TaxTMI 
TaxTMI 
2025 (12) TMI 823
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....nal, Indore Bench) in C.P. (IB) No. 29/9/MP/2020. By the impugned order, the Adjudicating Authority has admitted the Section 9 application filed by the Respondent No.2-Operational Creditor and admitted the Corporate Debtor into the rigours of Corporate Insolvency Resolution Process ("CIRP" in short). Aggrieved by the impugned order, the present appeal has been preferred by the Appellant-ex Director of the Corporate Debtor. 2. Coming to the brief facts of the case at hand, the Respondent No.2- Operational Creditor is a sole proprietorship concern of Mr. Abdul Maaz who owns two concerns namely Haji Shahadat & Sons and Maaz Exports under a common GST registration number. The Operational Creditor had entered into a business transaction with the Appellant-Steel expert Industries in the trading and supply of iron and steel materials. The Operational Creditor has claimed that the Corporate Debtor made only partial payments and failed to clear the entire outstanding amount despite repeated requests following which they issued a Demand Notice under Section 8 of IBC on 17.10.2019 to which the Corporate Debtor had responded by sending a Notice of Dispute on 26.10.2019. As no payment was fo....
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.... 8 Demand Notice which can be evidenced from the fact that they had filed a police complaint at Indore on 08.08.2019 and with the Deputy Commissioner of Police, Mumbai on 09.08.2019 complaining about their commercial dispute with the Operational Creditor. It was contended that since both these police complaints were prior to the Section 8 Demand Notice, this clearly testified pre-existing dispute. Besides police complaints, they had also approached the District and Session Court of Indore in a Civil Suit for adjudicating their ongoing commercial dispute which buttresses the fact that there was commercial dispute between themselves. Further the fact that the Operational Creditor had themselves also filed a police complaint before the Mumbai Police challenging the cash receipts produced by the Corporate Debtor leading to registering of a criminal case also testifies commercial dispute. The same cash receipts which constitute one of their principal grounds of dispute came to the notice of High Court of Bombay in the anticipatory bail application which in its orders had recorded that there was a serious commercial dispute ongoing between the parties. Therefore, when the veracity of the....
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....en supplied by them which fact is validated by invoices, delivery challans and e-way bills. The material supplied by the Operational Creditor have been utilized by the Corporate Debtor without any demur or protest regarding the quality of the goods supplied. The Corporate Debtor had made delayed payments in multiple instalments but eventually on having committed a default in the payment of unpaid operational debt, the Operational Creditor issued reminders for payment. The Corporate Debtor ignored these reminders compelling the Operational Creditor to issue a Demand Notice on 17.10.2019 for payment of Rs. 2,32,98,535/- which was followed by filing of a Section 9 application which was rightly admitted by the Adjudicating Authority. The Hon'ble Supreme Court in Mobilox Innovations judgment supra has held that a pre-existing dispute must not only have arisen prior to issue of statutory demand notice but should be real, bonafide and supported by evidence which is not so in the present case. The defence raised by the Corporate Debtor of pre- existing disputes being moonshine defence, it was vehemently contended that the impugned order is a well-reasoned order and that the Adjudicating Au....
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....onstantly improvising grounds to build up an illusory defence as an afterthought. 10. We have duly considered the arguments advanced by the Learned Counsel for the parties and perused the records carefully. 11. The short point for consideration is whether there was any discernible pre- existing dispute surrounding the debt claimed to be due and payable by the Corporate Debtor. 12. It is the case of the Appellant that they had already paid the entire outstanding amount to the Operational Creditor. In substantiation of their contention, it was submitted that the Appellant had withdrawn cash of Rs. 2,91,75,000/- from SBI and PNB during the period of 17.03.2016 to 24.04.2018 and out of this amount, payment of Rs. 1,81,84,460/- was defrayed to the Operational Creditor. It is further contended that all the invoices raised by the Operational Creditor and the cash payments made by the Corporate Debtor to the Operational Creditor has been duly reflected in their books of account and ledger. The Operational Creditor had received the entire amount in cash and had issued three cash receipts in acknowledgement which have been placed at pages 284-286 of the Appeal Paper Book (APB). Henc....
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.... in their possession whether its denial by the Operational Creditor can be held to be a genuine pre-existing dispute. 16. We find that three cash receipts have been placed on record by the Appellant at pages 284-286 of the APB which depict receipt of Rs. 32,39,460/- dated 25.04.2017; receipt of Rs. 1,19,20,000/- dated 30.04.2019 and receipt of Rs. 30,25,100/- dated 30.04.2019. Undisputedly these three cash receipts clearly pre-date the issue of Section 8 Demand Notice of 17.10.2019. The Appellant has also submitted a cash withdrawal table made by them at pages 239-240 of APB in support of their defence to demonstrate that cash payments were actually made to the Operational Creditor. The credulity and authenticity of these cash receipts have however been questioned by the Operational Creditor on the ground that these receipts were not signed by them nor issued on their authorised letter head and were therefore clearly fabricated and forged. Submission was pressed that the cash receipts of the Appellant are not supported by corresponding bank withdrawals or contemporaneous accounting records made by the Appellant. For FY 2017-18, when Rs. 1.19 Cr was purportedly paid in cash, the ....
