AI Drafter 
TaxTMI 
TaxTMI 
2020 (10) TMI 918
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....2. The 'Adjudicating Authority' while passing the impugned order dated 03.06.2020 at paragraph 18 to 20 had observed the following: - "18. A careful perusal of the reply filed by the respondent shows that it has not denied the procuring of the material/steel goods (i.e. MS Angle) from the petitioner and which were properly delivered to and have been utilised by the Corporate Debtor. The Corporate Debtor did not produce any document to show that it raised some objection in respect of lower quality of goods supplied to it or on price / rate of material supplied. Contrary to this, the petitioner made such declaration about the tax invoices wherein, TDS is stated to have been deducted on the invoices raised by the petitioner. It is also a matter of record that the Corporate Debtor has made a part payment and amount of Rs. 17,74,977/-. Thus, there is remaining balance of Rs. 9,42,841/- as on 22.09.2017. The Petitioner, by filing rebuttal document has refuted the allegation of the Corporate Debtor in respect of low quality of goods and defective material and produced copies of communication through email / WhatsApp screenshot for perusal of this Court along with its rebuttal doc....
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.....2016 (work order No. 2487084) with 'Indian Oil Corporation'. The job was to construct a Compound Wall and GI Chain link fencing around the 'Gujarat Refinery Township' and the period of work was from 21.05.2017 to 30.06.2017. The total bill submitted for the work is around INR 1.56 Crore. 4. The First Respondent / 'Operational Creditor' (a Sole Proprietorship Concern) used to supply MS Angle to the 'Corporate Debtor'. The primary use of this MS Angle was for executing this Works Contract / Work Order with 'Indian Oil Corporation' for 'Gujarat Refinery'. The total sum of money outstanding as per the version of the First Respondent / 'Operational Creditor' was INR 27,17,818 out of which INR 17,74,977 was paid and only INR 9,42,841 being the balance sum to be paid since 22.09.2017. 5. It is the case of the Appellant that the 'Demand Notice' under Form 3 and 4 dated 06.04.2018 was duly served and that the total amount of 'Debt' mentioned therein was INR 18,63,840. However, in the Application before the 'Adjudicating Authority' the total sum was mentioned as INR 27,17,818 and the discrepancy in the amount leads to the conclusion that post payment of INR 17,74,977 only a sum of 88,....
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....Section 65B of the Indian Evidence Act, 1872 (mandatory for placing electronic evidence on record). Appellant's Contentions 9. The Learned Counsel for the Appellant submits that the 'Adjudicating Authority' had failed to consider the fact that the material defect in the 'Demand Notice' is fatal to the facts of the present case. Also, that the defense of the defective goods was brushed aside and that the impugned order is without jurisdiction. 10. The Learned Counsel for the Appellant contends that the impugned order runs contra to the judgement of this Appellate Tribunal dated 24.02.2020 in Company Appeal (AT) (Insolvency) No. 1354 of 2019 in the matter of 'Neeraj Jain' V. 'Cloudwalker Streaming Technologies Private Ltd.' wherein it was held that the amount in default as specified in the 'Demand Notice' must be in consonance with the 'Application' filed and the invoices sent but, in this case there is a serious discrepancy and a fatal error in the total amount of 'Debt' between the 'Demand Notice' and the application filed under Section 9 of the 'I&B' Code. 11. It is represented on behalf of the Appellant that if the amount due, if taken to be the sum as mentioned in th....
