AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2025 (12) TMI 119
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....as settled principles of law. Submissions of the Appellant 2. The Appellant is Team Commotrade (India) Private Limited, a company engaged in the business of importing and marketing agricultural machinery and spare parts, including harvesters, transplanters, dryers, and tractors, under the brand name "Zoomlion." The Appellant appoints regional sub-dealers across India for distribution and sale of its products in various States, including West Bengal. The Respondent is a company engaged by the Appellant as a sub-dealer for distribution and sales of harvester machineries for agricultural activities, spare parts of such harvesters and providing after sale services to the harvesters. The Appellant herein vide letter of Intent dated 14.09.2019 appointed the Respondent as a subdealer for the purpose of marketing and selling Rotavator, Tractors, Dryers, Transplanters and Harvesters for Purba Midnapur and Paschim Midnapur Districts, West Bengal. The Respondent also issued several purchase orders. As per the Letter of Intent, the Respondent made a security deposit of Rs. 10,00,000/- as a dealer. The Respondent acted on the said Letter of Intent dated 14.09.2019 by placing purchase orde....
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....manufacturer admitted to having supplied defective machineries. All these materials, according to the Tribunal, confirmed that the dispute regarding quality and performance of the machines pre-dated the Section 8 notice. All these defences were without any basis and without any factual proof. 6. The Bench wrongly relied on Mobilox Innovations Pvt. Ltd. v. Kirusa Software Pvt. Ltd. [(2017) MANU/SC/1196/2017]. The Adjudicating Authority found that the defects pointed out by the Corporate Debtor were genuine and supported by records. It held that these disputes were not frivolous or an afterthought but had existed before the demand notice. Therefore, the claimed amount could not be treated as an undisputed or crystallized operational debt. It concluded that there was a pre-existing dispute which bars admission of a petition under Section 9 of the Code. 7. Appellant Contends that there has not been a single communication on record to show that the Respondent complained of inferior machine quality. In fact, the Respondent vide Email dated 17.08.2020 admitted its liability by setting timelines to make payment. Apart from the same, the Respondent also requested to issue new machines....
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....ellant by accepting the same, billed the Appellant at Rs. 26,00,000/- and a GST bill for the same was raised on 09.08.2021 and machines were received by him. During the course of arguments, the Respondent contended that these machineries were not delivered to the Respondent which is contrary to his submissions before the Hon'ble Adjudicating Authority wherein the Respondent has accepted that he received the machineries from the Appellant which is from the same place mentioned in the invoice dated 09.08.2021. 9. The Respondent admits the receipt of machineries supplied by the Appellant but did not raise any dispute with respect to the same at any point of time. There is absolutely no communication of any machinery supplied to the Respondent being defective until the Appellant sent a FORM 3 Demand notice. 10. Appellant relies upon the judgment of this Appellate Tribunal in the matter of R.A.J Krishna Construction Company Pvt Ltd., Vs Newera Solutions Private wherein it was held that: "12. It is also a well settled proposition of law that for a pre- existing dispute to be a ground to nullify an application under Section 9, the 6 dispute raised must be truly existing at ....
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....ion that tax invoices are not as per the GST Act is legally untenable, since the Respondents have accepted the receipt of machines and spares and acknowledged the liability and did not raise existence of a dispute till FORM 3 was issued by this Appellant. The Respondent also raised a contention which were not part of the submissions before the Hon'ble NCLT in his pleadings. 14. In the case of Mr. G. Ramakrishna Reddy V Manjeet Bucha & Anr, Company Appeal(AT)(CH)(INS) No. 198 of 2021, the Hon'ble NCLAT held that the role of the Adjudicating Authority should be limited to establish that the debt is due, remains unpaid and the default occurred with the minimum threshold of Rs. 1 Crore. (Paragraph 25) "The Hon'ble Supreme Court of India has also held in catena of the judgments that the role of the 'Adjudicating Authority' should be limited to establish that debt is due, remains unpaid and default has occurred with minimum threshold of Rs. 1 crore, then the 'Adjudicating Authority' should admit the Section 9 application. The Apex Court has also held that their should be minimum judicial interventions." (Emphasis supplied) 15. The Respondent further contended that the i....
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.... maintainable in view of the fact that the debt, if any, is below the threshold of Rs. 1 Crore as prescribed under Section 4 of IBC. Further, the invoices alleged to be in default are falling within the restricted period under Section 10A of IBC. It is contended that the entire case of Appellant is premised on letter dated 17th August 2020 at page 483 of Appeal wherein the Respondent agreed to pay Rs. 1,45,00,000/- on or before 31st March 2021 and the default in making the said payment accrued during the 10A period, hence the petition under Section 9 of IBC as well as the instant appeal is not maintainable. It is a trite law that even if a defence has not been taken that the Petition is barred under Section 10A of IBC, it is the duty of the Adjudicating Authority to scrutinise whether the invoices are barred by law or not and this Appellate Tribunal has affirmed the said position of law in case of Comet Performance Chemicals Private Ltd. vs Aarvee Denims and Exports Limited 2025 SCC Online NCLAT 53 at para 21 and also in case of Bhavit Seth vs Madan Bajrang Lal Vaishnawa & Anr. CA (AT) (Ins.) No. 328 of 2024 at para 13-15. 19. Respondent contends that the parties herein mutually....
