TaxTMI 
TaxTMI 
TaxTMI 
2022 (4) TMI 433
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....ess of providing high quality, superior performance encapsulants for the photovoltaic(PV) module industry. The Respondent is a Private Limited Company incorporated in the state of Gujarat under the provisions of Companies Act, 1956 and involved in manufacturing PV Encapsulants. 3. The grievance of the Appellant is that the Adjudicating Authority on misapplication of facts and law has held erroneously that part of the claim filed by the Appellant for outstanding payment due on raw material invoices is not an 'operational debt' and that the remaining part of the claim for balance payment for equipment being an 'operational debt' is subject to disputes. 4. The case of the Appellant is that they have supplied raw material to the Respondent under 43 invoices against the purchase orders placed by the Respondent. The Appellant is accepting the fact that the Respondent had made payment of 27 such invoices out of 43 invoices. The remaining 16 invoices are unpaid being considered as 'short term financing'. 5. It is the Appellant who has entered into on 30.08.2016 a 'Term Sheet' for Tolling and Joint Venture Agreement with the Respondent to provide EVA Resin including TAICROS, Laromer and ....
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....ich is purported to the Joint Venture cum Tolling Agreement between the parties. They have also agreed that the Respondent was only supposed to do job work (tolling) utilizing the Respondent existing manufacturing facilities for the Appellant and as per clause 5, tolling arrangement was envisaged and the Respondent was supposed to do the job work and all raw material were to be supplied by the Appellant and the Respondent was to only carry out production as a job worker. A tolling fee of US$ 0.125 per sq. mtr was also agreed to be paid. Further, since it is a tolling arrangement, it is obvious that the responsibility of the Respondent was to only carry out the production as a job worker ad give the finished goods to the Appellant and it was for the Appellant to then sell the products so manufactured by the Respondent on tolling basis. 8. The Ld. Sr. Counsel for the Respondent has stated that the Roles and Responsibilities have been defined in the Term Sheet. On part of the Respondent, the responsibilities included to lease their existing factory premises to the JV Company alongwith provisions of testing equipments, warehouse, etc and agreed to pay royalty to the Appellant on the s....
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.... by the Ld. Sr. Counsel for the Respondent that under this hybrid arrangement the appellant STR has only facilitated the purchases by making advance payment covering only the basic prices of import purchases. As and when STR used to make such purchases, as elaborated above, by way of intimation of such purchases having been made and advance payments have been made, STR has been raising invoices on the respondent. Again, such invoices have been raised in lots from time to time and have been given to the respondent again in lots for accounting purposes so that based on such invoices or proforma invoices the respondent can book such advance payments made by STR to various suppliers by giving corresponding credit to STR. Thus, the so called invoices mentioned by the appellant are not really the actual invoices covering the supply of goods by the appellant to the respondent but are essentially in the nature of proforma invoices or intimations about such purchases being facilitated by the appellant. The actual supplies have been made by various suppliers directly to the respondent as mentioned earlier and also as mentioned in the said proforma invoices. Thus, it is respectfully submitted....
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....s of PV Encapsulant Bucket 2: Outstanding payment for Equipment (Line 4 and STRM Blender) Bucket 3: Inventory (Raw material, packaging, finished goods) Bucket 4: Scrap/ Waste/bad debts Bucket 5 : Miscellaneous ( GST, Credit note adjustments,etc ) 14. The Adjudicating Authority has held that the parties were operating between themselves as per the Term Sheet. The Term Sheet for tolling and Joint Venture Agreement as stated above and has also held that the Respondent was a job worker for tolling and entitled for tolling fee. The break up of the claim has also been provided by the Adjudicating Authority which reflects that the claim is for remittance of money collected from end customers, cost of inventory given for tolling/production not used or accounted for supply of equipment (machinery for production line). The claim is made by the Applicant as Operational Debt. The Adjudicating Authority has further held that there are disputes between the parties among other things regarding scrap and other wastages on usage of inventory, functioning of some parts of equipments and on other claims of the appellantas shown in various mails. Based on the above observations the Adjudicat....
