TaxTMI 
TaxTMI 
TaxTMI 
2022 (12) TMI 612
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....iding this Appeal are:- The Corporate Debtor had been engaged in manufacturing bubble film rolls, Woven sack bags, foam sheets, etc. There have been transactions between the Corporate Debtor and the Operational Creditor since 2005. Purchase Orders were issued by the Corporate Debtor to the Operational Creditor. Payments were made to the Operational Creditor from time to time. With respect to last transaction between the parties, invoice dated 02nd June, 2016 amounting Rs. 4,21,633/- was received from the Operational Creditor. The payment of said invoice was not made, on account of certain dispute regarding the quality. An email dated 03.06.2016 was sent by the Operational Creditor to the Corporate Debtor demanding payment of interest upto April, 2016 of Rs. 8,170/-. The email further requested the Corporate Debtor to issue interest amount at the rate of 18% with invoice value in the next payment done. Email was sent by the Operational Creditor on 06th April, 2018 enclosing the account statement. A Demand Notice dated 18th April, 2019 under Section 8 of the Code was issued by the Operational Creditor claiming payment of Rs. 10,20,763.84/- as principal plus Rs. 5,91,118.49/- as int....
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.... not a case for initiating any ''Corporate Insolvency Resolution Proces' against the Corporate Debtor which is solvent company and to show the bona fide of the Appellant, Appellant has offered to deposit the entire amount in the Court. Appellant has already deposited the entire amount in this Court. It is submitted that the notice of dispute having been raised by the Corporate Debtor, the Application under Section 9 ought not to have been admitted. Section 9 Application cannot be filed for recovery of dues. 4. Learned Counsel for the Respondent refuting the submissions of Learned Counsel for the Appellant contends that the demand notice demanding principal and the interest totaling Rs. 16,11,882.33/- was as per ledger account of the Operational Creditor, details of which has already been given in Section 9 Application. The Respondent was obliged to pay 18% interest. There was no quality issue regarding the goods supplied and there is no material on record to indicate that Corporate Debtor ever raised any quality issue. It is submitted that notice of dispute issued by the Corporate Debtor was sham and moonshine and could not have been taken into consideration. The Operational Credi....
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....od of ten days from the date of delivery of the notice or invoice demanding payment under sub-section (1) of section 8, if the operational creditor does not receive payment from the corporate debtor or notice of the dispute under sub-section (2) of section 8, the operational creditor may file an application before the Adjudicating Authority for initiating a corporate insolvency resolution process." 8. Section 9(5)(ii) is as follows: "(5) The Adjudicating Authority shall, within fourteen days of the receipt of the application under subsection (2), by an order- (i)..... (ii) reject the application and communicate such decision to the operational creditor and the corporate debtor, if- (a) the application made under sub-section (2) is incomplete; (b) there has been [payment] of the unpaid operational debt; (c) the creditor has not delivered the invoice or notice for payment to the corporate debtor; (d) notice of dispute has been received by the operational creditor or there is a record of dispute in the information utility; or (e) any disciplinary proceeding is pending against any proposed resolution professional: Provided that Adjudicating Authority, shall ....
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....rigger the insolvency process by filing an application before the adjudicating authority under Sections 9(1) and 9(2)...." 12. The Hon'ble Supreme Court has further laid down that dispute which is contemplated is not patently feeble legal argument or an assertion of fats unsupported by evidence. In paragraph 51 of the above Judgment, following has been laid down: "...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 fats 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." 13. To the same effect is another subsequent judgement of the Supreme Court in [(2019) 12 SCC 697]....
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....To find out as to whether the dispute raised by the Corporate Debtor is moonshine dispute unsupported by any evidence, we need to look into the nature of allegations made in the Reply Notice. In paragraph 5, the Corporate Debtor has pleaded that accounts until financial year 2013-14, 2014-15, 2015-16 were settled by 31st March, 2016 and after 31st March, 2016 purchases made by the Corporate Debtor were to be cleared on invoice to invoice basis. In paragraph 6, the last purchase order with regard to invoice dated 2nd June, 2016 has been mentioned. It is useful to extract paragraph 5 and 6 of the Reply to Demand Notice: "5. That my client has been regularly raising he quality concern of the goods supplied by you and after the purchase made via invoice no. SMPL/JDR/614 dated 10.03.2016 my client made it very clear that he shall stop buying the products forth you due to the poor quality supplied by you which is adversely effecting the business of my client and as such to resolve the dispute pertaining to the purchase and payments and to continue the business my client a total rebate/discount of Rs. 2,76,413.85/- was offered by you on 31.03.2016 which was accepted by my client and res....
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....e was no due you have not mentioned anything over the said debt note." 18. The email dated 3rd June, 2016 has been annexed with the Reply Notice which email was sent by Operational Creditor which is to the following effect: "-----Forwarded message---- From: shree maru To:Agarwalpolysacks [email protected]> Sent: Friday, 3 June, 2016, 11:57:35am IST Subject: DEBIT NOTE Respected Sir We enclosed Delay Payment *interest charges up to April 2016 Rs. 8170/-Plz. Make chq. this amount you are discuss our director Mr. S. sethia Also, you are requested to issue interest amount @18% with invoice value of next payment done by you. Regards RG Kasliwal" 19. The averments of the Corporate Debtor are that the accounts till 31st March, 2016 were settled hence interest charges upto April, 2016 of Rs. 8,170/- were asked for by email dated 03.06.2016 which also said that subsequent payment has to be made with 18% interest. Paragraph 9 further gives a details of happening where the Operational Creditor denied to collect the goods and settlement was entered there between the parties that Operational Creditor shall not raise any demand of payment. Paragraph 9 an....
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....,170/- towards interest charged up to April, 2016 as the amount due of the Operational Creditor. The email dated 03rd June, 2016 sent by the Operational Creditor fully support the averments made in the Reply notice which is a notice of dispute given by the Corporate Debtor to the Operational Creditor. Present is a case where it cannot be said that defence taken by the Corporate Debtor in Reply Notice is a moonshine defence unsupported by any evidence. With regard to the issues raised in the Reply-Notice, the Adjudicating Authority in paragraph 23,24 and 25 has made following observations for rejecting the defence: "23. Concerning the pre-existence of dispute with respect to quality of goods, it is observed that the Respondent has raised this issue for the first time via its Reply to the Demand Notice dated 03.05.2019. This makes it a superfluous contention raised as an afterthought to escape the liability of payment. 24. Further, the Respondent in its Reply to the Demand Notice had claimed that a settlement of account had been done between both the parties in July, 2016 and October, 2016. However, no document to substantiate the same has been placed on record by the Corporate ....