TaxTMI 
TaxTMI 
2025 (7) TMI 1209
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....l Creditor submitted that a Petition under Section 9 of the Code, was filed for initiation of the Corporate Insolvency Resolution Process ("CIRP") against the Respondent, on account of the Respondent's failure to pay the outstanding operational debt amounting to Rs. 1,36,06,646.70. 4. The Appellant submitted that he operates under the Proprietorship Firm "Riddhim Textiles" and is engaged in the trade and supply of diverse textile goods, constituting the core of its commercial operations and the Respondent has been engaged in the business of trading in textiles, including cotton fabric dyeing, polyester fabric dyeing services, and viscose fabric dyeing services. 5. The Appellant submitted that the Respondent had approached the Appellant around the year 2015 with a proposal to purchase various textile materials and the Appellant and the Respondent Debtor mutually agreed to enter into a business relationship for the supply and purchase of such textile goods. The Appellant submitted that, pursuant to the business arrangement, the Respondent placed various purchase orders with the Appellant from the financial year 2015- 16 onwards and made ad hoc payments against the invoices rais....
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....y the particular invoices against which the said payments were made. In the absence of any such communication or intimation, the payments have been treated as ad hoc payments towards the total outstanding liability. 10. The Appellant submitted that the Respondent had provided account confirmation by sharing its ledger with the Appellant in the years 2019 and 2022. As per the most recent ledger statement shared by the Respondent on 23rd June 2022, the outstanding liability has been duly admitted and acknowledged to the extent of Rs. 1,39,85,901.02. The Appellant further submitted that an ad hoc payment of Rs. 25 lakh was received by the Appellant on 15th October 2022. Accordingly, after deducting the said amount from the previously admitted liability, the outstanding amount due and admitted by the Respondent stands at Rs. 1,14,85,901.02. 11. The Appellant submitted that, despite repeated follow-ups, the Respondent has failed to pay the outstanding balance. The Appellant issued a notice under the Arbitration and Conciliation Act, 1996 seeking recovery of the said dues. The Respondent, however, chose to ignore the said notice, failed to respond to the correspondence, and did not....
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....ll be deemed that no pre-existing dispute exists. 17. The Appellant submitted that the Adjudicating Authority has failed to appreciate that the Respondent did not raise any objection to the ledger of the Appellant in its reply to the Demand Notice issued under Section 8 of the Code, and therefore could not have belatedly raised such an issue at the stage of reply to the Insolvency Petition. The Appellant further submitted that the Adjudicating Authority erred in treating the WhatsApp message dated 24.07.2018 as a dispute, despite the fact that the said message does not indicate that any material was supplied by the Appellant or specify the invoice to which it pertains. Moreover, the Respondent continued to engage in business transactions with the Appellant and made part payments even after the date of the alleged WhatsApp message. 18. The Appellant submitted that the Adjudicating Authority has failed to consider that the alleged WhatsApp message dated 24.07.2018 was not sent by any Director of the Respondent, nor has any averment been made regarding the authority or designation of the individual who sent the said message. In the absence of proof of authority of the sender, th....
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....e-mail acknowledgment of debt and instead relied on an earlier WhatsApp message dated 24th July 2018, which is neither relevant nor substantiated. 22. The Appellant submitted that the Respondent has clearly acknowledged a debt exceeding Rupees One Crore, and as per Form 5A, the defaulted amount remained unpaid as of the petition date. The Adjudicating Authority erred in concluding that the debt was not crystallized, despite its limited role under Section 9 of the Code, which is not to adjudicate the quantum of debt but to assess whether the default exceeds the statutory threshold. Upon being satisfied that the default was above Rupees One Crore, the Adjudicating Authority ought to have admitted the matter into CIRP. The Appellant submitted that the Adjudicating Authority also failed to provide the Appellant an opportunity to rectify any authorization defect in accordance with the proviso to Section 9(5)(ii) of the Code, which mandates granting seven days to cure such defects before passing an order. 23. Concluding his arguments, the Appellant requested this Appellate Tribunal to set aside the Impugned Order and allow his appeal. 24. Per contra, the Respondent denied all av....