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....of 'Arjun Panditrao Kotkar' V. 'State of Maharashtra and Ors.' 15. The Learned Counsel for the Appellant contends that the Appellant in the present Appeal has filed IA 2375 of 2020(as an Applicant) seeking permission from this Tribunal to place on record (i) True copy of the order dated 22.09.2020 passed by this Tribunal in Company Appeal (AT)(Ins.) 592/2020 (ii) True copy of the order dated 06.01.2020 passed by the National Company Law Tribunal, Ahmedabad Bench, Ahmedabad in C.P. (IB) 227/NCLT/AHM/2018 (iii) True copy of the Work Order dated 20.09.2016 and the total bills submitted to 'Indian Oil Corporation' for the 'Contract' (iv) True copy of the e.mail dated 01.10.2017 and 14.10.2017 (v) True Copy of the e.mail dated 22.08.2020 (vi) True copy of the e.mail dated 16.07.2020 (vii) True copy of the letter dated 17.04.2017 (viii) True translated copy of the notice dated 02.04.2019 issued by VUDA regarding sealing of the premise (ix) True translated copy of the FIR dated 09.08.2020 on the file of Police Station Jawahar Nagar, Vadodara (x) Proof of service of additional affidavit and these additional documents came to the knowledge of the Appellant after passing of the impugned o....
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.... 02.05.2017 25361 213 19.05.2017 845638 07.06.2017 400000 07.06.2017 400000 13.06.2017 35627 124 24.07.2017 859796 11.09.2017 50000 469 15.09.2017 133045 FY2017-18 Total 1863840 885627 Grand Total 2717818 1774977 20. The aforesaid table clearly exhibits that the sum in default is Rs. 9,42,841/- and it is the same amount that was specified in the demand notice as well as in the Application before the 'Adjudicating Authority' filed under Section 9 of the Code. Besides this, the account was a 'running account' and that total sales will have to be taken into consideration while accounting for the total payments received. All the six sales invoices were sent along with the 'Demand Notice' and the requirement was complied with. 21. The 'Adjudicating Authority' had....
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....al creditor the existence of a dispute and/or the record of the pendency of a suit or arbitration proceeding filed before the receipt of such notice or invoice in relation to such dispute [Section 8(2)(a)]. What is important is that the existence of the dispute and/or the suit or arbitration proceeding must be pre-existing i.e. it must exist before the receipt of the demand notice or invoice, as the case may be." 25. The Learned Counsel for the First Respondent adverts to the decision of Hon'ble Supreme Court in 'Macquarie Bank Ltd.' V. 'Shilpi Cable Technologies Ltd., reported in (2018) 2 SCC page 674 wherein it is observed as follows:- "13. The first thing to be noticed on a conjoint reading of Sections 8 and 9 of the Code, as explained in Mobilox Innovations (P) Ltd. V. Kirusa Software (P) Ltd. [Mobilox Innovations (P) Ltd. v. Kirusa Software(P) Ltd., (2018 1 SCC 353: (2018) 1 SCC (Civ) 311] decided on 21.09.2017, at paras 33 to 36, is that Section 9(1) contains the conditions precedent for triggering the Code in so far as an operational creditor is concerned. The requisite elements necessary to trigger the Code are: (i) Occurrence of a default; (ii....
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....is very vital to note that no reply was issued to the demand notice of the First Respondent / 'Operational Creditor' and in reality, the 'pre-existing dispute' ought to have been in existence when the demand notice of the 'Operational Creditor' as per Section 8(1) of the 'I&B' Code was issued by the 'Operational Creditor'. In terms of the ingredients of Section 8(2) of the 'I&B' Code, the 'Corporate Debtor' is to bring to the notice of the 'Operational Creditor' about the existence of a dispute and / or the record of the pendency of a suit or arbitration proceeding filed before the receipt of such notice or invoice in relation to such dispute within a period of ten days from the date of receipt of such demand notice or copy of invoice(vide Section 8(2)(a) of the Code) 29. The First Respondent / 'Operational Creditor' is not a party to the documents which reflect the communication between the Appellant and their customer and as such they are not helpful to the Appellant / Applicant. The Appellant / Applicant has not offered any bonafide reason as to why the documents were not produced before the 'Adjudicating Authority'. The words 'substantial cause' mentioned in Order 41 Rule 27....
