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Generate professional replies, appeals, opinions to Show Cause Notices, assessment orders, audit objections, and other legal communications using TaxTMI's AI Drafter.
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AI Drafter ✕ Generate professional replies, appeals, opinions to Show Cause Notices, assessment orders, audit objections, and other legal communications using TaxTMI's AI Drafter.
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Issues: Whether the admission of the application under Section 9 of the Insolvency and Bankruptcy Code, 2016 was liable to be set aside on the ground that the operational debt had been adjusted or paid through sister concerns and that the debt stood disputed.
Analysis: The Corporate Debtor's own balance sheet reflected the amount due to the Operational Creditor under trade payables, while the amounts said to have been adjusted were shown separately as trade receivables from other entities. The settlement agreement signed by the appellant also recorded adjustment of liability in respect of the Operational Creditor, amounting to an acknowledgment of liability. The subsequent criminal proceedings were initiated after the demand notice and did not displace the documentary material showing unpaid operational debt and default.
Conclusion: The defence of payment or adjustment failed, and the admission of the Section 9 application was upheld.
Final Conclusion: The appeal was found to be without merit and the order admitting the insolvency application was sustained.
Ratio Decidendi: Where the corporate debtor's own records and a signed settlement agreement evidence liability, a plea of adjustment through third parties does not defeat proof of unpaid operational debt and default for Section 9 insolvency proceedings.
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