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....ne pre-existing disputes regarding the goods in question. Despite having already invoked arbitration, the Appellant subsequently, on 18.04.2023, issued a fresh and malafide Demand Notice under Section 8 of the Code, claiming an increased and unsubstantiated amount of Rs. 1,36,06,646/-. The Respondent submitted that he replied to the Appellant's Demand Notice on 26.04.2023, denying the alleged claims and reiterating the existence of pre-existing disputes regarding the goods supplied, for which arbitration had already been invoked by the Appellant. Despite this, in June 2023, the Appellant filed an application under Section 9 of the Code seeking initiation of CIRP against the Respondent, disregarding the settled legal principle that such proceedings are not maintainable where genuine disputes and ongoing arbitration exist. 29. The Respondent submitted that the Appellant's reliance on the Respondent's emails dated 21.11.2019 and 23.06.2022, as well as the GSTR-1 returns, to allege an admission of debt is wholly misplaced and erroneous. It is well established that the filing of GSTR-1 returns is a statutory requirement under the CGST Act and does not constitute an admission of liabi....
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....o consider the value of defective goods and amounts owed by the Appellant to the Respondent for goods sold by the Respondent. 34. The Respondent submitted that it is incorrect and misleading for the Appellant to dispute the authenticity and relevance of the WhatsApp messages dated 24.07.2018, which clearly evidence the Respondent's objection to the quality of materials supplied. The Respondent has consistently disputed the alleged claim amount, and the Adjudicating Authority rightly dismissed the Section 9 Application, finding no crystallized debt between the parties in light of the pre-existing dispute. The assertion that the Tribunal could not consider the WhatsApp message as evidence of a dispute is unfounded, as WhatsApp is a valid mode of communicating such objections. The Respondent also denied that the Adjudicating Authority failed to provide reasons for its decision; on the contrary, it correctly applied the legal principle that the Code cannot be invoked where a pre-existing dispute exists, and thus properly dismissed the Appellant's application. 35. Concluding his pleadings, the Respondent requested this Appellate Tribunal to dismiss the present appeal with cost ....
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....n 7 or Section 9 of IBC, is not a debt collection forum. The IBC tackles and/ or deals with the insolvency and bankruptcy. It is not the object of the IBC that CIRP should be initiated to penalize solvent companies for non-payment of disputed dues claimed by an operational creditor" 8. In the view of the above stated C.P. No. 534/MB/2023 deserves to be dismissed." (Emphasis Supplied) 39. From para 5 of the Impugned Order, we note that the Adjudicating Authority has taken into account invoice No. RT/207/17-18 dated 01.03.2018 and RT/228/17-18 dated 31.03.2018, according to which, the goods were never supplied by the Appellant but the amount was claimed by the Appellant. Similarly, the Adjudicating Authority has mentioned invoice No. RT/044/18-19 against which the material supplied by the Appellant is stated to be inferior quality and the same was communicated by the Respondent to the Appellant via watsapp message dated 14.07.2018. Based on above three invoices, the Adjudicating Authority concluded that the debt has not been crystalized and there has been pre-existing dispute. In Para 7, the Adjudicating Authority has recorded that the Respondent is financial ....
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....tanding amount till 31.03.2023, (b) e- mail dated 23.06.2022 sent by the Corporate Debtor containing ledger confirmation for the period 2018-19 to 2022-23 and (c) pending tax invoices. From above, it is clear that the Appellant has mentioned the specific amount of default as well as the documents relied upon. 45. Now, we will look into the reply sent by the Respondent to above demand notice which is dated 26.04.2023 and reads as under:- 46. From above reply dated 26.04.2023 to the demand notice dated 18.04.2023, we note that no reference to any of three disputed invoices have been referred at all. The reply is in general tone, denying averments made by the Appellant in the demand notice dated 18.04.2023. The reply also mentioned that since the Appellant has raised arbitration it tantamount to pre-existing disputes. 47. After recording all facts and taking into consideration the reasoning of the Adjudicating Authority dismissing the Section 9 application as well as taking into consideration the demand notice dated 18.04.2023, Respondent's reply dated 26.04.2023, the relevant three invoices along with alleged watsapp message, we shall examine the issues in detail. 48. ....
