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TaxTMI 
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2024 (11) TMI 479
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....dicating Authority has admitted the Section 9 application filed by M/s Nirmal Trading Company- Operational Creditor and admitted M/s Print Land Digital Pvt. Ltd.-Corporate Debtor into the Corporate Insolvency Resolution Process ("CIRP" in short). Aggrieved by the impugned order, the present appeal has been preferred by the shareholder of the Corporate Debtor. 2. Coming to the brief background of the present matter, M/s Print Land Digital Pvt. Ltd.-Corporate Debtor was engaged in the digital printing business and had business relationship with M/s Nirmal Trading Company-Operational Creditor. The Corporate Debtor placed purchase orders with the Operational Creditor- Respondent No. 1 from time to time and issued invoices for this purpose. The Operational Creditor claiming that 70 invoices issued between 31.08.2017 to 22.02.2019 remained unpaid issued a Statutory Demand Notice on 07.01.2020 under Section 8 of the IBC for an outstanding amount of Rs 1.67 Cr. including interest @18% p.a. towards Operational Debt. The Corporate Debtor sent a reply to the Demand Notice on 20.01.2020 denying any payment as due to the Operational Creditor besides and alleging that they had already dispute....
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....r the Operational Creditor submitted that in the present matter, the Corporate Debtor had unequivocally admitted an outstanding amount of Rs 1.49 Cr. being due to the Operational Creditor as on 31.03.2017. This admission of debt is clear from a letter dated 31.08.2017 wherein the auditor of the Corporate Debtor while auditing the accounts sought confirmation from the Operational Creditor for an outstanding amount of Rs 1.49 Cr payable to them by the Corporate Debtor. It was further pointed out that the Corporate Debtor is trying to escape from their legal liability under the IBC by taking recourse to illegal and malafide plea that the invoices had been fabricated by them. It was contended that the Corporate Debtor failed to put on record any communication to show that they had ever protested against the invoices raised by the Operational Creditor. Vehemently denying that the Operational Creditor had changed the invoices or had sent exaggerated and inflated invoices to the Appellant, it was contended that all payments made by the Corporate Debtor were settled by following the FIFO method and thereafter the balance principal amount stood at Rs 1.29 Cr. as on 31.03.2019. It was stoutl....
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....otice of the Operational Creditor was based on forged and fabricated invoices which did not match with the D-VAT Portal information. This forgery came to the knowledge of the Appellant only on the receipt of Demand Notice. More importantly, the Corporate Debtor had replied to the earlier two Demand Notices of 18.03.2019 and 11.04.2019 by way of a consolidated Notice of Dispute on 24.04.2019 raising disputes against the claimed amount. The same pre-existing disputes was again reiterated in the Notice of Dispute dated 20.01.2020 sent by the Corporate Debtor to the third Demand Notice dated 07.01.2020. The Ld. Sr. Counsel for the Appellant has relied on the judgment in Sabarmati Gas Ltd. Vs Shah Alloys Ltd. (2023) 3 SCC 229 in which the Hon'ble Supreme Court after relying on the judgment of Mobilox Innovations Pvt. Ltd. Vs Kirusa Software Pvt. Ltd. held that once the Corporate Debtor raises a dispute regarding the dues prior to the receipt of Demand Notice under Section 8 of IBC and the correctness or the truthfulness of the dispute is a matter of evidence, the defence cannot be brushed aside as spurious. 7. Per contra, it is the contention of the Operational Creditor that when the....
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....at the invoices on record relied upon by the Operational Creditor bears the stamp of the Corporate Debtor by way of acknowledgment and also supported by E-way bills. We also notice that the Adjudicating Authority has relied on the judgment of this Tribunal in Naresh Sevantilal Shah Vs Malharshanti Enterprises in CA(AT)(Ins) No. 415 of 2020 to hold that the cut-off date for existence of pre-existing dispute should be the date of issue of the first Demand Notice. Basis this judgment, the Adjudicating Authority has claimed that since there was no dispute raised by the Corporate Debtor prior to the date of issue of the first Demand Notice, the reply of the Corporate Debtor dated 24.04.2019 to the first and second Demand Notice cannot be accepted as proof of pre-existing dispute. The Adjudicating Authority has further taken the view that the Corporate Debtor apart from raising a bald denial has not filed any substantive material and has failed to raise any plausible contention requiring further investigation. 9. Before we dwell on the facts of the present case to analyse the sustainability of the impugned order which is under challenge, the statutory scheme with regard to filing of a....
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....ayment 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." 12. Further, Section 9(5)(ii) contemplates that Adjudicating Authority shall reject the Section 9 application, if notice of dispute has been received by the Operational Creditor or there is record of dispute in the Information Utility. Section 9(5)(ii) reads 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 discipl....