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....ibunal, some of which are discussed below: i. Mobilox Innovation Pvt. Ltd., Vs. Kirusa Software Pvt. Ltd (2018) 1 SCC 353 held at para 33-34, 37-38 &51 33. The scheme under Sections 8 and 9 of the Code, appears to be that an operational creditor, as defined, may, on the occurrence of a default (i.e., on non-payment of a debt, any part whereof has become due and payable and has not been repaid), deliver a demand notice of such unpaid operational debt or deliver the copy of an invoice demanding payment of such amount to the corporate debtor in the form set out in Rule 5 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 read with Form 3 or 4, as the case may be (Section 8(1)). Within a period of 10 days of the receipt of such demand notice or copy of invoice, the corporate debtor must bring to the notice of the operational 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. ....
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....creditor (Section 9(5)(i)(c)), or that no notice of dispute has been received by the operational creditor from the corporate debtor or that there is no record of such dispute in the information utility (Section 9(5)(i)(d)), or that there is no disciplinary proceeding pending against any resolution professional proposed by the operational creditor (Section 9(5)(i)(e)), it shall admit the application within 14 days of the receipt of the application, after which the corporate insolvency resolution process gets triggered. On the other hand, the adjudicating authority shall, within 14 days of the receipt of an application by the operational creditor, reject such application if the application is incomplete and has not been completed within the period of 7 days granted by the proviso (Section 9(5)(ii)(a)). It may also reject the application where there has been repayment of the operational debt (Section 9(5)(ii)(b)), or the creditor has not delivered the invoice or notice for payment to the corporate debtor (Section 9(5)(ii)(c)). It may also reject the application if the notice of dispute has been received by the operational creditor or there is a record of dispute in the information uti....
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....e a disputed claim, is not due i.e. it is not payable in law or in fact. This Court then went on to state: "29. The scheme of Section 7 stands in contrast with the scheme under Section 8 where an operational creditor is, on the occurrence of a default, to first deliver a demand notice of the unpaid debt to the operational debtor in the manner provided in Section 8(1) of the Code. Under Section 8(2), the corporate debtor can, within a period of 10 days of receipt of the demand notice or copy of the invoice mentioned in sub-section (1), bring to the notice of the operational creditor the existence of a dispute or the record of the pendency of a suit or arbitration proceedings, which is pre- existing - i.e. before such notice or invoice was received by the corporate debtor. The moment there is existence of such a dispute, the operational creditor gets out of the clutches of the Code. 30. On the other hand, as we have seen, in the case of a corporate debtor who commits a default of a financial debt, the adjudicating authority has merely to see the records of the information utility or other evidence produced by the financial creditor to satisfy itself that a default has occurred. I....
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....filed an application, which is otherwise complete, the adjudicating authority must reject the application under Section 9(5)(2)(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 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. It is important to separate the grain from the chaff and to reject a spurious defence which is mere bluster. However, in doing so, the Court does not need to be satisfied that the defence is likely to succeed. The Court does not at this stage examine the merits of the dispute except to the extent indicated above. So long as a dispute truly exists in fact and is not spurious, hypothetical or illusory, the adjudicating authority has to reject the application. ....
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....investigation and the said disputes which cannot be gone into any summary proceedings under the 'I&B' Code, it is held by this Tribunal that the application filed by the Appellant as an Applicant before the Learned Adjudicating Authority is not maintainable in the eye of law. Consequently, the appeals fail and the same is dismissed without costs. Before parting with the case, it is made clear that dismissal of application filed by the Appellant before the Adjudicating Authority will not preclude it to seek appropriate remedy before the Competent Forum for redressal of grievance of course, in accordance with law and in the manner known to law if it so desires/so advised." i. The Respondent has cited the various judgment of Hon'ble Apex Court as well as of this Tribunal: 1). CA(AT)(Ins) No. 149 of 2019 Tanya Bhatnagar Vs. Mohamed Hesham Amin BashaMashaa'I and Ors. held at para 3& 12: "3. It was brought to our notice that no agreement or arrangement was made between 'M/s. Global Energy Talent Private Limited' and the 1st Respondent and, therefore, no application under Section 9 of the 'I&B Code' was maintainable. 12. This order will not come in the way of other creditors who m....