AI Drafter 
TaxTMI 
TaxTMI 
2026 (1) TMI 274
X X X X Extracts X X X X
X X X X Extracts X X X X
....eal are: (i) The CD - OFB Tech Pvt. Ltd. is engaged in the business of trading and supply of raw materials to small and medium enterprises and other corporates. The Operational Creditor ("OC") has been executing the construction work. (ii) The Operational Creditor approached the CD for purchase of round HDPE Pipes of different dimensions of make Giga. The CD had entered into Memorandum of Understanding ("MoU") dated 21.09.2020 with M/s Giga Pipe Systems India LLP ("M/s Giga Pipe Systems") by which it sanctioned purchase and finance facilities to the M/s Giga Pipe Systems. (iii) In October 2020, the Operational Creditor issued purchase order on the CD for supply of pipes. The CD supplied the giga pipes to the OC sourced from M/s Giga Pipe Systems. The payments were made by the Operational Creditor to the CD towards the supply of the pipes. The last payment was made by the Operational Creditor to the CD on 24.08.2021. (iv) The Operational Creditor sent an email dated 27.10.2023 seeking confirmation of Statement of Account for Income Tax purposes from the CD. In response to the above email, the CD replied on the same day and shared ledger of Stateme....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... as alleged by the Operational Creditor. It is pleaded that after the last payment, for more than two years, there was no communication by the Operational Creditor and further for the first time by email dated 27.10.2023, confirmation of Statement of Account was sought for the Financial Year 2020-21, which ledger was shared by the CD. Vide email dated 30.10.2023, the Operational Creditor disputed two entries in the ledger. The Demand Notice issued by the Operational Creditor was replied and claim was disputed by the CD. In the record of information utilities, the status of debt is shown as 'disputed'. (x) The Adjudicating Authority by the impugned order admitted Section 9 application. The Adjudicating Authority came to the conclusion that there was no pre-existing dispute between the parties within the meaning of Section 9(5)(ii)(d), as the CD's set-off is unsupported by evidence linking the Operational Creditor to Giga Pipe Systems. The debt and default are established. In paragraphs 23 and 24, the Adjudicating Authority observed following: "23. The Tribunal finds no pre-existing dispute under Section 9(5)(ii)(d) as the Corporate Debtor's set-off is unsupport....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of Section 9 of the IBC and there being pre-existing dispute, the Adjudicating Authority ought to have rejected Section 9 application. It is further submitted that in the record of information utilities, the dispute was entered by NeSL, which was sufficient to rejection Section 9 application, as per Section 9, sub- section (5)(ii)(d). The Adjudicating Authority committed error in ignoring the notice of dispute and record of information utility. The Adjudicating Authority was required to reject the application by virtue of Section 9(5)(ii)(d) and the order of Adjudicating Authority is unsustainable. The CD is a profit earning company, who has turnover of more than Rs. 25,000 crores and it employes more than 25,000 employees across India. The Operational Creditor has approached the NCLT with unclean hands. The Operational Creditor is hand in glove with other two companies, i.e. M/s Giga Pipe Systems and KK Spun India Ltd. with whom the CD has dispute. The guarantees given by Giga Pipe Systems and KK Spun were invoked and notice of dispute was issued on 20.11.2023 by the CD to Giga Pipe and KK Spun as well as the Operational Creditor. The Operational Creditor did not reply to the not....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d of there being a pre-existing dispute between the parties, Section 9 application ought not to have been admitted. The Appellant has placed reliance on Section 9, sub-section (5)(ii)(d) and submits that Adjudicating Authority was obliged to reject the application under Section 9. Section 9, sub-section (5)(ii) is as follows: "9(5) (ii) reject the application and communicate such decision to the operational creditor and the corporate debtor, if - (a) the application made under sub-section (2) is incomplete; (b) there has been 1 [payment] of the unpaid operational debt; (c) the creditor has not delivered the invoice or notice for payment to the corporate debtor; (d) notice of dispute has been received by the operational creditor or there is a record of dispute in the information utility; or (e) any disciplinary proceeding is pending against any proposed resolution professional: Provided that Adjudicating Authority, shall before rejecting an application under subclause (a) of clause (ii) give a notice to the applicant to rectify the defect in his application within seven days of the date of receipt of such notice from the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....27-10-2023 (i) Status of Authentication of Default DISPUTED (j) Date of Last Acknowledgement of Debt (AoD): Not available Filing of Default (submission ID No.) (1) Submitted on 21-10-2024 19:04:01 Status of Authentication (Authenticated/ Disputed/ Deemed to be authenticated) Colour Code: Red Authentication completed on 22-10-2024 12:51:53 NeSL is authorized to issue this record of default and has accordingly affixed its digital signature, as per the provisions of the Insolvency and Bankruptcy Code, 2016 read with Insolvency and Bankruptcy Board of India (Information Utilities) Regulations, 2017, Guidelines for Technical Standards for Performance of Core Services and Other Services and the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2017. For MAVERIC DEV & COL. Pvt. Ltd. Sd/- Authorised Signatory" 11. Part A, of the NeSL record contains following reasons for dispute: "NeSL NATIONAL E-GOVERNANCE SERVICES LIMITED PART A *(Information of default filed with IU, covering information of debt, submitter and other parties connected with the debt, security in....