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....xtent that the same has been acknowledged in the ledgers accounts. The fact of the debt and default is further strengthened taking into consideration the fact that both the parties have factored into consideration the GST benefits in their respective entities based on the goods supplied by the Appellant to the Respondent. 52. For the pre-existing dispute, the Hon'ble Supreme Court of India has laid down clear guidelines in the case of Mobilox Innovations Pvt. Ltd. vs. Kirusa Software Pvt. Ltd. [(2018 1 SCC 353] where the disputes under Section 8(2)(a) of the Code has been elaborated. The Hon'ble Supreme Court of India has categorically mentioned that it is not for the Tribunal to go into details of the pre- existing dispute however at the same time the pre-existing disputes should not be Moon Shine defence. 53. We observe that pre-existing dispute, can relate to quality of goods or quantity of goods or counter claims by the Corporate Debtor which have been raised by the Corporate Debtor prior to demand notice has been issued by the Operational Creditor, like the Appellant in the present case. 54. We need to appreciate that the admission of an application filed under Sectio....
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....1/- above the requisite threshold limits excluding the Invoice No. 207 and 228 which the Respondent disputed during the Original Petition. 57. We find merit in the arguments of the Appellant that the defence of pre- existing dispute dating back to Year 2018, as raised by Respondent however that the Respondent himself has not only Acknowledged its Debt in Year 2019 and Year 2022 but has also made Part Payments to the Appellant/Operational Creditor on 05.08.2018, 30.08.2019, 30.01.2021, 27.04.2022 and lastly on 15.10.2022. Thus, we find arguments of the Respondent as not convincing on these grounds. 58. Now, we shall also look into to alleged pre-existing dispute for inferior quality of the goods as stated to be pointed out by the Respondent to the Appellant through a watsapp message dated 24.07.2018. We have already noted the watsapp message in earlier discussion. We reiterate that this watsapp message does not reflect any details as to invoices for which the dispute was raised or the amount thereof and the name of the party against which dispute has been raised. We have seen the various invoices brought to our notice in the appeal and the foot note no. 5 stipulates "if you....
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.... even three invoices amount is excluded (the all three invoices which have been mentioned by the Adjudicating Authority) (total amounting to Rs. 20,01,948/-), the remaining residual amount of default is still is Rs. 1,16,04,698/- which is more than the threshold limit of Rs. 1 Crores. 64. Based on above detailed analysis and taking into consideration the judgments of the Hon'ble Supreme Court of India as well as this Appellate Tribunal and further taking into consideration the various records discussed earlier, we find that the Adjudicating Authority clearly erred in rejecting the application filed under Section 9 of the Code of the Appellant. 65. In fine, the appeal succeeds and the Impugned Order is set aside. The original petition bearing in C.P. (I.B) No. 534/MB/2023 is restored back. Both the parties are directed to appear before the Adjudicating Authority on 14.07.2025, who shall take further action in accordance with law. 66. No cost. I.A., if any, are closed. ============= Document 1 DELIVERY CHALLAN ANJAANA CREATION Mfgrs. Of : SUITING & SHIRTING GST Nu2 27ACWPC6753G127 Works : G:19/2. M.I.D.C., Turapur (BOISAR) Mob: 9820544712. 8606312613. 9820544712 w....