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.... arrangement. However, what strikes a more discordant note is that the Appellant has conspicuously failed to explain as to why these cash receipts were never brought to the attention of any authority or any agency by them before the commencement of the Section 9 proceedings in the event that they were already available with them. The plea of alleged cash payments and supporting cash receipts was never made part of the police complaints but has been introduced for the first time only in reply to the Section 9 petition. Though the police complaints formed the foundational basis of the civil suit filed on 25.11.2019 in which even an amended version of the police complaint was added but it remains unexplained why the cash receipts were not placed on record if they were supposedly already in existence. What is still more baffling is as to why the Appellant in their Reply Notice dated 26.10.2019 to the Section 8 Demand Notice as seen at pages 190-193 of the APB did not disclose either the cash receipts or adduce any proof of cash payments or advance settlement. Not making this critical assertion at the stage of a statutory reply cannot be taken lightly as it defies commonsense as to why ....
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....ceive Rs. 23,524/-. When the situation threatened to become grim, I made a call to 100 helpline number and am now submitting this application for protection so that no untoward incident takes place against me. You are requested to take appropriate action on this. Yusuf Malubhaiwala Date:- 9 August 2019 To, Hon'ble Commissioner of Police, Mumbai Subject: - About false FIR likely to be lodged against me. Hon'ble Sir, This is to inform that I, the Applicant, Yusuf Bhai, S/O Joeb Ali Malubhaiwala, am a Director of Steel Expert Industries Indore Ltd situated at 7, Hathipala Road, Juni Indore, Indore and that we deal in steel. I had transactions of steel with Abdul Maj Chaudhari, Proprietor of Haji Shahadat Ali And Sons situated at 21, Chhota Sonapur, MS Ali Road, Mumbai 400008. On 8th August 2019, Abdul Maj Chaudhari arrived at my office situated under jurisdiction of Raoji Bazar Police Station, District Indore, Madhya Pradesh, along with 12-15 persons in four wheelers and started exerting pressure on me after showing false and misleading fabricated accounts, thereby trying to make illegal recovery. Abdul M....
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....ational Creditor, these shortcomings expose the unreliable nature of this defence. 23. We therefore find substance in the contention of the Respondent that the defence of pre-existing dispute cannot succeed basis such police complaints which complaints do not bear any direct linkage or have clear-cut nexus with the operational debt. In support of their contention, reliance was placed on the ratio of the judgment of this Tribunal in Aroon Kumar Aggarwal Vs ABC Consultants Pvt. Ltd. in CA(AT)(Ins) No. 409 of 2020 which held that the plea of pre-existing dispute has to co-relate with the amount claimed by the Operational Creditor and therefore find that this judgement does lend support to the argument canvassed by the Operational Creditor. Having said that, we do not find any reason to differ with the Adjudicating Authority which has held in the impugned order at para 19 therein that the police complaint dated 08.08.2019 alleging threats by the Operational Creditor citing inconsistent amounts was unrelated to the claimed debt and did not specifically dispute either the invoices or supply made. When the police complaint was not directly relatable to the commercial dealing between th....
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....agree with the Adjudicating Authority on this count. As regards the anticipatory bail application proceedings, apart from the fact that this proceeding had been initiated post the Section 8 Demand Notice, the relevant interim order dated 03.10.2023 was in the context of a criminal complaint for deciding anticipatory bail and not for adjudication on the existence of operational debt or discharge of any default thereof. Thus, the Civil Suit or Anticipatory Bail application proceedings which have been filed after filing of Section 9 application cannot be used to defeat a validly filed Section 9 application on grounds of pre-existing dispute. 27. This brings us to the Notice of Dispute dated 26.10.2019 sent by the Appellant to the Operational Creditor. It is contended by the Appellant that in this reply at para 3, they had raised the contention that the entire amount has been received by the Operational Creditor and also referred to the police complaints filed by them at para 4.11 therein. Thus, when they had denied their liability and also raised the issue of pre-existing dispute by way of police complaints, that shows that there was pre-existing dispute between the parties. 28.....
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.... to substantiate pre-existing dispute. 30. On the ground raised by the Corporate Debtor that filing of two Section 9 applications by Haji Shahadat & Sons and Maaz Exports tantamount to abuse of process lacks basis since both these entities were distinct and separate and therefore were entitled to file separate Section 9 applications. Hence, there was no infirmity on the part of the Adjudicating Authority in rejecting this objection raised by the Corporate Debtor. Further the objection raised by the Corporate Debtor that a sole proprietorship is not a juristic person and hence not competent to file a Section 9 application also lacks merit. As submitted by the Respondent, Section 9 application filed by sole proprietors in their personal name or trade name have been held to be maintainable by this Tribunal in its judgment in Neeta Saha Vs Ram Niwas Gupta in CA(AT)(Ins) No. 321 of 2021 and in Mateshwari Minerals Vs Jet Granito Pvt. Ltd. in CA(AT)(Ins) No. 776 of 2020. 31. Given the conspectus of facts and circumstances surrounding this case, we are not convinced that the disputes are genuine, real or pre-existing. Once the dispute raised appears to be an eyewash which do not trul....