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....13.03.2020 12.04.2020 48,923/- 26. GST/689 13.03.2020 12.04.2020 14,499/- 27. GST/688 13.03.2020 12.04.2020 1,72,641/- 28. GST/687 13.03.2020 12.04.2020 3,27,131/- 29. GST/686 13.03.2020 12.04.2020 1,06,717/- 30. GST/685 13.03.2020 12.04.2020 1,88,912/- 31. GST/684 13.03.2020 12.04.2020 57,349/- 32. GST/683 13.03.2020 12.04.2020 32,877/- 33. GST/682 13.03.2020 12.04.2020 23,859/- 34. GST/681 16.03.2020 15.04.2020 68,131/- 35. GST/680 13.03.2020 12.04.2020 1,20,808/- 36. GST/679 13.03.2020 12.04.2020 46,596/- 37. GST/678 13.03.2020 12.04.2020 49,285/- 38. GST/677 13.03.2020 12.04.2020 51,922/- 39. GST/676 13.03.2020 12.04.2020 38,175/- 40. GST/675 13.03.2020 12.04.2020 65,922/- 41. GST/674 13.03.2020 12.04.2020 37,102/- 42. GST/673 13.03.2020 12.04.2020 1,00,650/- 43. GST/672 13.03.2020 12.04.2020 45,852/- 44. GST/671 13.03.2020 12.04.2020 19,580/- Total 45,07,3....
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.... agreement between the parties about the price. Further, the invoice had to be generated in April 2020, however owning to dispute between the parties regarding the price the same was not generated which is evident from page 485 of Appeal wherein both the parties were negotiating qua the price till 19th November 2020, however, nothing was finalized as Respondent informed the Appellant to keep the harvesters. Further, the Appellant on 30th November 2020 unliterally asked the respondent to pay Rs. 20 Lakh without any consensus between the parties. 24. Respondent further contends that in view of the same the alleged invoice amount should be to be deducted from the alleged principal debt as claimed and also the amount which fell due during 10A period under the Code should also be deducted: Particular Amount in Rs. Principal Amount 1,64,89,928/- (Invoice No. GST/127) (-26,00,000)/- Amount which falls under Section (10A) (-45,07,324)/- Total 93,82,604/- Hence the Petition under Section 9 of IBC is not maintainable as it is below the threshold prescribed under Section 4 of IBC. Further, unilateral imposition of the interest cannot be considered to cross ....
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....ity is not maintainable as there exist pre-existing disputes between the Parties herein. It is submitted that the Respondent deposited a security deposit of Rs. 10,00,000/- (Rupees Ten Lacs Only) after the receipt of the security deposit by the Appellant, a draft copy of a Letter of Intent (hereinafter referred to as "LOI") was shared, however, the content of the LOI by and large were in favour of the Appellant and was unilaterally prepared to cater the objectives of the Appellant only and no leeway was given to the Respondent. Hence, till date the LOI was not executed and parties were doing business as per the mutual understanding. Further, the Appellant had supplied 15 harvesters in total, out of the above-mentioned harvesters supplied by the Appellant, the Respondent had supplied 13 harvesters to final consumers. That it is pertinent to state that most of the harvesters supplied to the consumers started to have mechanical malfunctioning after using it between 50 hours and 100 hours and post usage of the harvesters for 500 hours, these harvesters were completely breaking down, which has been duly considered by the Adjudicating Authority while passing the Order dated 25.06.2024. ....
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....machines of Zoomlion sold by the Appellant were faulty and various consumers all across the West Bengal and Odisha raised this issue and agitated the same before the appropriate authorities. In this regard various newspaper articles from 2020 has covered the agitation by the farmers and grievances of the consumers regarding the defects of the harvesters were mentioned. 33. It is also germane to mention herein that few customers had dumped the harvesters before the Respondent herein in name of servicing, after the harvesters started malfunctioning followed by its break down. Further these customers were reluctant to take back the faulty harvesters and demanded the refund of the amount paid by them. 34. The Appellant herein intentionally dumped the spare parts of different specifications with the Respondent herein inspite of the fact that it was well known to the Respondent that the harvesters were remaining unsold and there were return of the harvesters as well as these spare parts would be of no use to the Respondent. It is incumbent to mention herein that the Respondent time and again requested the Appellant to take back the spare parts and harvesters lying with the Responde....
