TaxTMI 
TaxTMI 
2024 (9) TMI 1305
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....pellant/Operational Creditor under Section 9 of the IBC, which sought to initiate the Corporate Insolvency Resolution Process ("CIRP") against the Respondent/Corporate Debtor, on the grounds of a pre-existing dispute between the parties. Submissions of the Appellant 2. The Appellant, engaged in the business of supplying "Annealed Tinned Copper Conductor - Class 2," had a longstanding business relationship with the Respondent/Corporate Debtor dating back to May 2007. The Respondent would issue purchase orders to the Appellant, and the Appellant would supply the ordered goods and raise invoices accordingly. 3. In November 2009, a third-party entity, Sumo Metallic Private Limited ("Sumo Metallic"), began a similar business arrangement with the Respondent. Notably, the management of both Sumo Metallic and the Appellant was the same. On 30.11.2015, Sumo Metallic merged with the Appellant as per an Order by the Hon'ble High Court of Calcutta. After the merger, no further business transactions occurred between the Appellant and the Respondent until 11.08.2018. 4. However, an outstanding debt amounting to Rs.90,16,311.65/- (rupees ninety lakhs, sixteen thousand, three hundr....
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....he total amount raised through these invoices aggregated to Rs.2,24,67,913/- (rupees two crores, twenty-four lakhs, sixty-seven thousand, nine hundred and thirteen only) out of which the Respondent made partial payments totalling Rs.85,26,531/- (rupees eighty-five lakhs, twenty-six thousand, five hundred and thirty-one only), leaving an outstanding amount of Rs.1,39,41,382/- (rupees one crore, thirty-nine lakhs, forty-one thousand, three hundred and eighty-two only). 7. On 07.12.2021, the Appellant issued a demand notice to the Respondent for the outstanding amount, including interest, which by then amounted to Rs.2,10,09,089.11/- (rupees two crores, ten lakhs, nine thousand, eighty-nine and eleven paise). 8. In response, the Respondent, in its letter dated 03.01.2022, alleged that the goods supplied under two earlier invoices (MF119-0375 and MF119-0377, both issued on 08.01.2019) were defective, which had affected their relationship with their client BHEL. However, these two invoices were not part of the Appellant's Section 9 Application. 9. On 24.12.2021, the Respondent filed a title suit (TS 1380/2021) before the Civil Court in Howrah, attempting to show a pre-exist....
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....redi Rajasthan. Further, 3 ledgers given by Respondent are related to Sumo Metallic Private Limited which stands merged with the Appellant. 16. The account statement as attached by the Respondent, at Annexure SA-1 at page number 13 of their supplementary affidavit is for the period 01.04.2018 to 19.06.2020 showing an excess balance of Rs. 75,627/- (rupees seventy-five thousand, six hundred and twenty-seven only), which is only for the Pathredi unit, but surprisingly, the net payable amount of Rs. 47,26,700.65/- (rupees forty-seven lakhs, twenty-six thousand, seven hundred and sixty-five paise) as confirmed by the Respondent's own email dated 08.10.2018 has not found its due place in the aforesaid account statement. Ledger statement attached with the Section 9 Application at Annexure H is from 01.04.2018 to 31.03.2022, which clearly shows that debit opening balance of Rs.1,06,15,789.58/- (rupees one crore, six lakhs, fifteen thousand, seven hundred eighty-nine and fifty-eight paise only) (meaning that the Appellant to receive the amount of Rs.1,06,15,789.58 from the Respondent) and carries the closing debit balance of Rs.1,39,41,381.58 (rupees one crore, thirty-nine lakhs, fo....
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....to the remaining payment, and any damages due to defective goods would be adjusted in the price. 22. The Respondent began placing orders with the Applicant in June 2018. Between June and December 2018, the Applicant supplied goods that met the required specifications. 23. The Respondents in their reply in this CP before the Adjudicating Authority had submitted as under: (i) The sums, in respect of which the Appellant has claimed operational debt against the Respondent, have already been paid by the Respondent to the Appellant in full. (ii) Defective consignments or lacked in quality were delivered by Appellant under invoices being no. MF 119-0375 and MF 1190377 issued on 08.01.2019. (iii) Frivolous claim of Rs. 1,13,33,639.58/- (rupees one crore, thirteen lakhs, thirty-three thousand, six hundred and thirty-nine and fifty-eight paise only) raised by Appellant vide letter dated 07.12.2021 without any particulars of the invoices in support of the claim. (iv) Against invoices being nos. MF1080773/1920 and MF108- 0904/1920, the Appellant had released payment in excess, to the extent of Rs. 75,627/- (rupees seventy-five thousand, six hundred and....
