TaxTMI 
TaxTMI 
2025 (11) TMI 1717
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....ion of Corporate Insolvency Resolution Process ('CIRP" in short) of the Corporate Debtor. Aggrieved by the impugned order, the Appellant has come up with the present appeal. 2. The Ld. Counsel for the Appellant, Ms. Megha Karnwal, giving a brief factual background of the matter submitted that the Operational Creditor-M/s RMV IT Services Pvt. Ltd. had entered into six agreements with M/s Red Eye Services Pvt. Ltd.-Corporate Debtor/Respondent to supply them computer/IT products on rental basis without transfer of right with lock-in period. The Corporate Debtor started defaulting in making payment to the Operational Creditor from June 2018 because of which the Appellant stopped raising invoices with effect from 29.09.2018. Subsequently, the Operational Creditor on the request of the Corporate Debtor shared payment and invoice details. After adjusting the differential amount of Rs. 27,033/- pointed out by the Corporate Debtor, the Operational Creditor submitted a computation sheet with corrected figures which reflected an outstanding amount of Rs. 96,27,114.46/- payable by the Corporate Debtor. It was asserted that any further question of reconciliation of accounts therefore did not....
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....en back by the Operational Creditor. It was also contended that the Adjudicating Authority dismissed the Section 9 application on the ground that the same had been filed with a pre-meditated mindset on the part of the Appellant merely on the ground that the demand draft for Section 9 application fees had been filed before issue of Section 8 Demand Notice at a time when there is no such statutory embargo under IBC. It was also contended that the impugned order was also bad in law as it wrongly held that the Operational Creditor by not disclosing that they had received a Notice of Dispute from the Corporate Debtor had not acted in consonance with the provisions of IBC. Submission was pressed that this finding of the Adjudicating Authority was not in conformity with the decision of judgment of the Hon'ble Supreme Court in Macquarie Bank Limited Vs Shilpi Cable Technologies Ltd in Civil Appeal No. 15135 of 2017. 4. Countering the arguments canvassed by the Appellant, Ms. Anjali Sharma, Ld. Advocate representing the Corporate Debtor- Respondent strenuously argued that the Adjudicating Authority had passed a well-reasoned order in rejecting the Section 9 application. The Operational C....
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....ished with the application shows that the aforesaid debt is due and payable and has not yet been paid? and (iii) Whether there is existence of a dispute between the parties or the record of the pendency of a suit or arbitration proceeding filed before the receipt of the demand notice of the unpaid operational debt in relation to such dispute? If any of the aforesaid conditions is lacking, the application would have to be rejected. Apart from the above, the adjudicating authority must follow the mandate of Section 9, as outlined above, and in particular the mandate of Section 9(5) of the Act, and admit or reject the application, as the case may be, depending upon the factors mentioned in Section 9(5) of the Act." 8. Let us now see whether the test laid down by Mobilox judgment supra of operational debt exceeding Rs. 1 lakh having become due and payable but not yet paid is applicable in the present case. 9. It is an admitted fact that both the Corporate Debtor and the Operational Creditor had entered into six agreements by which the Operational Creditor had supplied certain computer units to the Corporate Debtor. It is also an undisputed fact that the Operatio....
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....after our mutual discussion so will reduce rent accordingly. Regards" "On 20-Feb-2019, at 2:26 PM rajesh <[email protected]> wrote: Dear Sir, With reference to trailing email we are hereby sending you the final ledger with corrected figures and entries. Kindly check with your side and let us know if require any changes. Further if you do not reply any changes then the ledger is deemed to be accepted by you." (Emphasis supplied) 12. This set of two e-mails extracted above clearly shows that though rental invoices were not received from July 2018 from the Operational Creditor, the Corporate Debtor by their own volition, had sought all payment and invoice details with the underlying understanding that following updation of invoices and amounts finalised basis mutual discussion, thereafter, payments would be made by Corporate Debtor. In response the Operational Creditor agreed to submit the ledger details for verification by the Corporate Debtor and to make changes thereto if required. This e-mail does not in any manner indicate any signs of objections/dispute raised with the Operational Creditor for the computer/IT....
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....tor of Rs. 96,27,114.96/- only which amount was not controverted as no supporting record has been put forth. These e-mails clearly signify that the Corporate Debtor have admitted to the outstanding due appearing in the ledger of the Operational Creditor. In such circumstances, when the Corporate Debtor had admitted their outstanding liability and it was frozen after mutual agreement and adjustment of Rs. 27,033/-, raising the issue of reconciliation of accounts as a ground of dispute clearly lacks substance and credibility. From the facts available on record, we are convinced that the operational debt had crystallized well ahead of the issue of the Section 8 demand notice. 15. It is still more pertinent to note that in this e-mail it has been admitted that though the Corporate Debtor is "already in trouble" it was somehow managing to pay their dues. This clearly tantamount to admission of debt. Even on the interest claimed by the Operational Creditor, the Corporate Debtor has not disputed the same but only made a request to dispense with the interest component on grounds of financial difficulties faced by them. In all fairness, the Corporate Debtor after seeking indulgence of th....