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....Page : . 10 . Display/Hide Columns: Invoice no. Invoice date Total invoice value (2) Total taxable value (2) Integrated Tax (2) Central tax (2) State/UT Tax (#) Cess (2) Source RT/227/17- 18 31/03/2018 1,092.00 1,040.00 0.00 26.00 26.00 0.00 RT/212/17- 18 20/03/2018 4,63,865.00 4,41,776.56 0.00 11,044.41 11,044.41 0.00 RT/215/17- 18 24/03/2018 5,80,711.00 5,53,058.28 0.00 13,826.46 13,826.46 0.00 RT/207/17- 18 01/03/2018 7,63,373.00 7,27,022.00 0.00 18,175.55 18,175.55 0.00 RT/223/17- 18 31/03/2018 6,80,301.00 6,47,906.04 0.00 16,197.65 16,197.65 0.00 State/UT Tax (#) Cess (2) 20/03/2018 4,63,865.00 4,41,776.56 11,044.41 11,044.41 0.00 24/03/2018 5,80,711.00 5,53,058.28 0.00 13,826.46 13,826.46 0.00 01/03/2018 7,63,373.00 7,27,022.00 0.00 18,175.55 18,175.55 0.00 0.00 16,197.65 16,197.65 0.00 31/03/2018 6,80,301.00 6,47,906.04 . 1 2 . BACK A Site Last Updated on 28-03-2023 ( 2018-19 Goods and Services Tax Network Top TRUE COPY HASHISH O LALPURIA & CO. /COMPANY SECRETARIES Document 4 RIDDHIM TEXTILES 2004, 20h 5001, Panchialin Ning, non: Roxy Cinamn, Chats font, Mumbai - 400004 E-mail : w....
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....210/17- 18 11/03/2018 80,238.00 76.417.50 0.00 1,910.44 1,910.44 0.00 RT/226/17- 18 31/03/2018 1,46,619.00 1,39,636.98 0.00 3,490.92 3,490.92 0.00 RT/214/17- 18 20/03/2018 4,81,454.00 4,58,527.23 0.00 11,463.18 11,463.18 0.00 RT/216/17- 15 24/03/2018 2,95,852.00 2,81,754.04 0.00 7,044.10 7,044.10 0.00 0.00 12,581.46 RT/218/17- 18 26/03/2018 5,28,421.00 5,03,258.31 12,581.46 0.00 tax (2) Central Tax (2) State/UT (*) Cess Source Tax (2) Integrated Integrated Central State/UT Cess Source 20/03/2018 5,77,993.00 5,50,469.52 0.00 13,761.74 13,761.74 0.00 31/03/2018 8,42,542.00 8,02,420.00 0.00 20,060.50 20,060.50 0.00 01/03/2018 1,52,740.00 1,45,466.28 31/03/2018 1,46,619.00 1,39,636.98 20/03/2018 4,81,454.00 4,58,527.23 11,463.18 11,463.18 0.00 24/03/2018 2,95,852.00 2,81,754.04 RT/218/17- 18 Top TRUE COPY ASHISH O LALPURIA & CO. COMPANY SECRETARIES Document 6 RIDDHIM TEXTILES E-mail : [email protected], Phone -4971122) TAX INVOICE GST NO - Details of Receiver | ---- RT/044 18-13 11.06.2018 Penet RODHAM SYNTHETICS PVT LTD TUDHAM SYNTHETICS PVT LTD ....
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....notice / Invoice demanding payment in respect of unpaid operational debt due from RIDHAM SYNTHETICS PRIVATE LIMITED. (Corporate Debtor) under the Code. Madam/Sir. 1. This letter is a demand notice/invoice demanding payment of an unpaid operational debt duc from RIDHAM SYNTHETICS PRIVATE LIMITED, the Corporate Debtor. 2. Please find particulars of the unpaid operational debt below: PARTICULARS OF OPERATIONAL DEBT TOTAL AMOUNT OF DERT. DETAILS OF TRANSACTIONS ON ACCOUNT OF WHICH DEBT FELL DUE, AND THE DATE FROM WHICH SUCH DEBT FELL DUE RE: 1 36.06,646.70 (Rupees One Crore Thirty-Six Laes Six Thousand Six Hundred and Forty-Six and Seventy Paise only) excluding Interest @ 24% p.a. from the date of delay till the date of payment and realization. Ex6964211284 1/616677165642112 SP VIERALE RAILWAY STATION SAY Cometer Hus1,16/04/2023, 17:03 Details of transactions on account of which debt fell due: PD1:4000c1. Jacob Circle S.G NS (fract. at www.andaapost.gov.30> DHIM as D TRUE COPY ASHISH O LALPURIA & CO. COMPANY SECRETARIES Document 9 Riddhim Textiles (Operational Creditor) is in the business of supplying texdle good to various entities, Xi....
