TaxTMI 
TaxTMI 
2024 (3) TMI 646
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.... to be noticed for deciding the Appeal are : - 2.1. The Corporate Debtor- 'Dhanlaxmi Electricals Private Limited' is a license contractor and engineer for carrying out various contract works awarded to the Corporate Debtor. It has issued purchase order to the Operational Creditor for supply of AB Cables for its different projects. The Operational Creditor sold wires and cables of the Corporate Debtor and raised invoices from 29.09.2019 to 06.10.2019. Account Manager of the Corporate Debtor issued an e-mail dated 04.08.2021 forwarding the ledger pointing out certain differences in the ledger in the account of the Operational Creditor and the account of the Corporate Debtor. As per e-mail dated 04.08.2021, ledger from 01.04.2020 to 30.03.2022 reflected as closing balance of Rs.1,79,93,690/-. Operational Creditor issued a demand notice dated 25.08.2021 to the Corporate Debtor claiming an amount of Rs.1,79,93,691/- + interest of Rs.85,27,110/- totalling Rs.2,85,20,800/-. Advance copy of Section 9 application was also forwarded to the Corporate Debtor vide letter dated 09.11.2021. Corporate Debtor after receiving demand notice dated 25.08.2021 as well as letter dated 15.11.2021 regar....
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....by the Corporate Debtor. It is submitted that with regard to Invoice Nos. 203 and 205, no supply of appropriate material was placed, hence, it is submitted that the debit notes of Rs. 67,96,800/- and Rs.50,00,000/- which was issued by the Corporate Debtor on 20.11.2021 was never responded by the Operational Creditor which clearly indicate that dispute persisted. It is submitted that the Corporate Debtor bonafide after receiving the demand notice has made payment of Rs.61,00,000/- to the Corporate Debtor which according to the Corporate Debtor was the balance due. It is submitted that the Corporate Debtor is using Section 9 Application as recovery mechanism. It is submitted that the relevant e-mails have been brought along with the Appeal to establish pre-existing dispute between the parties. It is submitted that the acknowledgment dated 04.08.2021 cannot be treated to be acknowledgment on behalf of the Corporate Debtor, since the email was sent by account manager and not by the Corporate Debtor. 5. Shri Akshay Sapre, Learned Counsel for the Operational Creditor refuting the submissions of the Counsel for the Appellant contends that there was no pre-existing dispute and the dispu....
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....n days of the receipt of the demand notice or copy of the invoice mentioned in sub-section (1) bring to the notice of the operational creditor - (a) existence of a dispute, [if any, or] record of the pendency of the suit or arbitration proceedings filed before the receipt of such notice or invoice in relation to such dispute; (b) the [payment] of unpaid operational debt- (i) by sending an attested copy of the record of electronic transfer of the unpaid amount from the bank account of the corporate debtor; or (ii) by sending an attested copy of record that the operational creditor has encashed a cheque issued by the corporate debtor. Explanation. - For the purposes of this section, a "demand notice" means a notice served by an operational creditor to the corporate debtor demanding 3 [payment] of the operational debt in respect of which the default has occurred." 8. Section 9(1) empowers the Operational Creditor to file an application before the Adjudicating Authority for initiating a corporate insolvency resolution process after the expiry of the period of ten days from the date of delivery of the notice in event operational creditor d....
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....e & Cable Industries, Office No-101, Sagar Niwas, 'B' wing, Carter Road No 5, Opp. Neelkant Mahadev Mandir, Borivali (East), Mumbai-400066. Subject: Declination of No: FORM 3 Demand Notice Dated 25th August, 2021 and the following letter received on 15th November, 2021. Dear Sir, We are writing this to ensure clarity on your letter reference Form No: 3 Dated 25th August, 2021 and letter received on 15th November, 2021 regarding the Demand Notice/Invoice Demanding Payment. We have decided not to move forward your request at this point of time due to the following facts enumerated below. 1- The submitted Invoice No: 203 dated 29th September, 2021 in tune of Rs. 33,42,527/- and Invoice no: 205, in tune of Rs. 23,81,417/- Dated and 6th October, 2021 towards the supply of G.I. cannot be forwarded for payment due to non-receive of your material Inline to your bill claimed. There is lack of supporting documents related to supply of materials such as LR Copy, Test Certificate of class B.G.I. Pipe as per the approved GA/ GTP of MPKVVCL, Materials Delivery Receipt certified from site etc., in this regards multiple correspondence was issued to your ....
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.... is 5 years from the date of handing over the project. And we have been facing the cable fault immediately after erection of the cable due to your substandard supply of cable. 5- As on today we have installed approximately 80 Km extra Cable due to the faulty cable supplied by you. Hence, we hereby debit the extra charges paid for the rectification and reinstallation of the faulty cable. 6- Kindly note that our client M/s MSEDCL has examined and evaluated at site on your materials supplied and given us the remark of substandard quality. A proposal has been in process for black listing your organization from supplier and manufacturer list for all their projects across Maharashtra. In view to the above substantiation we look forward to your understanding of holding back your invoice without forwarding it at our end and hence, you are requested to accept the following Debit charges in order to process the payment further, failing which may lead the legal process to recover losses followed by propelling blacklisting process based on evidence as per MSEDCL record. a- Amount of Rs. 67,96,800/- For 80 K.M. Faulty Cable supplied for our Nagpur IPDS Projec....