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....fty-six lakhs, twenty-six thousand, three hundred and seventy-three only) against purchase order ECM/WORKS-8/19-20 (July 3, 2019). Invoice MF108-0773/1920 (September 18, 2019) for Rs. 42,28,248/- (rupees forty-two lakhs, twenty-eight thousand, two hundred and forty-eight only) against purchase order ECM/WORKS-09/19-20 (September 5, 2019). Invoice MF108-0904/1920 (October 24, 2019) for Rs. 34,36,125/- (rupees thirty-four lakhs, thirty-six thousand, one hundred and twenty-five only) against purchase order ECM/WORKS-10/19-20 (September 27, 2019). The Respondent fully and promptly paid all dues for the abovementioned invoices, and the Applicant has duly acknowledged receipt. 27. Additionally, the Respondent overpaid Rs. 75,627/- (rupees seventyfive thousand, six hundred and twenty-seven only) on invoices MF108- 0773/1920 and MF108-0904/1920. The Respondent requested a refund via emails dated June 19, 2020, and June 25, 2020. The Applicant confirmed on July 10, 2020, that the excess payment would be refunded. 28. The Applicant's claim of non-payment for the invoices is unfounded, as all dues were cleared well before the statutory demand notice issued on Ja....
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....s two crores, ten lakhs, nine thousand, eighty-nine and eleven paise only). The Appellant claims business relationship between the parties dates back to 2007, but it has relied on a series of purchase orders and invoices between May 2019 and October 2019 only. The demand notice was issued by the Appellant on 07.12.2021, to which the Respondent replied on 03.01.2022, disputing the claim and raising allegations regarding defective goods supplied under earlier invoices. Subsequently, the Respondent filed a title suit (TS 1380/2021) before the Civil Court, Howrah, to demonstrate the existence of a pre-existing dispute. This suit was filed after the issuance of the demand notice but before the filing of the Section 9 Application. The Adjudicating Authority dismissed the Section 9 Petition on the ground of a pre-existing dispute, as evidenced by the civil suit. 36. The Appellant argues that: The Respondent had raised no specific disputes regarding the five invoices mentioned in the Section 9 Application. The disputes raised by the Respondent pertained to earlier invoices (MF119-0375 and Company Appeal (AT) (Insolvency) No. 1392 of 2024 14 of 19 MF119-0377) issued on 08.01.201....
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....019 Rs. 17,16,794/- 357 08.01.2019 Rs.16,30,830.8/ 5. Our client, upon receipt of delivery of goods under the aforesaid invoices, sent the said consignment for test. However, since our client was obliged to BHEL, before the test results could come in, the consignments had to be sent to BHEL. 6. On or about 3rd April, 2019, the test reports revealed to our client that the goods under the aforesaid two invoices, did not confirm to the ordered specification. By an email dated 3rd April, 2019, you were duly informed of the fact that the consignment under the aforesaid two invoices failed to conform to the ordered specification. In response, you had replied as follows: "May be these type problem occurred due to material pass through TC Dies, also chance a scratch after metal contact but not visible with naked eyes." Thus, you had admitted to the fact that the said consignments did not comply with the expected standards. 7. Our client states that by reason of the aforesaid sub-standard quality of goods being supplied by you to our client, BHEL not only withheld the payment in respect of the said Invoices, the said BHEL further stopped placing orders....
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....w that there was an ongoing dispute between the parties at the time the demand notice was issued. The Respondent filed a civil suit (TS 1380/2021) on 24.12.2021, prior to the filing of the Section 9 Application. The Appellant has argued that this suit was a frivolous attempt to create a dispute post facto. However, the timing of the suit, coupled with the earlier correspondences and disputes over defective goods, demonstrates that the issue of defective supply was a matter of contention well before the Section 9 Application. 41. The Appellant had provided the particulars of operational debt for five invoices only for the year 2019 but while producing records of outstanding it has produced ledgers starting from 2016. The Respondent has contested the Appellant's Application of the FIFO method for adjusting payments, and there is no evidence to suggest that this method was mutually agreed upon. Moreover, the claim in the Section 9 Application concerns five invoices only and not for past invoices. In fact for establishing the payment made, the Respondent has filed the statement of account from the Federal Bank for each of the five invoices from @329 to @379 in the APB, which clearly....