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....s. 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 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." 14. Having noticed the statutory framework of IBC and the Mobilox judgement, we now come to the contention of the Operational Creditor that the Corporate Debtor had admitted an outstanding operational debt of Rs 1.49 Cr. being due to the Operational Creditor as on 31.03.2017. It has been contended that when the debt has been acknowledged by the Corporate Debtor, this was a fit case for admission of the Section 9 application. In support of their contention, the Ope....
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....as been vested only with summary jurisdiction. The Adjudicating Authority has also taken a view that it cannot delve into the exercise of recalculating of entries in the ledger especially when the invoices on record relied by the Operational Creditor carries the stamp of the Corporate Debtor besides being supported by E-way bills. We quite agree that the power and authority of the Adjudicating Authority to investigate into such disputes of forgery and fabrication of invoices is circumscribed by the summary nature of jurisdiction vested upon by it. The IBC does not contemplate adjudication of disputes relating to forgery and fabrication as that would require calling for evidence which cannot be done under IBC. 17. Be that as it may, we find that the Adjudicating Authority even after taking note that Mobilox judgment requires the Adjudicating Authority to examine whether there is existence of dispute between the parties, it has turned a blind eye to the notice of disputes sent by the Corporate Debtor by simply relying on the judgment of Naresh Sevantilal Shah v. Malharshanti Enterprises in CA(AT)(Ins.)No. 415/2020 and discounted the notices of dispute for having been issued subseq....
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....oods unless stated otherwise" briefed as Advance Recoverable in Cash or Kind, Hence it is amply clear that as on 31.03.2018 receivables of INR 4,80,954.20/- are pending from your Client to Our Client. True copy of the certificate dated 24.04.2019 issued by the practicing Company Secretary is annexed as Annexure B. 3. Hence, as per the said audited balance sheet of Our Client, it is apparent that your Client is not entitled to receive any payment from Our Client against the attached invoices of the period 18.04.2017 till 22.11.2017. 4. You are hereby called upon to forthwith withdraw the said Notice (Form 3) being defective and contrary to the records. 5. Your Client is advised to reconcile its accounts with those of Our Client for any further clarification." 20. The second Notice of Dispute dated 20.01.2020 is also extracted below: Without prejudice to the rights and contentions of Our Client as available under Law, our reply to your said Notice is as under: 1. There is already a prior existing dispute and Our Client has specifically mentioned in its reply dated 24.04.2019 that Your Client is indebted to Our Client to an extent of INR....
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....81,GST-185,GST-193,GST-194,GST-195,GST-196,GST-206,GST-210,GST-305,GST-308,GST-312,GST-316,GST-323,GST-325,GST-328,GST-330,GST-332,GST-334,GST-335,GST-338,GST-340 were duly paid by Our Client, however now acting contrary to its own stand, Your Client is alleging the same are unpaid. This self contradictory stand of Your Client itself goes to show the baseless and concocted nature of the demand raised herein; not to mention the prior existing dispute. 7. Your Client is advised to reconcile its accounts with those of Our Client for any further clarification." 21. When we look at the combined Notice of Dispute issued by the Corporate Debtor on 24.04.2019 as a sequel to the first and second Demand Notices issued by the Operational Creditor, it is clear that the demand of operational debt has been dubbed as "false", "frivolous" and "baseless". The said communication also emphasised that "not even a single penny" was payable to the Operational Creditor. Apart from denying the outstanding debt, the Corporate Debtor has pointed out that in terms of their audited balance sheet, the Corporate Debtor was not entitled to receive any payment and that on the contrary certain amount w....
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.... them in the nature of real pre-existing disputes. The ratio of Naresh Sevantilal Shah judgment which has been relied by the Adjudicating Authority to set the cut-off date of the date of issue of first demand notice for taking cognisance of the notice of dispute is not applicable in the present case since in that case, the first Demand Notice had been followed by filing of a Section 9 application before the Adjudicating Authority which was dismissed on technical grounds because Operational Creditor had made an incorrect claim. In the present case, no Section 9 application was filed after issue of first Demand Notice. Hence reliance on Naresh Sevantilal Shah judgment is misplaced because the facts therein are clearly distinguishable. 24. Even the other judgements relied upon by the Operational Creditor do not come to the aid of the Operational Creditor. In support of their contention that merely by disputing a claim cannot become a ground for triggering of Section 9 of IBC, reliance has been placed on the judgment of this Tribunal in Ahluwalia Contracts (India) Ltd. Vs Raheja Developers Ltd. in CA(AT)(Ins) No. 703 of 2018. In that case, it was held that there was no pre-existing ....