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....lants' Section 9 petition. 40. We note that the Appellant, Team Commotrade India Private Limited, is a company engaged in importing and marketing agricultural machinery under the brand "Zoomlion" through a network of sub-dealers across India. The Respondent was appointed as a sub-dealer for the Purba Midnapur and Paschim Midnapur districts of West Bengal via a Letter of Intent dated 14.09.2019. Pursuant to this, the Respondent made a security deposit of Rs. 10,00,000 and placed multiple purchase orders with the Appellant between 28.03.2019 and 09.08.2021. We find that across all transactions, a total invoiced value of Rs. 4,04,21,108/- was generated, against which the Respondent paid Rs. 2,39,31,180/-, leaving an unpaid balance of Rs. 1,64,89,928/-. On 11.08.2021, the Appellant issued a Form 3 demand notice, subsequently filing a Section 9 Petition on 07.07.2022, which was dismissed by the Adjudicating Authority on 25.06.2024. It is to be noted that total amount of debt claimed as per Part IV is Rs. 2,37,84,627.60 (Rupees Two Crore Thirty Seven Lakh Eighty Four Thousand Six Hundred and Twenty Seven and Paisa Sixty Only) with date of default being 09.08.2021 and this amount also ....
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....within the restricted period under Section 10 A of the IBC. As such, defaults related to these invoices cannot form the basis of an Insolvency Application. Deducting this amount from the total alleged outstanding of Rs 1,36,30,679/- (rupees one crore, thirty-six lakhs, thirty thousand, six hundred and seventy-nine only) reduces the admissible claim to Rs 99,84,479/- (rupees ninety-nine lakhs, eighty-four thousand, four hundred and seventy-nine only) which remains below the statutory threshold of rupees one crore. It is to be noted that this gets further reduced on deduction of the claims of interest. 20. The Respondent has also placed his reliance on the judgment of this Tribunal in Decor Paper Mills Ltd vs Mahashakti Plasto Pvt Ltd in Company Appeal (AT) (Insolvency) No. 2022 of 2024 which establishes that invoices falling within the 10 A period must be excluded from default claims. Therefore, the Application filed by the Appellant under Section 9 is not maintainable on this count also, as the default amount is below the statutory threshold." [Emphasis supplied] We concur with the arguments of the Respondent to exclude interest as was expounded by us in above judgme....
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....e before the Form 3 demand notice dated 11.08.2021. The Appellant emphasizes that all communications preceding the notice, including emails and WhatsApp exchanges, consistently acknowledged the Respondent's liability and reflected ongoing business without any product quality complaints. On the other hand, the Respondent claims that the dispute originated well before the demand notice. Respondent cites multiple malfunctions of the supplied harvesters, reports of returned products, consumer complaints, ongoing litigations, and acknowledgment by the principal manufacturer himself about the need for upgrades and improvements. The Respondent asserts that these facts evidence a bona fide, pre-existing dispute. 45. In this backdrop, before deciding the matter in hand, we look into the provisions of Section 9 which is reproduced as below: "Section 9. Application for initiation of corporate insolvency resolution process by operational creditor. (1) ... (2) ... (3) ... (4) ... (5) The Adjudicating Authority shall, within fourteen days of the receipt of the application under sub-section (2), by an order (i) admit the applic....
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....oceeding relating to a dispute is pending between the parties. 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." [Emphasis supplied) 48. We note that the parties sharply disagree on the role of the Adjudicating Authority, invoking the landmark Mobilox Innovations judgment. The Appellant stresses that the NCLT's role is confined to verifying debt existence, default, and statutory threshold compliance, and that a dispute relied upon to deny admission must not be speculative or an afterthought. In this case, they ar....
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....t claims. Therefore, the Application filed by the Appellant under Section 9 is not maintainable on this count also, as the default amount is below the statutory threshold. 21. Furthermore, it is to be noted that even if the dispute relating to invoices falling within 10 A period is not raised by the Respondent, as is being argued by the Appellant, it is not a bar as it is the duty of the Adjudicating Authority to scrutinise whether the invoices are barred by law or not." [Emphasis supplied) 52. In a similar situation in this, we are therefore, inclined to agree with above justification that invoices of 10A period should be deducted from the total amount, which fell due during 10A period as also the disputed amount, making the total amount to be less than threshold of Rs. 1 crore. And in that case, the Petition under Section 9 of IBC becomes not maintainable as per below mentioned calculation: Particulars Amount in Rs. Principal Amount (without interest) 1,64,89,928/- (Invoice No. GST/127) (as discussed earlier) (-26,00,000)/- Amount which falls under Section (10A) (as discussed above) (-45,07,324)/- Total 9382604/- 53. This case can b....