TaxTMI 
TaxTMI 
2024 (5) TMI 626
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....r Section 9 of the Insolvency & Bankruptcy Code (IBC), 2016. Adjudicating Authority vide its order dated 10.08.2023 had rejected the prayer of Operational Creditor to initiate the CIRP against the Corporate Debtor/ Respondent. Hence this appeal. 2. The order passed by Adjudicating Authority is a short 2 page order and the same is reproduced below: "This application is filed under Section 9 of the IBC, 2016, seeking initiation of Corporate Insolvency Resolution Process (CIRP) against the corporate debtor. The case of the applicant is that it has given 100% advance of USD 200000 to the corporate debtor for purchase of goods, which it had failed to deliver and has refused to pay back the advance. Ongoing through the application, we find that the Invoice annexed at page No.9 in the terms of delivery and payment clearly states that the goods were to be lifted from "Ex-Plant Rajkot", India. We also find from the email dated 18.04.2023, sent by Mr. Nimesh Sanghrajka to Mr.Navin Alwani, the Director of the alleged Operational Creditor, that the goods are ready at his warehouse and the applicant can lift the goods at any time. In her oral submissions Ms. Zalak, Ld. Coun....
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....here were emails exchange of between both the parties regarding supply, terms of delivery, refunds of the deposit and related issues. 7. The Appellant thereafter issued statutory demand notice under Section 8 of the IBC on 9th May 2023 ("the said notice"). The Respondent did not respond to the demand notice under Section 8 of the IBC. 8. Thereafter, the Appellant filed the Company Petition No. 182 of 2023 ("Company Petition") under Section 9 of the IBC against the Corporate Debtor for default by the Corporate Debtor in refunding the advance payment made by the Appellant of an amount of USD 200,000 (Two Hundred Thousand Dollars) in accordance with the said PO which was for the delivery of the said goods on 19th March 2020. 9. The Adjudicating Authority rejected the application for initiation of insolvency proceedings against the Corporate Debtor. The order of Adjudicating Authority was passed on the very first date of hearing after hearing the appellant (Operational Creditor). The respondent (Corporate Debtor) was not present in the hearing. Submission of the Appellant 10. The Appellant has assailed the impugned order of the Adjudicating Authority on the following gro....
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....tracts for the supply of goods and services between the operational creditor and the corporate debtor. Thus, a debt arising from advance payment made to a corporate debtor for the supply of goods or services qualifies as an operational debt." 12. The appellant has submitted that it was not his duty to lift the goods from the warehouse and in this regard, he relies on email dated 14.03.2020 from Sarju (from KTEX) wherein the terms of delivery and other relevant details are shown to have been confirmed by the respondents. In particular, the mail highlighted the following: "a. The 'Delivery Schedule' clearly shows that the Respondent was to prepare the consignment by 19.03.2020 after which they would inform about dispatch. b. Column pertaining to "Transportation' shows that the Respondent was supposed to inform the Appellant about the charges for the transportation of the consignment from the Rajkot Plant to the Mumbai/Delhi Airport. Therefore, it is clear that the Respondents were aware that the consignment was to be sent to Mumbai/ Delhi Airport and not picked up from their plant by the Appellant as contended by the Respondent. c.....
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....Authority wrongly interpreted the PO and held that provision of delivery of consignment to Mumbai/Delhi Airport is nowhere mentioned in the PO. Further, the words "ex-plant Rajkot" were wrongly interpreted to mean that the delivery was to be picked from the plant. 19. Lastly, the appellant has submitted that the Appeal is not barred by limitation due to the "excluded period" of Covid-19 as granted by Hon'ble Supreme Court from 15.03.2020 to 14.03.2021. 20. The appellant further submits that the reliance placed by the Respondent on this Appellate Tribunal Judgment is Sh. Mohan Lal Goel Vs. National Skill Development Corporation (2022) SCC online NCLAT 2020 has no applicability to the present matter in the light of Hon'ble Supreme Court's aforesaid Judgement. Submission of the Respondent 21. The Respondent has made 4 submissions before us. These in brief are: (i) Terms of purchase order prove that the appellant has breached the terms. (ii) Email communication shows goods were ready and stored at the warehouse. (iii) Adjudicating Authority has rightly relied upon the documents produced with the petition to conclude that no debt is proved. ....
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....-page Purchase Order as part of his Application before the Adjudicating Authority, which had no mention of the place or date of delivery and only specified the bank details of the parties. However, the Purchase Order attached to the present Appeal is a completely different document with 2 extra pages as annexures, which is being presented for the first time before this Appellate Tribunal. The Appellant raised no such request at the time of hearing before the Adjudicating Authority to amend or replace the aforesaid purchase order, consequently leading to the Application being dismissed on the first hearing itself. 27. Analysis and Findings We have gone through the detailed submission of Appellant and Respondent and the material on record. There are two issues which need to be decided. (i) Whether the appellant is an Operational Creditor as per IBC? (ii) Whether there has been a breach of terms and conditions of the contract leading to pre-existing dispute? 28. We take up the issue relating to Operational Creditor first. Here the Appellant has relied on Judgment of Hon'ble Supreme Court in Consolidated Construction Consortium Ltd. (supra). 29. In the cas....
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....ort, which specifies that operational debt is in relation to operational requirements of an entity. Second, Section 8(1) of the IBC read with Rule 5(1) and Form 3 of the 2016 Application Rules makes it abundantly clear that an operational creditor can issue a notice in relation to an operational debt either through a demand notice or an invoice. As such, the presence of an invoice (for having supplied goods or services) is not a sine qua non, since a demand notice can also be issued on the basis of other documents which prove the existence of the debt. This is made even more clear by Regulation 7(2)(b)(i) and (ii) of the CIRP Regulations 2016 which provides an operational creditor, seeking to claim an operational debt in a CIRP, an option between relying on a contract for the supply of goods and services with the corporate debtor or an invoice demanding payment for the goods and services supplied to the corporate debtor. While the latter indicates that the operational creditor should have supplied goods or services to the corporate debtor, the former is broad enough to include all forms of contracts for the supply of goods and services between the operational creditor and corporate....
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....d Judgment, as there is a clear nexus between payment made and supply of goods and services. Accordingly, we decide that the appellant is to be treated as Operational Creditor in the instant case. 32. The second issue relates to 'whether there has been a breach of terms and conditions of the contract leading to pre-existing dispute'. The appellant has relied on purchase order, revised proforma invoice dated 12.03.2020 and emails to established that the respondent has failed to deliver the goods on time and on being issued demand notice has not refunded the amount of advance to the appellant. They have submitted a different copy of purchase order in their appeal which was not submitted before the Adjudicating Authority. A copy of the same is placed below : 33. The purchase order which was placed before the Adjudicating Authority was only a bank statement showing the bank details of both appellant and respondent. It has no details of place and mode of delivery. The revised proforma invoice dated 12.03.2020 gives the terms of delivery and payment as "Ex-Plant Rajkot, India". 34. The third document which has been introduced directly in the appeal before us is a purchase order ....
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....liver 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. it must exist before the receipt of the demand notice or invoice, as the case may be.... ( Emphasis supplied ) 40. It further noted in paragraph 38 of 'Mobilox Innovations (P) Ltd. v. Kirusa Software (P) Ltd.' (supra) it was held that when a notice is received by a corporate debtor under Section 8(2) of the IBC, it is enough that a dispute is pending and it is not necessary that a suit/arbitration also be pending: "38..........We have also ....