TaxTMI 
TaxTMI 
2021 (2) TMI 724
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.... order dated 18.06.2020 disposed of the Company Petition and passed the following orders: "Para -10. In the result, CP(IB) No.34/BB/2020 is hereby disposed of with the following directions: (1) The parties are at liberty to prosecute the Arbitration Application bearing A.A No.25025 of 2019 pending before the XXVIII Additional City Civil Sessions Judge, Mayo Hall Unit (CCH-29), Mayo Hall, Bengaluru. (2) The Petitioner is granted liberty to take appropriate legal course of action, subject to result of the above Arbitration case. (3) No order as to costs." 3. The Adjudicating Authority has decided the case on the reason that the Company Petition has been filed with an intention to recover the disputed outstanding amount in question & Arbitration Application bearing A.A No. 25025 of 2019 is pending before the XXVIII Additional City Civil Sessions Judge, Mayo Hall Unit (CCH-29), Mayo Hall, Bengaluru. 4. The Appellant has submitted that it is the Corporate Debtor which approached the Appellant for supply of Ready-Mix Concrete (RMC), Tyles, UPVS and Blocks (Materials) in 2014 onwards and under the arrangement between the parties the Corporate Debt....
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....ed vide their report dated 24th January, 2020 (page 178 to 184 of Appeal Paper book). The Appellant has raised the issue of initiation of unlawful Arbitration including unlawful issuance of notice under Section 21 of the Arbitration and Conciliation Act, 1996. The Appellant has also raised the issue of unrelated FIR filed on 12th September, 2018 as the name of the Appellant is not in the FIR and allegation is of manipulation of accounts department. They have also raised the issue of consideration of economic distress due to pandemic having been considered by the Adjudicating Authority which is against their powers. The Appellant has also clarified the inapplicability of the judgments cited by the Respondent and the same are reproduced below: Yash Technologies Private Limited Vs. Base Corporation Limited, Company Appeal (AT) (Ins) No.01 of 2019. Facts : the Appellant had filed a petition under section 433 (e) and Section 343(1) of Companies Act, 1956 which was transferred pursuant to Rule 5 of Companies Act (Transfer of Pending Proceeding) Rules, 2016. The Ld. Adjudicating Authority vide its order dismissed the application under section 9 of IBC, 2016 on the ground of pr....
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....019. Facts: the said appeal was filed by the erstwhile director of the Corporate Debtor. The present appeal arose out of an order passed by the ld. Adjudicating Authority, wherein the ld Adjudicating Authority had admitted the application under section 9 of IBC, 2016. Distinguishing note: Hon'ble NCLAT in the present judgment had set aside the judgment passed by the ld. Adjudicating Authority wherein the CIRP was initiated against the Corporate Debtor. Hon'ble NCLAT held that the operational Creditor failed to submit any documents to prove the existence of the operational debt and the amount in default. Furthermore, the operational creditor had also failed to submit the copes of the invoice, copy of bank statement and relevant documents. (Para 79 @ 34-35 of judgment). The Operational Creditor had issued a notice for payment of due, failing which the dispute shall be referred to arbitration. (Para 79 @ 34 - 35 of judgment) Whereas, the said case in not applicable in the present proceedings since, the debt herein is due, admitted and defaulted: The Respondent provided a Reconciled balance confirmation vide emails dated Se....
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....n - Any dispute arising out of the contract made by this order shall be referred to arbitration as defined under the Arbitration Act and statutory amendments made thereto or approach appropriate legal forum for any loss suffered by the purchaser. 9. They have also produced details of payments made to Appellant from September, 2014 to February, 2019 with varying in figures amounting to approx. Rs. 125 crores. The Respondent has also annexed copy of emails at Annexure R-8, 9 &10 at page No.154 to 191 of the Statement of Objections. The copy of email and other debit notes issued for the defects on various dates. All these reflect correspondence of August 2016, February, 2018, September 2018 and then about the incomplete works from email of June, 2019 and Debit note of November 2018. 10. The Respondent has alleged that Appellant have manipulated some of the officers working the Respondent's Account Department and obtained confirmation letter dated 22nd March, 2019 which was withdrawn by the Respondent on 03rd May, 2019 and in the Process the Respondent has also to file FIR against the Deputy General Manager for issuing such balance confirmation certificate. The Respondent has als....
