TaxTMI 
TaxTMI 
2022 (4) TMI 433
X X X X Extracts X X X X
X X X X Extracts X X X X
....tates of America' and is engaged in the business 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 t....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... it has not disputed that a 'Term Sheet' was executed between the parties which 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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....respondent (in partial fulfillment of tolling arrangement). 11. It is also stated 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
....onciliation of the same in five identified buckets as under: Bucket 1: Receivables from end customers 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, functionin....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d to go into details of voracity of various submissions made by the Appellant and the Respondent. h. The Appellant has cited the following judgments of Hon'ble Apex Court and also of this Tribunal, 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 befo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rity finds that either there is no repayment of the unpaid operational debt after the invoice (Section 9(5)(i)(b)) or the invoice or notice of payment to the corporate debtor has been delivered by the operational 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 pa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cords of the information utility or on the basis of evidence furnished by the financial creditor within 14 days. The corporate debtor is entitled to point out to the adjudicating authority that a default has not occurred; in the sense that a debt, which may also include 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 ha....
X X X X Extracts X X X X
X X X X Extracts X X X X
....itors 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. 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 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 tha....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... "35. In the foregoing detailed discussions and also this Tribunal taking into account the vital fact that the Respondent in its Reply notice dated 17.05.2018 had disputed the claim of the Appellant and its liability to pay etc. by raising serious bonafide factual pre-existing disputes, which requires an in depth examination / 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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." The aforesaid principle squarely applied to the present case. The above cited case is virtually meant for two things that I&B Code cannot be used for chasing of payment and at the same time it cannot be applied where there is existence of dispute. However, in the present case, there was a reconciliation meeting and as a result of which an email was sent from Respondent to the Appellant setting out payment schedule for the future remittance as appearing at page 91 of the Appeal Paper book. j. All this reflects that there is a need to find out voracity of various submissions and the business module; it does not seem to be straight jacket case that there is no payment due to the Appellant from the Respondent but at the same time it cannot confirmed that all sums as demanded by the Appellant is due and payable in law and on fact by the Respondent as there seems to be some back to back payment understanding between the parties as appears from the record. k. Hence, in the fitness of thing....
X X X X Extracts X X X X
X X X X Extracts X X X X
....operate an EVA Solar Encapsulant Film Plant with a design capacity to produce approximately 7,000 tonnes annually of the Products (as defined below), located in Ahmedabad, India (the "Plant") and to market and sell the Products produced by the Plant. Subject to the terms of the Agreement, ProjCo will be permitted to market the Products produced by the Plant solely to solar module.. manufacturers located and producing photovoltaic panels in India. Any marketing of the Products outside of India will be solely at STR's discretion, Any sales outside of India will be subject to a minimum gross margin as agreed to by Lucent and STR. In exchange for payment by STR to Lucent of the Tolling Fee of $0.125/m2 exclusive of packaging materials, Lucent shall (i) produce product according to STR's formula and specification (ii) agree to compensate STR for materials used that do not meet customer requirements (iii) agree to limit recycled material content to less than 5% of the finished goods by weight (iv) agree to compensate STR for raw materials used beyond an agreed upon scrap rate of 3%. STR shall (i) provide raw materials nece....
X X X X Extracts X X X X
X X X X Extracts X X X X
