Invoice-based Section 9 claims require proper supporting documents, and a plausible pre-existing dispute defeats the application.

In a Section 9 proceeding based on invoices, the demand notice was defective because it did not disclose the relevant invoice particulars or enclose the supporting invoices, and Form 3 could not be used to bypass production of the primary documents. An email dated 15.01.2016 was not accepted as a valid acknowledgement of liability because it was not shown to acknowledge debt in favour of the claimant and did not overcome the limitation objection. The debtor's reply denying the debt and disputing the underlying transaction amounted to a plausible pre-existing dispute, so the application had to be rejected without entering into a final merits adjudication.

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Issues: (i) Whether a demand notice issued in Form 3 was valid when the operational debt was founded on invoices and the invoices were not attached; (ii) Whether the email dated 15.01.2016 amounted to acknowledgement of liability so as to extend limitation; (iii) Whether the corporate debtor's reply constituted a notice of dispute warranting rejection of the Section 9 application.

Issue (i): Whether a demand notice issued in Form 3 was valid when the operational debt was founded on invoices and the invoices were not attached.

Analysis: The demand notice described the claim as arising from invoices, but did not disclose the relevant invoice particulars and did not accompany the notice with the supporting invoices. Form 3 is not a device to avoid producing the primary document on which the operational debt is based. Where the debt arises from invoice transactions, the creditor cannot bypass the need to furnish the invoices merely by choosing Form 3. The omission also remained material because even the documents mentioned in the notice were not enclosed.

Conclusion: The notice was held to be defective, and the finding on this issue was against the appellant.

Issue (ii): Whether the email dated 15.01.2016 amounted to acknowledgement of liability so as to extend limitation.

Analysis: The email was addressed to Rasmi Marketing and not shown to be an acknowledgement of liability in favour of Rama Traders. The surrounding correspondence did not displace the corporate debtor's denial, and the alleged attachment was not shown to be a reliable acknowledgment by the debtor. The claim also faced the difficulty that the demand itself was projected as time-barred, and the material relied upon did not establish a clear acknowledgment within the meaning required for extension of limitation.

Conclusion: The email was not accepted as a valid acknowledgement of liability, and the limitation objection was not overcome by the appellant.

Issue (iii): Whether the corporate debtor's reply constituted a notice of dispute warranting rejection of the Section 9 application.

Analysis: The reply to the demand notice denied the debt, disputed the nature of the underlying transaction, and asserted that the appellant was a commission agent rather than a supplier. This was not a spurious or unsupported defence. Applying the settled test for operational creditor proceedings, the adjudicating authority was required to reject the application once a plausible pre-existing dispute was shown.

Conclusion: The reply amounted to a notice of dispute, and rejection of the Section 9 application was justified.

Final Conclusion: The appeal failed in view of the defective demand notice and the existence of a real dispute between the parties, leaving the appellant to pursue other remedies available in law.

Ratio Decidendi: In a Section 9 proceeding, where the operational debt is based on invoices, the creditor must serve a notice that properly discloses and supports the claim, and if the debtor raises a plausible pre-existing dispute, the application must be rejected without embarking on a final adjudication of the merits.

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