar MSW Limited
Case Number: Company Petition IB/142/ND/2024
Judgment Date: 09/05/2025
For the Applicant: Mr. Utsav Mukherjee, Mr. Saksham Ahuja, Mr. Mayukh Roy, Mr. Bhaskar Pandey, Advs.
For the Respondent : Mr. Aslam Ahmed, Mr. Rohit Jain, Mr. Harilal, Mr. Zeeshan Haidar, Mr. Shubham Soni, Advs