2022 (2) TMI 147 - AT - Insolvency and Bankruptcy

Appeal Dismissed: Lack of Proof of Delivery Leads to Rejection of Insolvency Application

The Tribunal dismissed the appeal challenging the NCLT's decision to reject a section 9 application under the Insolvency and Bankruptcy Code due to ... Real dispute - proof of delivery - unimpeachable evidence - Section 9 of the Insolvency and Bankruptcy Code, 2016 - demand notice under section 8 of the Insolvency and Bankruptcy Code, 2016 - operational creditor - corporate debtorProof of delivery - unimpeachable evidence - Whether the discrepancies in Invoice No. MPPL/405/15-16 (Invoice 1) and the existence of two versions of the invoice defeated the claim of the operational creditor under Section 9. - HELD THAT: - The Tribunal accepted the Appellant's explanation that the handwritten document was a proforma issued at loading showing an approximate prevailing rate and that the later computerized invoice correctly recorded the applicable rate for the supply. The Appellant demonstrated that credits were given for any short supply arising from differing weigh-bridge records. On that basis the discrepancy between the two invoice versions was explained and not treated as establishing a substantive denial of liability.Discrepancy in Invoice 1 was satisfactorily explained and was not held to be a fatal impediment to the claim.Proof of delivery - real dispute - Whether Invoice No. MPPL/062/16-17 (Invoice 2) was supported by cogent proof of delivery such that the Section 9 petition could succeed despite the respondent's denial. - HELD THAT: - The Appellant relied on an e-mail (dated 11.4.2017), quarterly VAT returns and its ledger entries to show supply. The Tribunal held that the e-mail did not amount to confirmation of receipt, the VAT returns and ledger were at best indirect evidence concerning tax compliance and could not substitute for unimpeachable proof of delivery, and the consignment note did not convincingly establish receipt by the Corporate Debtor. Because the Corporate Debtor had specifically disputed delivery in its reply to the demand notice, the operational creditor was required to produce conclusive evidence of supply; it failed to do so and the dispute as to delivery was held to be bona fide.Claim under Invoice 2 was rejected for want of unimpeachable proof of delivery; a real dispute existed.Proof of delivery - forgery - real dispute - Whether Invoice No. MPPL/080/16-17 (Invoice 3) was proved to have been delivered to and received by the Corporate Debtor, in view of the respondent's allegation of forgery. - HELD THAT: - The Corporate Debtor alleged forgery of the invoice and disputed the signature on the invoice. The Appellant's reliance on VAT filings and an assertion that the same lorry delivered both items were not substantiated by cogent documentary evidence. In the absence of a receipt or other unimpeachable documentary proof of delivery and given the specific denial of receipt by the Corporate Debtor, the Tribunal concluded that the operational creditor had not established delivery of the goods stated in Invoice 3 and that the dispute was real.Claim under Invoice 3 was not established; the dispute over delivery and authenticity of the invoice was held to be genuine.Section 9 of the Insolvency and Bankruptcy Code, 2016 - real dispute - Whether the Section 9 application by the operational creditor should be admitted notwithstanding the respondent's disputes on delivery and invoice authenticity. - HELD THAT: - Applying the principle that the IBC process cannot be used where a 'real dispute' exists, the Tribunal evaluated the documentary evidence submitted in response to the Corporate Debtor's specific denials in its reply to the demand notice. For Invoices 2 and 3 the Appellant failed to produce unimpeachable proof of delivery and could not dispel the respondent's legitimate disputes. Reliance on indirect tax records and ledger entries was held insufficient to defeat a pleaded denial of receipt. The Tribunal therefore sustained the Adjudicating Authority's conclusion that a real dispute existed and that the Section 9 petition lacked merit.The Section 9 application was correctly dismissed because genuine disputes existed concerning supply and the authenticity/receipt of the invoices; IBC remedy could not be invoked.Final Conclusion: The appeal is dismissed; the Adjudicating Authority's order rejecting the Section 9 petition was upheld because the operational creditor failed to produce unimpeachable proof of delivery for two of the contested invoices, giving rise to bona fide disputes which precluded initiation of insolvency proceedings under the IBC. Issues:Discrepancies in claim of Operational Creditor, objections by Corporate Debtor, non-payment of outstanding amount, disputed invoices, non-delivery of goods, disputed rates, forged invoice, lack of proof of delivery.Detailed Analysis:1. Discrepancies in Claim and Objections:The appeal was filed under section 61 of the Insolvency and Bankruptcy Code, 2016, challenging the judgment of the NCLT, Kolkata Bench, which dismissed the section 9 application due to discrepancies in the claim of the Operational Creditor and objections raised by the Corporate Debtor. The Operational Creditor alleged non-payment of the outstanding amount by the Corporate Debtor.2. Disputed Invoices and Non-Delivery of Goods:The main issues revolved around three disputed invoices and the delivery of goods. The Corporate Debtor disputed the delivery of goods related to the invoices and raised concerns about the rates charged by the Operational Creditor. The disputes were raised in response to a demand notice, with the Corporate Debtor denying receipt of goods for certain invoices.3. Arguments and Counterarguments:The Operational Creditor argued that discrepancies in rates were due to different invoices issued at different stages, with the correct rate mentioned in the final invoice. The Corporate Debtor disputed the delivery of goods for one invoice and requested proof of delivery, which the Operational Creditor failed to provide convincingly.4. Lack of Proof of Delivery:Regarding one invoice, the Corporate Debtor's confirmation email was not considered proof of delivery, and the quarterly VAT returns and ledger accounts submitted were deemed insufficient to establish the delivery of goods. The Tribunal emphasized the need for unimpeachable proof of delivery to support the claim under section 9 of the IBC.5. Decision and Legal Precedent:The Tribunal found that the Operational Creditor failed to provide convincing evidence of the delivery of goods for the disputed invoices. Citing a legal precedent, the Tribunal highlighted that the IBC cannot be invoked in the presence of a real dispute. As a result, the appeal was dismissed, upholding the decision of the Adjudicating Authority to reject the section 9 application.6. Conclusion:The Tribunal concluded that the application lacked merit and upheld the decision of the Adjudicating Authority. No costs were awarded in the judgment. The detailed analysis focused on the lack of conclusive proof of delivery of goods, leading to the dismissal of the appeal based on the existence of legitimate disputes raised by the Corporate Debtor.