AI Drafter 
TaxTMI 
TaxTMI 
2023 (2) TMI 951
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....with the impugned order dated 30.06.2022 in CP (IB) No. 210/9/HDB/2020 (Filed by the 'Appellant / Operational Creditor / Petitioner'), passed by the 'Adjudicating Authority', ('National Company Law Tribunal', Hyderabad Bench, Hyderabad), in 'rejecting' the 'Petition', as 'not maintainable'. 3. The 'Adjudicating Authority', ('National Company Law Tribunal', Hyderabad Bench, Hyderabad) in CP (IB) No. 210/9/HDB/2020, while passing the 'impugned order' dated 30.06.2022, inter alia at Paragraphs 15 to 24, had observed the following: 15. "It is ascertained, beyond doubt, from the above, that the mandatory statutory requirement of issuing a demand notice to the Corporate Debtor, under Section 8 of the Code, 2016, must have been executed by the Operational Creditor, prior to approaching this Tribunal under Section 9 of the Code, 2016. The issuance of a demand notice under the Code, 2016, has not been carried out by the Operational Creditor, thereby putting the entire proceedings in peril. 16. Therefore, in the light of the above analysis, this Application is liable to be dismissed on the ground of the non-issuance of the statutory notice, mandated by Section 8 of the C....
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....itration proceedings and not otherwise. This would lead to great hardship; in that a dispute may arise a few days would lead to great hardship; in that a dispute may arise a few days before triggering of the insolvency process, in which case, though a dispute may exist, there is no time to approach either an arbitral dispute may exist, there is no time to approach, in which case, though a dispute may exist, there is no time to approach either an arbitral tribunal or a court. Further, given the fact that long limitation periods are allowed, where disputes may arise and do not reach an arbitral tribunal or a court for upto three years, such persons would be outside the purview of Section 8(2) leading to bankruptcy proceedings commencing against them. Such an anomaly cannot possibly have been intended by the legislature nor has it so been intended. 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 considerati....
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....ets supplied, attached at Page Nos. 57 and 58 of the Application. (d) The report of the DCO, Mahabubnagar, dated 20.11.2018, attached at Page No. 208 of the Application, reads as follows: "There are 40 no. of engines, 05 nos. are in partial shape in Mahabubnagar godown. These engines are not with complete parts." (e) That through letters as mentioned above, the Respondent has elaborated various deficiencies in services and disputes between the parties. (f) That there already existed disputes relating to the deficiency in the goods supplied by the Petitioner. 24. As discussed above, the Corporate Debtor has raised a dispute with sufficient particulars. Hence, the amount of claim raised by the Petitioner clearly falls within the ambit of a disputed claim. Section 9 (5) (ii) (d) of the Code, 2016, provides that the Adjudicating Authority shall reject the application, if notice of dispute has been received by the operational creditor or there is a record of dispute in the information utility. This Tribunal has also noted the pre-existence of a dispute between the parties, in terms of the exchange of correspondence, referred to above. The Hon....
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....er the I & B Code, 2016, with a 'Mandate', that the 'Tribunal', would proceed from the stage, at which. the 'Proceedings' are transferred, as it is from the 'Hon'ble High Court', without reading any assumed 'Statutory Compliance'. 8. The stand taken on behalf of the Appellant is that the Hon'ble High Court for the State of Telangana, Hyderabad, on 29.11.2019 in IA No. 1 of 2019 in CP No. 311 of 2016, between M/s. Indra Marshal Power Pvt. Ltd., represented by Authorised Signatory Mr. Ajay Sharma v. M/s. Akshaya Irrigation Products Pvt. Ltd., by the Managing Director Mr. Brahmanandam Tummala, Hyderabad, Andhra Pradesh, had transferred the Company Petition No. 311 of 2016, to the 'Adjudicating Authority' ('National Company Law Tribunal', Hyderabad'), for conducting further proceedings. As such, the 'impugned order', is liable to be set aside, in the interest of Justice. 9. The Learned Counsel for the Appellant refers to the decision of the Hon'ble Supreme Court of India in Forech (India) Limited v. Reconstruction Company Ltd. (2019) 19 SC Cases, Page 549, wherein, at Paragraphs 9, 17 and 23, it is observed as under: 9. "On and from 17.08.2018, Section 434 was substitute....
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....Rules, 1959:] Provided also that proceedings relating to cases of voluntary winding up of a company where notice of the resolution by advertisement has been given under sub-section (1) of Section 485 of the Companies Act, 1956 but the company has not been dissolved before the 1st April, 2017 shall continue to be dealt with in accordance with provisions of the Companies Act, 1956 and the Companies (Court) Rules, 1959: Provided further that any party or parties to any proceedings relating to the winding up of companies pending before any Court immediately before the commencement of the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2018, may file an application for transfer of such proceedings and the Court may by order transfer such proceedings to the Tribunal and the proceedings so transferred shall be dealt with by the Tribunal as an application for initiation of corporate insolvency resolution process under the Insolvency and Bankruptcy Code, 2016 (31 of 2016). (2) The Central Government may make rules consistent with the provisions of this Act to ensure timely transfer of all matters, proceedings or cases pending before the Company Law Board or the court....
