TaxTMI 
TaxTMI 
2019 (1) TMI 1748
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....ithheld at Bidar unit, etc. 2. The brief facts of the case, as mentioned in the petition, are as follows : (a) The applicant is a company incorporated under the provisions of the Companies Act, 1956 and is engaged, inter alia, in manufacturing, mar keting and promotion of alcoholic beverages, i. e., IMFL and liquor pro ducts and has the expertise in manufacturing processor, formulations, quality control, marketing network and support logistics and capability to launch, promote and market IMFL products. (b) The corporate debtor is a company incorporated under the pro visions of the Companies Act, 1956 and is engaged, inter alia, in the manufacturing, blending and bottling of Indian Made Foreign Liquor (hereinafter referred to as "IMFL") and also manufacturing of Extra Neutral Alcohol (hereinafter referred to as "ENA"), which is the main raw material for manufacturing of alcohol at its Factory at Bidar, Karnataka. (c) As stated supra, the corporate debtor is engaged in the manufacture of IMFL and ENA and accordingly, the corporate debtor has two distinct divisions of operations at its Bidar factory, i. e., the first comprising of a primary distillery uni....
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....e above agreement, the applicant was also purchasing ENA from the corporate debtor for its liquor manufacturing unit at Solur. Also the ENA consumed for manufacturing of the applicant's brands at corporate debtor's factory was purchased from the corporate debtor itself as it was convenient to internally transfer the ENA from one division to another and also reduced the cost of transportation. (g) It is stated that in the meeting held on December 8, 2011 between the managing director of the corporate debtor and finance director of the petitioner, the managing director of corporate debtor requested the petitioner to pay an advance amount equivalent to value of 2 lakh liters of ENA to meet the working capital requirements of primary distillery unit. The Petitioner having regard to the reputation of the corporate debtor acquiesced to the request of the corporate debtor. It has paid an advance amount of Rs. 44,00,000 on June 30, 2012, towards purchase of ENA for Solurunit of the applicant and Rs. 47,57,800 for purchase of ENA for captive use (i. e., manufacture of applicant's brands of IMFL) at Bidar unit of corporate debtor. (h) However, since the corporat....
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....g was co-terminus with the agreement dated February 21, 2011. (l) Even though, the agreement dated February 21, 2011 was valid up to January 11, 2013, the same was terminated in November, 2012 itself as the corporate debtor stopped production of IMFL of the applicant's brands. Hence, the corporate debtor was required to return to equipment's immediately to the applicant. However, as on this date, the corporate debtor has not returned equipment's to the applicant. Hence, it is liable to indemnify the applicant and pay a sum of Rs. 30,00,000 which is the written down value of the equipment as on the date of termination of the memorandum of understanding and agreement dated February 21, 2011. It is stated that the purchase invoices of the equipment's are in the name of M/s. Gemini Distilleries P. Ltd., an entity, which was acquired by the applicant. (m) Further, it is stated that as per clause 4(f) of the agreement dated February 21, 2011, the applicant was required to arrange for working capital finance for manufacture of Unistil brands and products and ensure that the manufacturing schedule of the products are maintained. Accordingly, the applicant ....
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.... in the proceedings under the I and BC, 2016. The corporate debtor has filed this application only with an intention to harass the applicant and to avoid insolvency proceedings. At any rate, there are no prior existing disputes before any forum and the defence is moonshine. Further, the corporate debtor till date has not issued any notice to the application invoking the arbitration clause in the agreement dated February 21, 2011. (q) It is also stated that even after filing of the arbitration application, the corporate debtor vide its letter dated May 5, 2018 had assured the applicant that it will clear the outstanding balance amount within 6 to 8 months. Having regard to the same, the applicant with an intention to amicably settle the issues, did not proceed to take any legal action, under the Code. However, even after a period of three months, the corporate debtor did not refund any amount to the applicant as promised. It is stated that the corporate debtor has not done any business for past 4 years and has earned zero revenue from its business operations, which is evident from its financial statement for financial statements for financial year ended March 31, 2016 and M....
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....ner : (a) Rs. 44,00,000 advance paid towards supply of ENA to Solur Unit. (b) Rs. 47,57,800 advance paid towards internal transfer of ENA for manufacturing of UNISTIL Alcoblends P. Ltd., brands under the manufacturing agreement dated February 21, 2011. (c) Rs. 51,38,424 towards interest payable at 18 per cent. on ENA Advance Paid-Bidar Unit as on January 31, 2018. (d) Rs. 47,52,000 towards interest payable at 18 per cent. on ENA Advance Paid-Solur Unit as on January 31, 2018. (e) Rs. 16,27,827 due towards the value of the Stock withheld at Bidar Unit. (f) Rs. 30,00,000 towards the value of fully automatic high speed bottling line provided by the creditor to the corporate debtor. (g) Totaling to an amount of Rs. 2,36,76,051 including interest at 18 per cent. per annum. 7. It is not in dispute that the impugned agreement contains several terms and conditions to be fulfilled by both the parties. It also contain clause 30, which deals with dispute resolution and it reads as under : "Any dispute or difference or question between the parties hereto concerning anything contained in or arising out of this Agreement ....
