TaxTMI 
TaxTMI 
2021 (12) TMI 485
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....on products. The Respondent too is also engaged in similar business apart from providing consultancy services to the Appellant. The Appellant has asked for refund of outstanding amount of Rs. 30,75,408/-. The Respondent neglected to refund the said amount inspite of demand notice served on them and hence filed 'Insolvency Petition' under Section 9 of the Code before the Adjudicating Authority. On its petition being dismissed by the Adjudicating Authority, it has appealed to set aside the impugned order dated 15.07.2021 and initiate 'Corporate Insolvency Resolution Process' (CIRP). 3. The Adjudicating Authority has dismissed the petition on the ground of limitation, dispute between the parties, the amount being loan, the Petition filed under Section 9 is not maintainable and has accordingly dismissed the petition. 4. Mr. Prajendra Jaroli, one of the 'Director' of the Respondent Company - Corporate Debtor was working as an employee with the Appellant since 2000. He was responsible for the management of trading and exports of the Appellant. Thereafter, on the request of Mr. Prajendra Jaroli, the Appellant agreed to continue his services as 'Consultant'. Mr. Prajendra Jaroli inco....
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....Pvt. Ltd., reported at 1976 SCC Online Cal 342, the Hon'ble High Court of Calcutta had observed that:- "14. It is also elementary that the entries in the books of account cannot alter or affect the nature, quantity and character of any transaction and that for the purposes of taxation the substance of the transaction in question has to be looked at. The substance of the matter, in the instant case before us, must be viewed in the light of the said litigation including the decree and the said order passed therein. Further, the conveyance in that case should also be read and understand in the context of the said decree and the order including the facts and the circumstances of the case as found by the Tribunal. The Adjudicating Authority has, therefore, wrongly proceeded on the basis that claimed amount is a 'loan' where in fact it was given as 'advance'. Advance given is an operational debt within the meaning of the term encompassed in Section 5(21) of the Code. 5. The Appellant has contended that advance was given, no doubt, in the year 2014 but there was a continuous transaction till November, 2017. All such debit notes passed between 29.02.2016 to 24.11.2017 are du....
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....to or forming part of such financial statements are expressly recognised by Section 134(7). Equally, the auditor's report may also enter caveats with regard to acknowledgements made in the books of accounts including the balance sheet. A perusal of the aforesaid would show that the statement of law contained in Bengal Silk Mills (supra), that there is a compulsion in law to prepare a balance sheet but no compulsion to make any particular admission, is correct in law as it would depend on the facts of each case as to whether an entry made in a balance sheet qua any particular creditor is unequivocal or has been entered into with caveats, which then has to be examined on a case by case basis to establish whether an acknowledgement of liability has, in fact, been made, thereby extending limitation under Section 18 of the Limitation Act." 7. It has also been submitted by the Appellant that the present Corporate Debtor is not a party to the company Petition (IB) No. 1706 /2019 filed by Mr. Prajendra Jaroli which is his individual capacity against the Operational creditor to recover his alleged dues which was dismissed by Adjudicating Authority vide order dated 28.11.2019. The Corpora....
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....corporate debtor. While audited Balance Sheet of the operational creditor for the Financial Year 2016-17 reflects and outstanding amount of Rs. 30,71,903/- under the heading "advances to be recovered in cash or kind from the Corporate Debtor". Hence, it is very much clear that an amount of Rs. 30 lakhs are recoverable from the Corporate Debtor and it is also very much clear that that amount is advanced towards commission/brokerage payable to the other party at a future date as and when such commission becomes due. Hence, it is an amount towards utilization of provisions of services provided by the other parties and is covered under Section 5(21) the Code. For clarity & brevity, Section 5(21) of the Code, is reproduced below for convenience: "Section 5(21)- "Operational Debt" means a claim in respect of the provision of goods or services including employment or a debt in respect of the payment of dues arising under any law for the time being in force and payable to the Central Government, any State Government or any local authority." This is as per the prevalent accounting practice supported by Schedule- III Part -1 of the Companies Act, 2013 as stated abo....
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....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." In this case, it is very much clear that the dispute between the corporate debtor has first time pointed out in the reply to the notice without any supporting paper to reflects that there is a pre-existing dispute. It is also clear that the amount is due and payable under the Law as the parties have parted their ways from 2018 and has not refunded the outstanding amount to the....