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.... in an unequivocal manner, in its 'Ledger Account'. 11. The Learned Counsel for the Appellant, points out that in the 'Advocate's Reply' of the 'Respondent', dated 12.04.2016, addressed to the Appellant's Advocate for the first time, 'Spurious and Frivolous Dispute', relating to the 'defects in IMDE Pump sets', was raised after two years of supply of the Pump Sets. Indeed, there was no dispute in regard to the supplies of aforesaid IMDE Pump sets, made by the 'Appellant', which amounted to continuing Admission of its 'Liability'. 12. Also that the Respondent in the 'Additional Counter', filed during Apr'2017, before the Hon'ble High Court had admitted that '1495 Nos of IMDE Pump Sets total costing Rs.2,40,73,058/- were supplied by the Petitioner Company during the period from 12-11-2013 to 03-10-2014. 13. The Learned Counsel for the Appellant, adverts to the fact that the 'Appellant', in its 'Rejoinder Affidavit', (in Company Petition No. 311 of 2016), before the 'Hon'ble High Court', had asserted that the 'Respondent / Company', had never informed the 'Appellant', in regard to the 700 Pump sets, lying in its 'Godown', and the 'Dispute', was only 'fabricated'. 14. Added....
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....ible 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." 18. While summing up, the Learned Counsel for the Appellant prays for 'allowing' the instant 'Appeal', by this 'Tribunal', in setting aside the 'impugned order' dated 30.06.2022 in CP (IB) No. 210/9/HDB/2020, the 'Adjudicating Authority', ('National Company Law Tribunal', Hyderabad Bench). Procedure under Rule 64 of NCLT Rules, 2016 (concerning the matters dealt with by the Erstwhile Company Law Board'): 19. As per Rule 64 of the 'National Company Law Tribunal Rules, 2016, the 'Tribunal', shall hear the matter from the stage of the 'Proceedings' or 'Cases',....
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.... of the Hon'ble Supreme Court in 63 Moons Technologies v. Union of India, reported in (2017) 40 SCC 621. 23. Further, where the 'Registered Office' of the 'Company', was situated, it is held that the pending proceedings with the 'Company Law Board', can be transferred to the respective 'Bench' of the 'Tribunals'. Glimpse of the I & B Code, 2016: 24. A 'Petition' / an 'Application', for initiation of 'Corporate Insolvency Resolution Process', by an 'Operational Creditor', requires 'strict proof' of 'Debt' and 'Default', as per 'Judgment' of this 'Tribunal' dated 08.05.2019 in RAMCO Systems Limited v. Spicejet Limited vide Comp. APP (AT) (INS) No. 31 of 2018. 25. A disputed question pertaining to 'Claims' and 'Counter Claims', cannot be determined by an 'Adjudicating Authority', in an 'Application', under Section 9 of the I & B Code, 2016, as per Judgment of this 'Tribunal' dated 19.11.2019 in Deepak Gupta v. Ved Contracts Pvt. Ltd. & Ors. (Vide Comp. App (AT) (INS.) No. 1262 of 2019). 26. To be noted that, existing of a 'Pre-existing Dispute', is a bar to an initiation of 'Corporate Insolvency Resolution Process', at the instance of an 'Operational Creditor', as per J....
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....ankruptcy (Application to Adjudicating Authority) Rules, 2016, had averred under Part-IV 'Particulars' of 'Operational Debt', that the Total Amount of Debt was Rs.2,40,69,233.30 (Rupees Two Crores Forty Lakhs Sixty Nine Thousand Two Hundred and Thirty Three and Paise Thirty only) apart from Interest @ 18% per annum from the date of Respective Invoices and according to the 'Appellant' / 'Operational Creditor' / 'Petitioner', it supplied 'Goods' to the 'Corporate Debtor', on various dates, which were duly endorsed on the 'Lorry Receipts', and further that upon several requests and demands, to the 'Corporate Debtor, it failed to pay the same, due to which, the 'Operational Creditor', had sent a 'Demand Notice' dated 23.03.2016, under Section 434 (1) (a) of the Companies Act, 1956. Later, CP No. 311 of 2016, was filed, before the Hon'ble High Court of Telangana, Hyderabad (for the State of Telangana and State of Andhra Pradesh), for 'Winding up Petition', where the 'Corporate Debtor', entered its appearance, filed their 'Counter', and a 'Rejoinder', was filed by the 'Operational Creditor', to which, the 'Corporate Debtor', has filed its 'Reply', in which, the 'Corporate Debtor', had ad....