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....urt records a finding on it." 32. The comments made by 'Indian Oil Corporation' do not bind the First Respondent and the same cannot be put against it. The hand written note purportedly made by the Appellant's customer is part of an internal communication between the Appellant and their customer and that the First Respondent does not have any legal relationship with the 'Indian Oil Corporation'. Except for the e.mails annexed as A7 in IA No. 2375 of 2020, all other documents were in possession of the Appellant much earlier to the date on which the order was reserved by the 'Adjudicating Authority' and hence, it cannot be said that the Appellant was unable to submit the documents in question before the Authority. As such, the IA No. 2375/2020 seeking to place on record the additional documents is unsustainable in law and liable to be dismissed at the threshold. Gist of 2nd Respondent's Status Report 33. On various occasions, the 'Resolution Professional' addressed numerous communications to the suspended management of the 'Corporate Debtor' (including the Appellant) intimating them about the initiation of 'Insolvency Resolution Process' against the 'Corporate Debtor' and se....
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.... shows an amount of INR 9,17,434/- as an outstanding one towards the First Respondent. Evaluation 37. At the outset, it is to be pointed out that in Form 3 (see Clause (a) of sub-rule (1) of rule 5) Form of Demand Notice/Invoice Demanding Payment Under the Insolvency and Bankruptcy Code, 2016 under the caption 'particulars of operational debt' in S.No.1 the total amount of 'debt' is mentioned as Rs. 18,63,840/- sales account (GST - 18%) 22.09.2017. In S.No. 2, the amount claimed to be in default is described as 9,42,841/-(repayment due date 22.09.2017). 38. It comes to be known that an additional affidavit pursuant to an order dated 28.02.2019 passed by the 'Adjudicating Authority' was filed by the Proprietor of the First Respondent, before the said Authority whereby and whereunder it was mentioned that the defect in Part-V of Form 5 submitted by the Applicant was raised as in point no. 1 to 5 were replied as 'Not Applicable' and in point no. 8 it was replied as 'Separate Application' and because of the said defect raised, a rectified Form 5 with the additional affidavit towards rectification of defect pursuant to notice issued under Section 9(5) by the 'Adjudicating Autho....
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....ng the amendment in issue and, therefore, the contra plea taken on behalf of the Appellant is not acceded to by this Tribunal. 43. Be it noted, that in a given petition filed by the 'Operational Creditor' there is a heavy burden on the 'Corporate Debtor' to show that the dispute is a real and genuine one. Further, where a petition of the 'Operational Creditor' was opposed by the 'Corporate Debtor' on the ground that the dispute existed between the parties regarding the quality of the goods supplied but failed to raise the dispute within ten days of the receipt of 'Statutory Notice' under Section 8 of the 'I&B' Code, it is held that the petition is maintainable. 44. If a dispute truly exists in fact and is not a hypothetical or an illusory one, then, the 'Adjudicating Authority' is to reject the Application. A defence being a mere bluster can also be rejected by an 'Adjudicating Authority'. 45. Section 8 of 'I&B' Code adopts the test to all classes of Applications that may initiate Insolvency proceedings against the 'Corporate Debtor'. An 'Operational Creditor' is to show refusal of the 'Debtor' to repay the 'debt' despite 'Statutory Notice' issued under Section 8 of the Co....
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....'s record an additional evidence is not to be permitted. Further, the placing of letters / communications as additional documents in an Appeal squarely depend upon whether the same are required to a 'Tribunal' to enable it to deliver a judgement. If the documents sought to be placed on record are absolutely unnecessary to decide the controversy between the parties are irrelevant for the issues to be decided, they cannot be permitted to be received. 50. Also, that the non-realisation of the importance of the documents due to inadvertence or lack of proper legal advice would not bring the case within the expression 'other substantial cause' under order 41 Rule 27 of the Civil Procedure Code, as per decision 'Haryana State Industrial Development Corporation' V. 'Cork Manufacturing Company' reported in AIR 2008 SC page 56. 51. It is significantly pointed out that the true copy of the order dated 22.09.2020 in Company Appeal (AT) (Insolvency) No. 592 of 2020(A1), true copy of the order dated 06.01.2020 (A2) passed by the 'Adjudicating Authority', National Company Law Tribunal, Ahmedabad Bench, Ahmedabad in C.P. (IB) 227/7/NCLT/AHM/2018, true copy of e.mail dated 22.08.2020 and the....