2020 (8) TMI 391 - AT - Insolvency and Bankruptcy

Tribunal Upholds Decision on Section 9 Application, Dismisses Corporate Debtor's Appeal

The Tribunal upheld the Adjudicating Authority's decision to admit the Section 9 Application filed by the Operational Creditor, dismissing the appeal by ... Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - existence of debt and dispute or not - Operational Debt - HELD THAT:- The submission of the Counsel for the Appellant that amounts of ₹ 1,95,79,294/- and ₹ 1,95,34,823/- dated 21.10.2017 and 10.11.2017 respectively are reflected in the journal entries in the ledgers of the sister concern M/s Olympus Metal Private Limited is unsustainable specially keeping in view the evidence on record and the specific pleading by the Operational Creditor in their Rejoinder that these amounts have been paid to them through RTGS Bank transfer. There are no substantial reasons given by the Corporate Debtor for having sent a letter authorising the transfer of the same amount in favour of a third Party, when the same amounts have admittedly been paid to the Operational Creditor itself. Hence, there are force in the contention of the Learned Counsel appearing for Operational Creditor that these two amounts were never claimed as ‘Operational debt’ as they have already been paid. There is no documentary evidence filed by the Appellant to substantiate their plea that all accounts have been reconciled and signed by both the Parties except for filing these confirmatory letters which portray so many discrepancies and therefore, inspire no confidence. Both the defences raised by the Appellant’s Counsel are mutually exclusive and cannot coexist as a debt cannot be disputed and discharged at the same time - the Appellant did not raise any plausible contention requiring further investigation and the argument raised is not substantiated by any evidence. There is no illegality or infirmity in the Order passed by the Adjudicating Authority - Appeal dismissed. Issues Involved:1. Admission of Section 9 Application.2. Pre-existing dispute.3. Documentary evidence and reconciliation of accounts.4. Payments made to Operational Creditor.5. Discrepancies in journal entries and confirmatory letters.6. Contempt of order and non-cooperation by appellants.Issue-wise Detailed Analysis:1. Admission of Section 9 Application:The appeal challenges the Order dated 26.02.2020 by the National Company Law Tribunal (NCLT), New Delhi, which admitted the Section 9 Application filed by the Operational Creditor, M/s. Worldwide Metals Pvt. Ltd. The shareholder of the Corporate Debtor, M/s. J.P. Engineers Pvt. Ltd., filed this appeal under Section 61 of the Insolvency and Bankruptcy Code, 2016.2. Pre-existing Dispute:The appellant contended that the Adjudicating Authority ignored the documentary evidence of a 'pre-existing dispute' between the parties. The Operational Creditor had issued a demand notice on 27.10.2018, to which the Corporate Debtor replied on 05.11.2018, stating that necessary journal entries and adjustments had been made, and no amounts were outstanding.3. Documentary Evidence and Reconciliation of Accounts:The appellant argued that the Operational Creditor had acknowledged reconciled accounts for various periods, showing no amount was due and payable. The appellant presented confirmatory letters and journal entries allegedly confirmed by the Operational Creditor and its sister concerns.4. Payments Made to Operational Creditor:The Adjudicating Authority noted that the Corporate Debtor had made payments of Rs. 1,95,34,823 on 21.10.2017 and Rs. 1,95,79,294 on 10.11.2017 to the Operational Creditor via RTGS Bank transfer. The Corporate Debtor failed to produce any tri-partite agreement authorizing payments to other concerns.5. Discrepancies in Journal Entries and Confirmatory Letters:The Adjudicating Authority observed several discrepancies in the letters and journal entries relied upon by the appellant. For instance, a transaction signed by Mr. Vikas Gandhi on 30.04.2018 was questionable as he had resigned on 22.01.2018. Additionally, the signatures did not match his service record, and the Articles of Association mandated the presence and signature of a Director wherever the company stamp was used.6. Contempt of Order and Non-cooperation by Appellants:The Resolution Professional filed IA No. 1509 of 2020, alleging non-adherence to the Order dated 03.03.2020 by the appellants. The appellants were accused of withdrawing money wrongfully, not providing information regarding assets, debtors, purchase orders, invoices, and not handing over physical assets. The application was disposed of with liberty to the respondent to pursue the matter with the Adjudicating Authority.Conclusion:The Tribunal found that the dispute raised by the Corporate Debtor was 'illusionary and moonshine,' intended to erase its liability and defeat the claim made by the Operational Creditor. The Tribunal upheld the Adjudicating Authority's order, dismissing the appeal and finding no illegality or infirmity in the decision. The principle laid by the Hon’ble Supreme Court in 'Mobilox Innovations Pvt. Ltd. Vs. Kirusa Software (P) Limited' was deemed applicable, emphasizing that the existence of a dispute must be pre-existing before the receipt of the demand notice or invoice. The appeal was dismissed with no order as to costs.