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....ntaining ledger confirmation for the period 2018-19 to 2022-23. 3. Pending Tax Invoices. RECORD OF DEFAULT WITH THE INFORMATION UTILITY (IF ANY) 3. if you dispute the existence or araount of unpaid operational debt (in default) please provide the undersigned, within ten days of the receipt of this letter, of the pendency of the suit or arbitration proceedings in relation to such dispute filed before the receipt of this letter/notice. 4. If you believe that the debt has been repaid before the receipt of this letter, please demonstrate such repayment by sending to us, within ten days of receipt of this letter, the following: a. an attested copy of the record of electronic transfer of the unpaid amount from the bank account of the corporate debtor or b. an attested copy of any record that M/s. RIDDHIM TEXTILE; has received in payment 5. The undersigned request you to unconditionally repay the unpaid operational debt (in default) in full within ten days from the receipt of this letter failing which we shall initiate corporate insolvency resolution process in respect of Ridham Synthetics Private Limited. Yours Sincerely Signature of person authorized to act on....
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....s. The amounts claimed in the demand notice and the amounts claimed vide the invoices do not match and your client is therefore put to a strict proof thereof. 6. We further state that you have issued the present demand notice without disclosing the deficiencies in the quality of product supplied by your client. In fact, we had informed your client through WhatsApp that the goods supplied by your client are of an inferior quality and your client was therefore asked to return the same. 7. With regards to the invoices, we state that the amount claimed by your client through these purported invoices is clearly beyond the period of limitation. Thus, it does not amount to a legally recoverable RINA AN ISO-9001-2008 COMPANY IN HOUSE NABL ISO-17025 : 2005 LABORATORY -- cess! TRUE COPY ASHISH O LALPORIA & CO. COMPANY SECRETARIES Document 13 TEL :082-240M Ridham Synthetics Pyt. Ltd. ----------- debt We are also informing you that there exists an arbitration clause in the invoices raised by you. It clearly states that "the transaction is subject to Disputes and Arbitration rules of Mumbai Textile Merchant's Mahajan'. 9. It is pertinent to mention that any ....
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.... IN HOUSE NABL ISO-17025 : 2005 LABORATORY ----- ------- TRUE COPY ASHISH & LALPURIA & CO. COMPANY SECRETARIES 1 Document 15 RUTUJA R. MAHADIK ADVOCATE HIGH COURT Phone :9820940538 Add: 39A/14, Mavji Mansion, Elphinstone Road, Mumbai- 400 013 REGISTERED A.D. To. 1. Ridham Synthetics Pvt. Ltd., Plot No. B-23/24. Village Segaon, Mahalaxmi (W). Mumbai - 400 011 And also at (i) Ridham Synthetics Pet. Ltd., Shree Mahalaxmi Woolen Mills Compound Dr. E Moses Road, Mahalaxmi, Mumbai - 400 011 tin Ridham Synthetics Pvt. Ltd., 632X - C24 Dombivli, MIDC. Sagaon Manpada Road, Dombivli (E) Thane 421 203 (iii) Ridham Synthetics Pvt. Ltd., 342/343, A to Z Industria! Estate, Ganpatrao Kadar Marg, Lower Parel (W). Mumbai - 400 013 2. Kamlesh Vimalchand Bafna Director of Ridham Synthetics Pvt. Ltd., 632X + C24 Dombivli, MIDC. Sagaon Manpada Road, Dombivli (E) Thane 421 203 TRUE COPY ASHISH O'LALPURIA & CO. COMPANY SECRETARIES Document 16 3. Kaushik Ishwarlal Desti Director of Ridham Synthetics Pvt. Ltd., 632X + C24 Dombili, MIDC, Sagaon Manpada Road, Dombivli (E) Thane 421 203 4. Jasma Kamlesh Bafna Director of Ridham Synthetics Pvt. Ltd., 632X....