TaxTMI 
TaxTMI 
2025 (11) TMI 959
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....iled by the Respondent No.1-Operational Creditor and admitted the Corporate Debtor into the rigours of Corporate Insolvency Resolution Proceedings ("CIRP" in short). Aggrieved by the impugned order, the present appeal has been preferred by the ex-director of the Corporate Debtor. 2. Coming to the brief facts of the case, the Appellant/Corporate Debtor- Clothwari Printing Pvt. Ltd. had placed an order for purchase of a digital textile printer from Italy on the Respondent No.1/Operational Creditor-Insight Print Communication Pvt. Ltd. This purchase order was placed on 21.11.2019 by the Corporate Debtor and on the same date, the Respondent No.1 raised an invoice amounting Rs 3,12,44,282/- and delivered the machine on 23.11.2019. In terms of the conditions of payment, the payment was required to be made after a 90 days trial period. Admittedly, no payment had been received by the Operational Creditor except for a payment of Rs 5 Lakh only on 28.09.2022 by the Corporate Debtor. However, while this payment was contested by the Corporate Debtor to have purportedly been made towards purchase of printer cartridge, the Respondent No.1 claimed this amount to be part payment towards purchas....
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....l period of 90 days. This validated their contention that since the Operational Creditor had failed to submit proof of satisfactory trial, it was not in a position to demand any payment. Buttressing their argument further that the printer supplied was defective and not performing satisfactorily, it was submitted that this fact was clearly borne out by two e-mails sent by the Operational Creditor wherein they admitted to have deployed their engineers to set right the defective printing machine at their own cost. 4. It was also submitted that the Section 9 application filed by the Operational Creditor stood barred by limitation since the right to sue had arisen 90 days from the date of invoice which was 21.11.2019. The three years limitation period expired on 20.11.2022 while the Section 9 application was filed on 21.06.2023 which was clearly beyond the three years period. In any case, the alleged debt claimed by the Operational Creditor never became due as the 90 days trial period agreed between the parties in the MoU never completed since the printer was non-operational from the beginning. While admitting that a payment of Rs 5 Lakhs was made by them on 28.09.2022 to the Operati....
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....ved by the Corporate Debtor without any demur or protest. At the time of receipt of the printer, no dispute was raised that the Operational Creditor had supplied the machine earlier than the time-period stipulated in the MoU. It was contended that this issue of early delivery as contrary to the terms of the MoU was a feeble defence which was raised as an afterthought by the Corporate Debtor. It was further submitted that the printer had also been commissioned and no disputes were raised on the performance of the printer. Further, it is misplaced on the part of the Corporate Debtor to argue that since the printer was not functional, the Appellant had not raised any demand for payment. This is belied by the fact that the Appellant had sent two e-mails on 25.03.2022 and 24.05.2022 in which the Appellant had clearly raised the request for payment. However, the Corporate Debtor has been selectively focusing on a few remarks contained in these e-mails to conjure a wrong impression that the e-mails were an admission that the printer machine was not working properly. On the contrary, the Corporate Debtor not having raised any objection or dispute with respect to delivery and commissioning ....
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....tutory provisions of the IBC show that Section 8(2) gives liberty to a Corporate Debtor served with a Demand Notice under Section 8(1) by an Operational Creditor to bring to the notice of the Operational Creditor the existence of a dispute. In the present case, it is uncontested that the service of the Section 8 Demand Notice dated 08.12.2022 had been served by the Operational Creditor on the Corporate Debtor on 20.12.2022 and in response thereto, the Corporate Debtor had replied to the said Notice on 10.02.2023. The date of reply had spilled beyond the period of ten days period specified for the purpose of replying. Be that as it may, as long as the Notice of dispute has been raised, it needs to be taken cognisance of by the Adjudicating Authority, particularly so, when in the facts of the present case, the reply was sent by the Corporate Debtor well before the filing of the Section 9 application. It is a well settled proposition that for a pre-existing dispute to be a justifiable ground to thwart an application under Section 9, the dispute raised must be truly existing either at the time of filing a reply to notice of demand as contemplated by Section 8(2) or at the time of filin....