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....lied to the Respondent and has resorted to Arbitration Proceedings in line with the purchase orders terms and conditions. They have also raised that the case argued in the Appeal is in variation to the case as argued before the Adjudicating Authority and in variation to the notice issued under Section 8. They have also raised the issue that there is a genuine pre-existing dispute which is proved from the records and initiation of Arbitration Proceedings. 13. We have gone through the various submissions made by the parties and carefully gone through the Hon'ble Supreme Court Judgment Mobilox Innovations Private Limited Vs. Kirusa Software Private Limited in Civil Appeal No. 9405 of 2017. For the brevity or clarity, Section 8 &9 of the Code is reproduced below: Section 8 -Insolvency Resolution by Operational Creditor. - (1) An operational creditor may, on the occurrence of a default, deliver a demand notice of unpaid operational debtor copy of an invoice demanding payment of the amount involved in the default to the corporate debtor in such form and manner as may be prescribed. (2) The corporate debtor shall, within a period of ten days of the receipt of the dema....
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....erational debt by the corporate debtor or such other information, as may be prescribed. (4) An operational creditor initiating a corporate insolvency resolution process under this section, may propose a resolution professional to act as an interim resolution professional. (5) The Adjudicating Authority shall, within fourteen days of the receipt of the application under sub-section (2), by an order- (i) admit the application and communicate such decision to the operational creditor and the corporate debtor if,- (a) the application made under sub-section (2) is complete; (b) there is no payment of the unpaid operational debt; (c) the invoice or notice for payment to the corporate debtor has been delivered by the operational creditor; (d) no notice of dispute has been received by the operational creditor or there is no record of dispute in the information utility; and (e) there is no disciplinary proceeding pending against any resolution professional proposed under sub-section (4), if any. (ii) reject the application and communicate such decision to the operational creditor and the corporate debtor, if- ....
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....d of the electronic transfer of the unpaid amount from the bank account of the corporate debtor or send an attested copy of the record that the operational creditor has encashed a cheque or otherwise received payment from the corporate debtor (Section 8(2)(b)). It is only if, after the expiry of the period of the said 10 days, the operational creditor does not either receive payment from the corporate debtor or notice of dispute, that the operational creditor may trigger the insolvency process by filing an application before the adjudicating authority under Sections 9(1) and 9(2). This application is to be filed under Rule 6 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 in Form 5, accompanied with documents and records that are required under the said form. Under Rule 6(2), the applicant is to dispatch by registered post or speed post, a copy of the application to the registered office of the corporate debtor. Under Section 9(3), along with the application, the statutory requirement is to furnish a copy of the invoice or demand notice, an affidavit to the effect that there is no notice given by the corporate debtor relating to a dispute of the....
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....rofessional, the application may be rejected (Section 9(5)(ii)(e)). Para 25 - The adjudicating authority, when examining an application under Section 9 of the Act will have to determine: (i) Whether there is an "operational debt" as defined exceeding Rs. 1 lakh? (See Section 4 of the Act) (ii) Whether the documentary evidence furnished with the application shows that the aforesaid debt is due and payable and has not yet been paid? and (iii) Whether there is existence of a dispute between the parties or the record of the pendency of a suit or arbitration proceeding filed before the receipt of the demand notice of the unpaid operational debt in relation to such dispute? If any one of the aforesaid conditions is lacking, the application would have to be rejected. Apart from the above, the adjudicating authority must follow the mandate of Section 9, as outlined above, and in particular the mandate of Section 9(5) of the Act, and admit or reject the application, as the case may be, depending upon the factors mentioned in Section 9(5) of the Act. 14. On going through the submissions made by the parties and keeping in mind the provisions of ....