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....trary to the fact. It is useful to notice paragraphs 5, 6, 7 and 8 of the Affidavit, which are as follows:- "5. In response to the Section 9 Application dated 9th November 2021 (Old Application), a letter dated 20th November 2021 was received from the Corporate Debtor raising certain false and baseless allegation; 6. The allegations raised in the above letter are false, fabricated, baseless and contrary to the fact that the Corporate Debtor vide its email dated 4th August 2021 (attaching a copy of the acknowledged Statement of Account) duly acknowledged a principal amount of Rs. 1,79,93,690.80 as due and payable to the Operational Creditor. The aforesaid email while highlighting certain differences in relation to the balance as per the books of accounts of the Corporate Debtor raised no concerns/ outstanding concerns in relation: a. The alleged non receipt of the goods billed vide invoice no. 29th September 2019 and 6th October 2019 (both erroneously mentioned as 2021 invoice in the letter dated 20th November 2021; b. Any outstanding quality/ quantity or other issues in relation to the material supplied to the Corporate Debtor; c. Any re....
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....lete, the adjudicating authority, under the proviso to sub - section (5), may give a notice to the applicant to rectify defects within 7 days of the receipt of the notice from the adjudicating authority to make the application complete. Once this is done, and the adjudicating authority 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 incom....
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....or 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 futility. 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 9 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 appli....
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....4, 5 and 6, following has been pleaded by the Corporate Debtor:- "4. Due to the substandard materials supplied by you, we have incurred huge financial losses. As you are aware that the warranty period for the supply of the cable is 5 years from the date of handing over the project. And we have been facing the cable fault immediately after erection of the cable due to your substandard supply of cable. 5- As on today we have installed approximately 80 Km extra Cable due to the faulty cable supplied by you. Hence, we hereby debit the extra charges paid for the rectification and reinstallation of the faulty cable. 6- Kindly note that our client M/s MSEDCL has examined and evaluated at site on your materials supplied and given us the remark of substandard quality. A proposal has been in process for black listing your organization from supplier and manufacturer list for all their projects across Maharashtra. In view to the above substantiation we look forward to your understanding of holding back your invoice without forwarding it at our end and hence, you are requested to accept the following Debit charges in order to process the payment further, fail....
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.... dated 03.07.2019 sent by the Corporate Debtor to Operational Creditor is as follows:- "From: Dhanlasmi Electrical <[email protected]> Date: Wed, Jul 3, 2019 at 5:47 PM Subject: Regarding Insulation Failure of Service cable industries To: dhanlasmielectrical**@gmail.com Dear Sir We have received the 306968 Mtrs. quantity of service cable from M/s. Saraswati wire and cable industries. After charging of service cable after few days it seems that of insulation of service cable has been melt and cable was short. The quantity of fault cable is approximately 200000 mtrs. Hence it is requested to you please look into the matter and do the needful. Thanks and Regards, Pankaj Palaskar Assistant Manager Kamptee Thanks and regards DHANLAXMI ELECTRICALS PVT. LTD Site-Nagpur" 21. The above email clearly pointed out deficiency in the quality of the material supplied. We may also notice that after receiving of the complaints regarding cables, a letter dated 05.12.2019 was sent by the Operational Creditor to the Corporate Debtor which is file....
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.... 17 Sailab Nagar 450 18 Bajrang Park 1170 19 Chhatrapati Nagar 3790 20 Warispura 880 21 Sonar oli 3790 22 Juni Oil 2410 23 Kate Oli 3880 Hence it is requested to you please look into the matter and do the needful. Thanks and Regards Dhanalaxmi Electricals Pvt. Ltd." 23. The above clearly indicate that on joint inspection by the parties, service cables fault locations were identified along with the approximate meter of the cables. There is no indication that any steps were taken by the operational creditor for replacement of cables as was represented on 05.12.2019 or any other resolution between the parties. The operational creditor did not take any steps for the entire year 2020 till August 2021. Demand notice was issued by the operational creditor when he received e-mail dated 04.08.2021 sent by account manager of the corporate debtor sending the ledger confirmation for amount of Rs.1,79,93,691/-. 24. Learned Counsel for the Corporate Debtor has submitted that the said ledger confirmation was not sent by authori....
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....nd, therefore, pre-existing dispute between the parties, Section 9 application ought not to have been admitted. 26. We may also notice a recent judgment of the Hon'ble Supreme Court in "S.S. Engineers vs. Hindustan Petroleum Corporation Ltd. and Ors.- 2022 SCC OnLine SC 1385" where the Hon'ble Supreme Court was hearing the Appeal filed by the operational creditor arising out of Section 9 proceeding. The Hon'ble Supreme Court in the above case had occasion to consider the statutory scheme delineated under Sections 8 and 9. Hon'ble Supreme Court after noticing the earlier judgment in "Mobilox Innovations (P) Limited" (supra) laid down following in paragraphs 30, 31 and 32:- "30. This Court finds that there was a pre-existing dispute with regard to the alleged claim of the appellant against HPCL or its subsidiary HBL. The NCLAT rightly allowed the appeal filed on behalf of HBL. It is not for this Court to adjudicate the disputes between the parties and determine whether, in fact, any amount was due from the appellant to the HPCL/HBL or vice-versa. The question is, whether the application of the Operational Creditor under Section 9 of the IBC, should have been admitted by t....