TaxTMI 
TaxTMI 
2021 (8) TMI 427
X X X X Extracts X X X X
X X X X Extracts X X X X
....me Plumber Pipe Products. "Jains & Alliance Palm Ventures Pvt. Ltd." (Corporate Debtor) had placed several purchase orders with the Operational Creditor for supplying of Supreme Plumber Pipe Products since 2015. The parties continued to have a normal business relationship with each other till 2017. The Corporate Debtor failed to pay some of the invoices sent by the Operational Creditor for goods already supplied. The total amount due and payable by the Corporate Debtor to the Operational Creditor is Rs. 12,75,316/- which includes Rs. 9,15.107/-as principal amount and Rs. 3,60,209/- as interest at the rate of 15 % per annum from 15.07.2017 to the date of default i.e. 19.06.2019. The Corporate Debtor neither disputed the quality of the products supplied nor the invoices that the principal amount of Rs. 9,15.107/- is due and payable to the Operational Creditor. The Corporate Debtor keep assuring the Operational Creditor that the payment will be done, however, the Corporate Debtor failed to make the payment, therefore, the Operational Creditor issued a demand notice under Section 8 (1) of the IBC on 19.06.2019 demanding payment of Rs. 12,75,316/-. The Corporate Debtor replied to the de....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ounsel appearing on behalf of the Appellant (Operational Creditor) submits that Ld. Adjudicating Authority has rejected the Application on following grounds: (i) The Operational Creditor did not account for amount of a sum of Rs. 2,60,594/- remitted by the Corporate Debtor. (ii) The Corporate Debtor has raised the dispute regarding authenticity of some of the invoices. (iii) No case has been made out that the Corporate Debtor is unable to pay its debt. (iv) The Operational Creditor has attempted to use the provisions of IBC as a recovery forum. 7. Ld. Counsel for the Operational Creditor submits that it is incorrect that the Operational Creditor has not adjusted the amount of Rs. 1,37,296/- and 1,83,298/-and in support of argument drawn our attention towards the ledger entries filed by the Operational Creditor A-7 pg. 131 of the Appeal Paper Book. The total amount received from the Corporate Debtor have been reflected in the Operational Creditor's ledger account. Thus, Ld. Adjudicating Authority erroneously held that the Operational Creditor has not adjusted the amount of Rs. 2,60,594/- which is paid by the Corporate Debtor and after adjustment of the aforesaid princ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Counsel for the Appellant (Operational Creditor) submits that the notification dated 24.03.2020 increasing the threshold from Rs. 1 Lacs to 1 Cr. is not attracted to the present case as the Corporate Debtor has committed default on 15.07.2017 and the Application under Section 9 of the IBC is filed on 04.11.2019. The Ld. Adjudicating Authority is in disregard of the settled principles of law and has resulted in complete injustice to the Operational Creditor. Thus, the impugned order is not sustainable in law and is liable to be set aside. 12. Per contra, Ld. Counsel appearing for the Respondent (Corporate Debtor) submitted that the Corporate Debtor has raised a dispute that some of the invoices have been manipulated by the Operational Creditor. Therefore, the Corporate Debtor has not paid the amount and kept the same pending for verifying the authenticity of the said invoices. The Corporate Debtor has already paid a sum of Rs. 1,37,296 on 26.04.2018 and a sum of Rs. 1,83,298 on 03.08.2018 and in support produced the Bank Statements. The Operational Creditor has not come with clean hands and has suppressed the aforementioned payments and malafidely claiming that a sum of Rs. 9,15....
X X X X Extracts X X X X
X X X X Extracts X X X X
....108/-in the Corporate Debtor's Account. The credit entries are matching with the bank account statement (R-1 at Pg. 155 - 156 Appeal Paper Book) filed by the Corporate Debtor which is at Pg. 155 to 156. Thus, we find no ground to hold that Rs. 2,60,594 remitted by the Corporate Debtor has not been adjusted by the Operational Creditor. Ld. Adjudicating Authority has erroneously given a finding that the Operational Creditor has suppressed these two payments. Issue No. (ii) Whether there is any pre-existing dispute? 17. The Corporate Debtor was served with demand notice under Section 8(1) of the IBC on 28.06.2019 Acknowledgment is at Pg. 133 of the Appeal Paper Book. As per Section 8(2) of the IBC the Corporate Debtor was required to reply within a period of 10 days of receipt of the demand notice i.e. till 08.07.2019. However, the Corporate Debtor has replied to the notice on 15.07.2019, and in reply the Corporate Debtor has not raised any dispute with regard to the existence of the amount of debt, quality of goods or breach of representation or warranty. We would like to reproduced the relevant portion of the reply which is as under: - (A-9 at Pg. 141 Appeal Paper ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y. 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 or 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." 20. With the aforesaid we are of the considered view that the Corporate Debtor has failed to prove that there exists any dispute between the parties in regard to the amount claimed by the Operational Creditor. Ld. Adjudicating Authority superficially examined the allegations and held that there is dispute between the parties. Such finding cannot be sustained. Issue No. (iii) Whether the Operational Creditor has attempted to use the provisions of IBC as a recovery forum? 21. We would like to refer the Judgment of Hon'ble Supreme Court in the case of K. Kishan Vs. Viajy Nirman Company Pvt. Ltd. (Civil Appeal No. 21824& 21825 of 2017) decided on 14.08.2018 held that: "7) Our recent judgment ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ional 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. (Para 34). 12) In para 38, this Court cautioned: "We have also seen that one of the objects of the Code qua operational debts is to ensure that the amount of such debts, which is usually smaller than that of financial debts, does not enable operational creditors to put the corporate debtor into the insolvency resolution process prematurely or initiate the process for extraneous considerations. It is for this reason that it is enough that a dispute exists between the parties." Finally, the law was summed up as follows: - "51. 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)(2)(d) if notice of dispu....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... complete the Adjudicating Authority must reject the Application under Section 9 (5) (2) (d) of the IBC, if notice of dispute has been received by the Operational Creditor or there is record of dispute in the information utility. As we have already discussed that the Corporate Debtor has failed to prove that there exists any dispute between the parties in regard to the amount claimed by the Operational Creditor. The Corporate Debtor has not placed on record any material to infer that the Operational Creditor has filed the claim prematurely or for extraneous considerations or as a substitute for debt enforcement procedures. The Operational Creditor has claimed Rs. 12,75,316/- which is supported by the ledger entries, purchase orders, invoices, exchange of emails and demand notice. The Corporate Debtor has not filed any document in rebuttal. Thus, we are unable to convince with the Ld. Adjudicating Authority that "the Operational Creditor has attempted to use this forum as a recovery forum, and that also in respect of a disputed debt". 23. Ld. Adjudicating Authority also held that "no case has been made out that the Corporate Debtor has become insolvent and has lost its substratum....