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....enty four lakhs ninety six thousand and ninety nine only). It is contended that as per clause 25 of the agreement, the petitioner is bound to indemnify for all losses, claims, all liabilities expenses, etc. Since there is a disputes has arisen between the parties. There is an arbitration process available as per the provisions of agreement, and thus they have invoked the arbitration by filing Arbitration Case before the City Civil Court. (5) It is also stated that the books of accounts have to be reconciled and adjusted by appropriately adjusting the sums of damages due to the respondents and, thereafter, question of paying any money, if any, to the petitioner, would arise. However, at present the petitioner is due a sum of Rs. 3,97,67,170 (rupees three crores ninety seven lakhs sixty seven thou sand and one hundred seventy only). However, the petitioner made false claims as per the letters dated April 15, 2014, July 7, 2014, November 19, 2015, February 14, 2018. They have pointed that all letters are silent about the agreement dated February 21, 2011. (6) They are liable to pay the following dues to statutory authorities : (a) Excise renewal licences fee....
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....0,00,000 towards value of fully automatic high speed bottling line provided by the petitioner and only the petitioner is having lien on the equipment and it should be used by the respondent for the purpose goods to be supplied for the petitioner. As per the agreement in question, the petitioner has a right for return of the machinery and it cannot demand money. 10. It is to be pointed here that the minutes of meeting of the petitioner-company with Mr. Balakrishnan, managing director of the respondent-company held on December 8, 2011 (enclosed as annexure 2, pages 56 and 57 of the petition) it is agreed to make advance payments temporarily equivalent to 2 ltrs. of ENA to meet the working capital requirement primarily distillery unit and agreed to allow a rebate of Rs. 2 per litre on transfer price of ENA, in the absence of credit facility from the banks. Accordingly, it was agreed to transfer Rs. 52.80 lakhs to the respondent. Therefore, there are no terms and conditions with regard to repayments to such advance payments and much less interest issue. 11. It is also relevant to point here that the memorandum of understanding (memorandum of understanding) dated August, 2011 (enc....
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.... the operational creditor gets out of the clutches of the Code." In another case, Mobilox Innovations P. Ltd. v. Kirusa Software P. Ltd. [2017] 205 Comp Cas 324 (SC) ; MANU/SC/1196/2017, wherein the hon'ble Supreme Court, inter alia, held as follows (page 373 of 205 Comp Cas) : "It is clear, therefore, that once the operational creditor has filed an application, which is otherwise complete, the adjudicating authority must reject the application under section 9(5)(ii)(d) if notice of dispute has been received by the operational creditor or there is a record of dispute in the information utility. It is clear that such notice must bring to the notice of the operational creditor the 'existence' of a dispute or the fact that a suit of arbitration proceeding relating to a dispute is pending between the parties. Therefore, all that the adjudicating authority is to see at this stage is whether there is a plausible contention which requires further investigation and that the 'dispute' is not a patently feeble legal argument or an assertion of fact unsupported by evidence it is important to separate the grain from the chaff and to reject a spurious defen....
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.... state that the operational debt, in the present case, can not be said to be an undisputed debt." 15. In another latest judgment rendered in Transmission Corporation of AP Ltd. v. Equipment Conductors and Cables Ltd. [2018] 4 Comp Cas-OL 532 (SC) ; [2018] 1 IBJ (JP) 641 (SC) (C. A. No. 9597 of 2018, dated October 23, 2018), it has, inter alia, held that existence of undisputed debt is sine qua non of initiating the CIRP. As per paragraph 34 of judgment, it is stated that the Adjudicating Authority, while examining an application under section 9 of Code, will have to determine (page 543 of 4 Comp Cas-OL) : "(i) Whether there is an 'operational debt' as defined exceeding Rs. 1 lakh ? (ii) Whether documentary evidence furnished with the application shows that the aforesaid debt is due and payable and has not yet been paid ? (iii) Whether there is existence of dispute between the parties or the record of the pendency of a suit or arbitration proceeding filed before receipt of demand notice of the unpaid operational debt in relation to such dispute ? If any one of afore said conditions is lacking, the application would have to be rejected."....