....mperature and humidity controlled warehouse sufficient for storage of raw materials and finished goods (iv) Installation/Renovation Costs associated with the installation of a second extrusion line (v) Royalties A nominal royalty (TBD) will be paid to STR on a quarterly basis. The royalty shall not exceed the rent paid to Lucent. Assuming that the parties execute the Agreement by October 1, 2016, and extrusion trials to be conducted in September are successful: (i) STR will begin ordering under the tolling agreement in November 2016,. Document 3 8. Term 9. 10. 11. DESCRIPTION Investment: Additional Investment: Financing Conditions and Security: 12. Dividends: 13. Share Transfers: 14. President: 15. Board of Directors: PROVISION (ii) STR will make decision on joint venture by May 1, 2017 The term of the Agreement shall be for a period of five (5) years, subject to earlier termination by the parties as set forth below under "Termination". Following the date of exercise of the Option (the "Option Exercise Date"), each of Lucent and STR (the "Shareholders") will fund Proj....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ness Detailed standards of practice and operating procedures shall be decided by the Board and in all circumstances the ProjCo shall comply with: Practice: (a) good industry practice for petrocheinical plants of a similar size and nature being operated by skilled and prudent international petrochemical producers; (b) all material environmental laws and regulations including the Equator Principles and other standards necessary to secure financing from commercial banks; all imaterial health and safety standards applicable in India; and (c) (d). all material laws and regulations of India. 18. Incorporation mechanics: : 19. Termination: 20, Assignment/Transfer: Lucent and STR shall take the necessary steps to have ProjCo incorporated in India. Lucent and STR will represent and warrant that, as at the date of the transfer of shares, ProjCo has not traded and does not have any liabilities or obligations other than: (a) liabilities disclosed in writing to the Shareholders; or (b) those otherwise arising as an operation of law. Either Party may elect to terminate the Agreement if the other Party: 2....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ipping. Our Agreed Terms will be FOB; just as we did last year for Line-5 from China. (We will try our best to get CIP written on Invoice and charge the difference between FOB and CIF back to you at actual, again similar to what we were able to do from China) AGREED ABOVE POINT 1 (2) Late penalty $25,000. *We will set a 'production ready date" and if this date is not met then based on responsibilities this penalty will be. assessed to either STRE or Lucent. If the date is met then no penalty will be assessed. *we will work out a task, roles, and responsibilities chart and a timeline including a target Install-completion date and training timeline for some of your staff. We will also include time for hiring new staff and labor and debugging of the line to come up with an early and reasonable production ready date. AGREED ABOVE POINT 2 (3) Recovery of $200,000. by a discounted Tolling Fees $0.04 per sm. (minimum) "after Line-5 is filled, the overflow of orders will be put on Line-4 under a discounted tolling fee. the discount will be for a flat INR 2.60 per sq. m. (based on a FX rate of 1 USD 65.00 INR this is equivalent to USD 0.04 per sq.m.) of FG made on Line-4....
X X X X Extracts X X X X
X X X X Extracts X X X X
....We will also include time for hiring new staff and labor and debugging of the line to come up with an early and reasonable production ready date . (3) Recovery of $200,000. by a discounted Tolling Fee $0.04 per sm. after Line-5 is filled, the overflow of orders will be put on Line-4 under a discounted tolling fee. the discount will be for a flat INR 2.60 per sq. m. (based on a FX rate of 1 USD 65.00 INR this is equivalent to USD 0.04 per sq.m.) of FG made on Line-4 per our tolling agreement. * For material made on Line-4 in 2018, it will be INR 8.125- INR 2.60 ($0.125-$0.04) per sq.m. and for 2019 it will be INR 6.500-INR 2.60 ($0.10-$0.04) per sq.m. of FG per our tolling terms. The tolling fee for Line-5, which you have already purchased and paid for will not be touched. For 2018 it will be INR 8.125 ($0.125) per sq. m. and for 2019 it will be INR 6.500 ($0.10) per sq. m. of FG per our tolling terms. We will formalize these details in a contract, but need your agreement on these broad terms. If you agree, please confirm via email. Thank you so much, Jay Jayesh G. BokrÃa, Ph.D. Global R&D Manager Holdings Inc. Document....
X X X X Extracts X X X X
X X X X Extracts X X X X
....wa Changovia, Ahmedabad-382213 Gujarat, India. Kind Atta. tr. 13eepak Kamar Pari Email: purchastrentel Mobile: +91 9447634299 VENDOR STR HOLDINGS INC. 10 WATER STREET. ENFIELD, CT 06082 www.soler.com GST NO. 124AACCL0497PIZ3 FO NO. PO DATE 53 วงส PURCHASE ORDER LUCENT/STR/2017/11 19-05-2017 SHIP TO LUCENT CLEAN ENERGY PVT.LTD. (100%) Block-187, Opp. Laxumarayer Petul Pump, farkhej Bela Highway, Changodar, Ahmedabad-382213 Gujarat, India PLEASE SUPPLY THE FOLLOWING MATERIALS AS PER THE TERMS & CONDITIONS MENTIONED BELOW UNIT PRICE SR. NO. PART NO. & DESCRIPTION QTY. UNIT AMOUNT (USD) (USD) 1 CAROMER CHEMICAL POR PV ENCAPSULANTA Make an 300 00 Ka $4.50 3,600 00 3,000.00 TOTAL ORDER AMOUNT (IN WORDS). THREE THOUSAND SIX HUNDRED US DOLLAR ONLY 1. PAYMENT TERMS 2. INTO TERMS 365 Days asen trede Car Nahva Sheva (Mumta SPECIAL INSTRUCTIONS 1.THS ORDER MUST BE SHOWN ON ALL SORES, PALEAGES SIPPING DOCUMENTS, VERLES AND CORRISPONDE YE ACLEPTANCE OF AND ASSPORTY FOR MATERAL SHAPED ON THES ORDER MGS ONLY UPON DUVLAY BY THE CAR TO THE....