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....use 14 that the computer/IT products were to be provided by the Operational Creditor "purely on rental basis for agreed contract period on returnable basis". 19. The Adjudicating Authority in the impugned order has observed that the Corporate Debtor in their e-mail dated 18.02.2019 and 21.02.2019 had informed the Operational Creditor that they had not received invoices from July 2018 to February 2019 and that these invoices were not reflected in the GSTR-1 as well. When we look at the terms outlined in the agreements signed between the two parties, there is no requirement envisaged therein for raising of invoices by the Operational Creditor. When the terms of the agreement clearly stipulated that rent had to be paid on a monthly basis and there was no obligatory requirement spelt out for issue of invoices, in the given facts of the case, we are of the considered view that it cannot be argued that rental payments were not due or not payable merely because invoices were not raised. We also find that the Operational Creditor had a proffered a genuine reason for discontinuing the raising of invoices for GST had to be paid the moment the invoices were raised. They wanted to avoid a s....
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....rate Debtor and accordingly reduced the outstanding dues. No other issue of reconciliation was thereafter raised until the issue of the Section 8 Demand Notice. That the Corporate Debtor thereafter did not raise any further request for reconciliation of accounts clearly shows that there was no dispute between the two parties with regard to their inter se financial accounting. There is no mention whatsoever of any unadjusted payment of Rs. 72 lakhs. When the Corporate Debtor was mindful of raising discrepancy for an amount as small and meagre as Rs. 27,033/-, it defies logic that they would have been unmindful of the omission of non-adjustment of a sum of money of a substantial magnitude of Rs. 72 lakhs. We are therefore inclined to take a considered view that the non-adjustment of Rs. 72 lakhs which was raised in the reply to the Section 8 Demand Notice was an afterthought to tide over their outstanding liability qua the Operational Creditor. We are also of the view that reliance placed on the judgement in East India Udyog judgment supra is misplaced. The facts in that case are clearly distinguishable since the Corporate Debtor in that case had refused to accept the outstanding ope....
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....nd terms of the agreement (since you have violated the terms of the agreement) we request you to handover all the above mentioned equipment by 6 p.m today amicably. We reserve all the rights to receive the rental dues along with the interest penalty as tallied in the previous email. Finally request you to inform your people to cooperate with our team, present at your office to collect the materials. Hope things are clear and expecting your smooth cooperation in this regard." "Re: Breach of rental terms and request to handover the materials Wed 3/13/2019 5:28 PM From: Rahul Dhondwad To: rajesh Cc: Deepak Upadhyay, [email protected], [email protected], [email protected], "Saveena Sachar, Lawhive" Dear Rajesh, As per our verbal communication along with Rs. sir Parmeshwar ji myself and Deepak Parmeshwar ji decided to pre-terminate all valid contracts and return the machines after that we have started returning the machines and we have returned most of the machines only few cylinder setup is with us. Even we are returning all pending Mac Pro cylinders. Request to you please repl....
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....lication under Section 9(1) of the IBC. Further, Section 9(5)(ii) contemplates that Adjudicating Authority shall reject the application if notice of dispute has been received by the Operational Creditor or there is record of dispute in the Information Utility. 27. Having noticed Sections 8 and 9 of the IBC, we find that in the facts of the present case, the Operational Creditor had dutifully sent a Section 8 Demand Notice and thereafter filed the Section 9 application only after expiry of 10 days' time. Thus, there is no sign or evidence of any violation or contravention of the statutory provisions of the IBC with regard to filing of either the Section 8 Demand Notice or Section 9 application. There is no statutory prescription of any time-frame for deposit of Section 9 application fees nor any embargo placed on filing of such application fees prior to issue of Section 8 Demand Notice or prior to receipt of reply to Section 8 Demand Notice from the Corporate Debtor. At best, the deposit of the Section 9 application fees even before the issue of Section 8 Demand Notice reveals that the Operational Creditor was taking extra precaution that no undue time gets lost in the process of....
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....age it may be useful to refer to the relevant excerpts of the Macquarie judgment supra which is as reproduced below: 13. When we come to Section 9(3)(b), it is obvious that an affidavit to the effect that there is no notice given by the corporate debtor relating to a dispute of the unpaid operational debt can only be in a situation where the corporate debtor has not, within the period of 10 days, sent the requisite notice by way of reply to the operational creditor. In a case where such notice has, in fact, been sent in reply by the corporate debtor, obviously an affidavit to that effect cannot be given. Guided that we are by the judicial precedents laid down by the Hon'ble Apex Court, when we see the impugned order in the light of the Macquarie judgment supra, we are constrained to observe that para 5.2 of the impugned order is bad in law. 31. From the aforesaid discussion and analysis of facts and circumstances, we are of the considered opinion that the Corporate Debtor has defaulted in the payment of operational debt, of an amount exceeding Rs. 1 lakh, which amount had clearly become due and payable, and further in the absence of any pre- existing dispute, we find....