TaxTMI 
TaxTMI 
TaxTMI 
2025 (7) TMI 708
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....al has been preferred by the Appellant. 2. The relevant facts which required to be notice for deciding the present matter before us are as follows : - The Operational Creditor-Innovators Facade Solutions Private Limited was engaged by the Corporate Debtor-Pasari Multi projects Private Limited to provide design-built services in building construction for a project-Biowonder which was a commercial-cum-Hotel project. A Letter of Intent ('LoI' in short) was issued on 09.07.2015 for Rs.10.68 crore by the Corporate Debtor to the Operational Creditor for this project. The Project was commenced by the Operational Creditor on 09.07.2015 and the first Running Account Bill ('RAB' in short) was raised on 15.03.2016. Corporate Debtor failed to discharge payment for RAB-19 of Rs. 4.68 crores raised by the Operational Creditor despite reminders. Since the Corporate Debtor failed to make payments, the Operational Creditor issued a demand notice in Form-3 for an amount of Rs. 4.91 crore including interest. This first demand notice was issued on 12.02.2019. The Operational Creditor withdrew this first demand notice due to certain alleged clerical error made by them in the computation. The C....
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....tional Creditor had issued the first demand notice on 12.02.2019 which demand notice was issued before the filing of the civil suit. The Adjudicating Authority also failed to consider that the Corporate Debtor had even replied to the first demand notice. The first demand notice therefore clearly pre-dated the filing of the title suit on 16.04.2019. Admittedly the first demand notice had to be revised due to a clerical error but it was strenuously contended that merely because the first Demand Notice had to be revised for bonafide reasons, it cannot be overlooked that the Civil Suit had been filed after the receipt of the first demand notice by the Corporate Debtor and hence did not qualify to be a pre-existing dispute. It was also emphatically asserted that for any dispute to be treated as a pre-existing dispute under Section 8(2)(a) of IBC, the dispute has to arise prior to the receipt of demand notice by the Corporate Debtor. The Civil Suit in the instant case therefore cannot be considered as a pre-existing dispute and hence the impugned order was contrary to the ratio of the Hon'ble Supreme Court in Mobilox Innovations Pvt. Ltd. vs. Kirusa Software Pvt. Ltd (2018) 1 SCC 353 in ....
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.... 7. Refuting the contentions raised by the Appellant, it was submitted by Shri Abhijeet Sinha, Ld. Senior Counsel for the Respondent-Corporate Debtor that the present appeal petition is misconceived. The Adjudicating Authority had rightly held that the Section 9 application was not maintainable since there were pre-existing disputes between the parties. The Title Suit No. 371 of 2019 which had been filed by the Corporate Debtor on 16.04.2019 was prior to the issue of the demand notice of 25.04.2019 which clearly demonstrates pre-existing disputes. Besides the civil suit, there were several other disputes between the two parties which had its origin prior to the second demand notice of 25.04.2019 basis which the Section 9 application had been filed. Elucidating further it was submitted that the LoI dated 09.07.2015 clearly provided that the duration of the project was 12 months and had to be completed in 7 months from the date of acceptance of the LoI. However, the Operational Creditor had delayed in performing their part of the obligations in a timely manner in terms of the LoI. On the modalities of payment, it was submitted that both parties had agreed to a procedure by which runn....
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....ation to the Operational Creditor is therefore statutorily provided for in Section 8. 11. It is however the case of the Appellant that they had issued two demand notices under Section 8 of IBC. The first demand notice was withdrawn as it was admittedly erroneous and subsequently a revised demand notice was issued on 25.04.2019 in continuum of the first demand notice. It is therefore their case that since the pre-existing dispute has been predicated on a civil suit dated 16.04.2019 which was instituted after the issue of the first demand notice, the civil suit did not qualify to be treated as pre-existing dispute. 12. Per contra, it is the contention of the Respondent that the first demand notice cannot be treated as a demand notice under Section 8 of the IBC since this demand notice was abandoned as withdrawn before sending the second Demand Notice on 25.04.2019 which was followed by filing of an application under Section 9 of IBC on 20.07.2019. Thus, the Section 9 application was filed by the Appellant basis the fresh demand notice dated 25.04.2019. Seen from the date of issue of the fresh second demand notice, it was contended by the Respondent that the institution of civil sui....
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....o be in continuation of the previous one, i.e. 12 February, 2019. Hence, previous erroneous notice dated 12 February, 2019 should be ignored and the fresh notice u/s 8 dated 25 April, 2019 should be taken into account, and it is evident that before it could be served the civil suit already stood filed on 06 April, 2019." 14. Coming to our analysis and findings, it is an undisputed fact that the Operational Creditor had initially sent a Demand Notice on 12.02.2019 to the Corporate Debtor. This demand notice was purportedly despatched by the Appellant by speed post on the same date. When we look at the material placed on record, it is clear that the first Demand Notice was however received by the Corporate Debtor only on 16.02.2019 as evident from the Tracking Report placed at page 118 of Appeal Paper Book ('APB' in short). More significantly, the first demand notice was admittedly withdrawn by the Operational Creditor on grounds of typographical error in that they had failed to take into account certain payments already received by them from the Corporate Debtor. 15. Given this factual backdrop that the demand notice of 12.02.2019 under Section 8 of the IBC was withdrawn, we now p....
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....t dated 16.04.2019. This civil suit was also highlighted in the Notice of dispute of the Corporate Debtor in response to the second demand notice. We have no doubts in our mind therefore that the civil suit had been filed prior to the issue of second Section 8 Demand Notice on 25.04.2019 and was a pre-existing dispute and therefore there is no infirmity committed by the Adjudicating Authority in treating the civil suit to be a pre-existing dispute. 17. Apart from the civil suit as a ground for pre-existing dispute, we notice that the Corporate Debtor had also terminated the contract with the Operational Creditor on 14.02.2019 which date preceded the second demand notice and for that reason even predated receipt of the first demand notice by the Corporate Debtor. The Corporate Debtor also adverted attention to a series of emails exchanged between the two parties which substantiates the evidence of disputes between them. At page 74 of Reply Affidavit, an email has been placed on record stating that the Appellant wanted the relocation of the rainwater pipe from its original position which was objected to by the Corporate Debtor as it tantamount to compromising with the design, qualit....
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.... of dispute which antedates Section 8 demand notice. 18. It is well settled that a Section 9 application filed by an Operational Creditor cannot be sustained in case there is evidence of existence of dispute and if such disputes have been communicated to the Operational Creditor before the receipt of Section 8 notice as has happened in the present case. In the present case, the contract termination notice and civil suit had both preceded the date of issue of Section 8 demand notice on 25.04.2019. In addition, we notice that disputes relating to the quality of work; delay in execution of work; disputes relating to imposition of new commercial condition beyond the scope of LoI; introduction of new financial terms; claim of excessive bills; losses on account of delay etc. had also been brought to the knowledge of the Appellant-Operational Creditor vide a string of emails sent from time to time as already summarised above. The notice of dispute of 03.05.2019 had also highlighted breach of contract, delay of project and its abandonment by the Appellant, issue of inflated bills and that project related disputes had been raised by emails prior to the Section 8 demand notice. Cumulatively....