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....oval basis. You with an intention to play fraud on my client have portrayed the payment of Rs. 5,00,000/- as the payment made for the printer machine. On the contrary, the printer machine is a second hand printer which was not in working condition and my client M/s Clothwari Printing Private Limited have requested you time and again to take back your printer from our premises as the same is not productive in nature." (Emphasis supplied) 13. When we look at the above reply to the Section 8 demand notice, we notice that there is a categorical denial of outstanding operational debt by the Corporate Debtor besides raising several grounds to show that there was a pre-existing dispute between the parties with respect to the performance of the digital textile printer. Also, there is a clear dispute raised with regard to the purpose behind their payment of Rs 5 Lakhs to the Operational Creditor. The Corporate Debtor has explained in their reply notice that the amount of Rs 5 Lakhs was paid towards printer cartridge and was not a part-payment towards furthering payment against the invoice raised for the supply of the printer. It is therefore amply clear that the Notice of Dispute not ....
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.... cannot choose to raise this as a ground of dispute at this stage. Moreover, once the printer was delivered, the liability to pay on the part of the Corporate Debtor was triggered. Elucidating further it was submitted that two e-mails had been sent on 25.03.2022 and 24.05.2022 by them to the Corporate Debtor requesting for payment. It was also contended that on 28.09.2022, the Corporate Debtor had made a payment of Rs 5 Lakhs to them which amounted to be a clear admission of debt on their part. 16. Coming to our analysis and findings, we would like to mention that certain disputes have been raised by the Appellant in their Reply to the Section 8 Demand Notice. We now proceed to dwell further on the facts of the case to examine as to whether the disputes raised in the Reply to the Section 8 Demand Notice was real, discernible and pre-existing. At the outset, we however make it clear that we do not wish to get dragged into the history of how the printer came to be supplied first to BRFL and thereafter supplied to the Corporate Debtor. Keeping in view that BRFL is not a party in the present proceedings, we cannot rely on the submissions made by the Appellant on behalf of an extrane....
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.... to you that the quality of printing is better or as good as the other machines. We have given you the right solution for the gum padding. The machine was supplied on your terms & in an atmosphere of friendship. We supported the machine with our best engineer being there and a person for operating this machine on our payroll, for the last 3 years. I would never put in my own funds, except for a friend. What more is required from me? How can I survive if I do not get the payment even now." (Emphasis supplied) 18. When we peruse the two e-mails dated 25.03.2022 and 24.05.2022, we notice that the Operational Creditor in both the e-mails have categorically stated that they did not receive any payment from the Corporate Debtor towards defraying the cost of the printer machine until the date of issue of the second e- mail. It is also clear from a reading of the two e-mails that no payment had been received by the Operational Creditor until 24.05.2022 though the printer was delivered to the Corporate Debtor way back in November 2019. We however do not find any material having been placed on record by the Operational Creditor to show that ....
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....t by the Corporate Debtor and the two e-mails sent by the Operational Creditor seeking payment for the first time after a lapse of three years while also concurrently assuring to provide assistance to ensure optimal performance of the printer indicates that there were some protracted differences between the two parties on the printer supplied. With both the emails being on record which points out a sub-stratum of persisting dispute between the two parties, for the Adjudicating Authority to hold that the pre-existing dispute was unsubstantiated, does not appeal to our reasoning. This dissatisfaction has been amplified in the Notice of Dispute raised by the Corporate Debtor in response to the Section 8 Demand Notice. These disputes though amply borne out in the two e-mails and the Reply Notice of Dispute, seem to have been superfluously glossed over by the Adjudicating Authority. 21. We now come to the contention of the Respondent No.1 that part payment of Rs. 5 Lakhs having been made, it amounts to acknowledgement of debt and default in payment. However, when we look at the Reply to the Demand Notice, we find that the same clearly mentions the reasons for making the payment....
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....ther there is a plausibility of dispute and that the defence of pre-existing dispute raised by the Corporate Debtor is not a feeble defence or unsupported by evidence without entering into adjudication of the dispute. The relevant extracts of the above judgment are as reproduced below: "33... 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 maybe. In case the unpaid operational debt has been repaid, the corporate debtor shall within a period of the self-same 10 days sent and attested copy of the record of the electronic transfer of the unpaid amount from the bank account of the corporate debtor or send an attested copy of the record that an operational creditor has encashed a cheque or otherwise received payment from the corporate debt [Section 8(2) (b)]. It is only if, after the expiry of the period of the said 10 days, the operational creditor does not either receive payment from the corporate debtor or notice of dispute, that the operational creditor may trigger the insolvency process by filing an application before the ....