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....ppellant / Petitioner', much less the Sum of Rs.2,40,69,233.30 and further there being no 'Debt' due, the failure to repay a 'Non-existence Debt', does not arise. 41. The stand of the Respondent (before the Adjudicating Authority) is that the purported Letter dated 04.08.2015, is a 'Fabricated' one for the purpose of this case and further the purported 'Claims', made by the 'Appellant' / 'Petitioner', in the main Company Petition, arise from the 'Contractual Dispute', and the 'Appellant / Petitioner', is seeking a specific performance relief, for which, the 'Adjudicatory Forum', is a 'Civil Court' / 'Arbitrational Tribunal', hence the 'Company Petition', is liable to be 'dismissed'. 42. Before the 'Adjudicating Authority', the 'Appellant / Petitioner' in his 'Rejoinder', had denied that it supplied any IMDE Pump sets with inferior quality China made parts and further that the Pump sets supplied by the 'Appellant / Company', are 'ISI' mark, certified by 'BIS'. Also that, the 'Respondent / Company', had never communicated, informing the 'Appellant / Petitioner', about the return of the Pump sets by the Farmers. 43. The stand of the Appellant / Petitioner is that, till date, ....
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....p; 2,40,73,058/- 48. With regard to the averment of the 'Respondent / Company', pertaining to the holding up of the Sum of Rs.82,97,608/- by the Department is concerned, according to the 'Appellant', the 'Respondent', had not produced a single document to support its 'Statement', and the cause of such holding. Also that, it is incorrect to state that the 'Respondent / Company', had intimated the 'Appellant / Petitioner', as to the quality and failure of engine and the 'Appellant / Petitioner', denies the same, in a vehement manner. 49. In the instant case on hand, the 'Appellant / Petitioner', had preferred IA No. 1 of 2019 in CP No. 311 of 2016 (Before the Hon'ble High Court for the State of Telangana, Hyderabad), seeking to 'transfer' the 'Company Petition' to 'National Company Law Tribunal', Hyderabad Bench, for 'Adjudication' and on 29.11.2019, it was observed and ordered as under: "Heard learned counsel for the petitioner, and the learned counsel for the respondent-Company. The Hon'ble Supreme Court in Jaipur Metals & Electricals Employees Organization v. Jaipur Metals & Electricals Ltd1, after referring to the amendments in Companies Act, had held as u....
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....Telangana in IA No. 1 of 2019 in CP No. 311 of 2016 dated 29.11.2019, which the 'Adjudicating Authority' ('Tribunal'), is to adhere to in 'true letter and spirit', without any deviation whatsoever, as opined by this 'Tribunal'. Likewise, the observations of the 'Adjudicating Authority' ('Tribunal'), in the 'impugned order' dated 30.06.2022, at Paragraph 10, 'Hence the earlier proceedings, before the 'Hon'ble High Court', may not be of much significance in the matter before this 'Tribunal'. In any case, even if the matter were considered as transferred from the 'Hon'ble High Court', it would 'stand' abated, etc., are an 'incorrect', 'invalid', and 'legally untenable' one. 53. It cannot be gainsaid that Rule 5 of the Companies (Transfer of Pending Proceedings) Rules, 2016, is applicable, only in respect of a case, where 'Notice', was not served on the 'Respondent'. As a matter of fact, the instant case on hand, the 'Notice', was not only served, but, the 'Winding up Petition', came very near to the stage with the completion of pleading by the respective 'Parties'. Also that, the 'Fifth Proviso to Section 434 (1) (c) as substituted', under the I & B Code, 2016, has permitted the fi....
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.... fact that this 'Tribunal', sitting in 'Appeal', has set aside the 'impugned order' dated 30.06.2022, passed by the 'Adjudicating Authority' ('National Company Law Tribunal', Court No. II, Hyderabad Bench), it is made crystalline clear that the 'merits' of the matter between the 'Parties', have not been gone into, by this 'Tribunal'. 58. Before parting with the case, this 'Tribunal' pertinently directs the 'Adjudicating Authority', ('National Company Law Tribunal', Court No.2, Hyderabad Bench), to 'Number' the 'CP No. 311 of 2016' (as ordered by the 'Hon'ble High Court for the State of Telangana, Hyderabad', on 29.11.2019 in IA No. 1 of 2019 in CP No. 311 of 2016), to its 'File', by 'assigning a New Number', and to take it on its 'File', and to proceed further, in accordance with 'Law'. 59. Further, the 'Adjudicating Authority', after taking the 'CP No. 311 of 2016' (Ordered to be made over by the Hon'ble High Court for the State of Telangana, Hyderabad, vide Order dated 29.11.2019 in IA No. 1 of 2019 in CP No. 311 of 2016) to the File of the 'Adjudicating Authority', number it, by the 'Office of the Registry', shall inform the respective 'Parties' to the 'Proceedings', by is....