2022 (8) TMI 765 - AT - Insolvency and Bankruptcy

Appeal Dismissed Due to Pre-Existing Dispute on Forged Documents

Oyster Steel and Iron Pvt. Ltd. Versus Laxmi Foils Pvt. Ltd.

Oyster Steel and Iron Pvt. Ltd. Versus Laxmi Foils Pvt. Ltd. - TMI Issues Involved:1. Pre-existing dispute between parties.2. Allegations of forged and fabricated documents.3. Jurisdiction of the Adjudicating Authority under Section 9 of the Insolvency and Bankruptcy Code, 2016.4. Business practices and adjustments through debit notes.5. Use of Insolvency and Bankruptcy Code as a recovery forum.Detailed Analysis:1. Pre-existing dispute between parties:The Appellant filed an appeal under Section 61 of the Insolvency and Bankruptcy Code, 2016, challenging the order dated 30.09.2019 by the National Company Law Tribunal (NCLT), Principal Bench, New Delhi. The NCLT observed that the Respondent had annexed Debit Notes dated 31.03.2015 and 31.05.2015, which were issued before the Demand Notice dated 19.11.2018. This indicated a pre-existing dispute. The NCLT further noted that the contention of the Appellant regarding the documents being forged raised a civil dispute requiring further investigation, which could not be resolved in summary proceedings.2. Allegations of forged and fabricated documents:The Appellant claimed that the Respondent produced three fabricated Debit Notes in response to the Section 8 demand notice. The Appellant alleged that these Debit Notes were never issued or received and were fraudulent. However, the Respondent argued that these Debit Notes bore the Appellant's sign and stamp, evidencing their receipt. The NCLT concluded that the issue of whether the Debit Notes were forged required a trial and could not be decided in summary proceedings.3. Jurisdiction of the Adjudicating Authority under Section 9 of the Insolvency and Bankruptcy Code, 2016:The NCLT referred to the Supreme Court's judgment in Mobilox Innovations Pvt. Ltd Vs. Kirusa Software Pvt. Ltd., which stated that the Adjudicating Authority must reject an application under Section 9(5)(2)(d) if there is a notice of dispute or a record of dispute in the information utility. The NCLT emphasized that the existence of a plausible contention requiring further investigation meant that the application should be rejected. Since there was a genuine dispute, the NCLT rejected the Appellant's petition.4. Business practices and adjustments through debit notes:The Appellant maintained a running account for the supplies made to the Respondent, who made lump sum payments against the dues. The Respondent claimed that the entire amount on account of the invoices was discharged through Debit Notes for rate differences and short supply. The Appellant contested this, alleging that the Debit Notes were fabricated. The NCLT noted that the Appellant had not pursued any claim for the outstanding amount from May 2015 to December 2018, suggesting that the Debit Notes were accepted. The NCLT also observed that the Appellant did not mention any outstanding amount in their communications with the Respondent, further supporting the acceptance of the Debit Notes.5. Use of Insolvency and Bankruptcy Code as a recovery forum:The NCLT highlighted that the provisions of the Insolvency and Bankruptcy Code could not be used as a means for chasing payments or building pressure for releasing payments. The Supreme Court in Transmission Corporation of Andhra Pradesh Limited Vs. Equipment Conductors and Cables Limited held that the Code is not intended to be a substitute for a recovery forum and should not be invoked when there is a real dispute. The NCLT concluded that the Appellant was using the Code to bring pressure on the Respondent for disputed payments.Conclusion:The NCLT upheld the view that the existence of a genuine dispute between the parties precluded the invocation of Section 9 of the Insolvency and Bankruptcy Code. The appeal was dismissed, and the pending applications were disposed of. The interim order was vacated, and no order as to costs was made.