X X X X Extracts X X X X
X X X X Extracts X X X X
....se Orders to show a I ouroorted debt where none exists. Authentication Completed on 22-10-2024 12:51:53" 13. The Operational Creditor itself brought on the record, the Record of Information Utility. Section 9 proceedings are summary proceedings, which an Operational Creditor can initiate on there being existence of debt and default having been committed by the CD. Section 9, sub- section (5)(ii) requires the Adjudicating Authority to reject the application, if any of the circumstances from (a) to (e) are found. When there is record of dispute in the Information Utility, the Adjudicating Authority is obliged to reject the application. The legislative scheme of Section 9 is not for resolving any dispute between the Operational Creditor and the CD and when the record of Information Utility contains mention of dispute, the Adjudicating Authority is obliged to reject the application. The learned Counsel for the Appellant has rightly relied on the judgment of this Tribunal in Bhawani Prasad Mishra vs. Armaco Infralinks Pvt. Ltd. & Anr. - Company Appeal (AT) (Insolvency) No.557 of 2025. This Tribunal in the above case had occasion to consider Section 9(5)(ii)(d). In the above cas....
X X X X Extracts X X X X
X X X X Extracts X X X X
....665H Debt Start Date 03/04/2021 Debt Currency INR Sanction Currency INR Funded Type Funded Security flag unsecured Sanctioned Amount 714467365.00 Facility Name Purchase of Goods Coal Total Outstanding Amount 355816538.06 Amount Overdue 355816538.06 Principal Outstanding 355816538.06 Account Closed Flag no Default Details Date of Default 15/08/2024 Default Amount 355816538.06 Total Outstanding Amount 355816538 14. This Tribunal relying on the disputed status of the debt and Section 9(5)(ii)(d) has held that Adjudicating Authority could not have proceeded to ignore the same. In paragraphs 28 and 29 of the judgment following have been held by this Tribunal: "28. When we look into Section 9(5)(ii)(d) there are two circumstances under which Section 9 application deserves to be rejected i.e. (i) notice of dispute has been received by operational creditor or (ii) there is record of dispute in the Information Utility. In the present case, both the above clauses are fully met since notice of dispute has been received by operational creditor and....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ajra and Chinora coal mines and only Marki Mangli III mine is in operation, the production capacity of which makes it impossible for the Corporate Debtor to supply it by 14.09.2024". In that case, the Petition was dismissed as the obligation of the Corporate Debtor to supply the goods was expiring on 14.9.2024, hence the petition was dismissed on the ground of it being pre-mature i.e. having been filed prior to last date for supply of Coal in that case. However, the fact remains that the Corporate Debtor has taken advances from more than one buyers against its commitment to supply Coal to then, however, its capacity to fulfil these obligations was undoubtedly in question. This leads to a conclusion that the defence of pre-existing disputed raised by the Corporate Debtor is merely a moonshine defence to cover up its failure to supply the goods against the advance, and the Operational Creditor is entitled to seek refund of such amount."" 15. It is also relevant to notice that Records of the Information Utility was produced and annexed by the Operational Creditor itself in its Section 9 application and in the reply to Section 9 application, the CD referring to the Record of Dispute....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ional Creditor regarding excess payment made to the CD and it was for the first time in October 2023, when Statement of Account of Financial Year 2020-21 was sent by Operational Creditor to the CD, requiring confirmation. The email dated 27.10.2023 sent by Operational Creditor to the CD is as follows: "Fw: CONFIRMATIONS From: Maverick Dev ([email protected]) To: [email protected] Cc: [email protected] Date: Friday, October 27, 2023 at 10:44 AM GMT+5:30 Subject: CONFIRMATIONS Dear sir PFA the statement of account for fy 2020-21, you are requested to confirm the same by making seal and sign. This is reuired for IT Assessment purpose. Thanks & Regards vivek goyal for Maverick Developers & Colonisers Pvt ltd PH: 9261080048" 19. Along with email dated 27.10.2023, the Statement of Account for 01.04.2020 to 31.03.2021 was forwarded. The said email was replied by the CD, which according to the CD was as per the ledger maintained by it. The email dated 27.10.2023 sent by the CD to Operational Creditor is as follows: From: Yadvender Singh Yadav *hadvend....
X X X X Extracts X X X X
X X X X Extracts X X X X
....(India) RECEIPT OSASYS 39492 17600000.00 24- Aug- 21 By Kotak Mahindra Bank (India) RECEIPT OSASYS 39565 5000000.00 24- Aug- 21 By Kotak Mahindra Bank (India) RECEIPT OSASYS 39580 14000000.00 24- Aug- 21 By Kotak Mahindra Bank (India) RECEIPT OSASYS 39581 13500000.00 31- Aug- 21 To GIGA PIPE SYSTEMS INDIA PRIVATE LIMITED_S AAICG4822F JVCOASYS 57080 25595276.00 Total 30595276.00 201973000.00 *1713777 24.00 Not recorded in OFB Date Particulars Vch Type Vch No. Debit Credit 31-Mar- 21 Ires On Purchases 125309.31 Total 125309.31 125309,31 Thanks & Regards, Yadvender Singh Yadav Team Finance +91 9416191653 [email protected] OfBusiness.com #6th Floor|Global Business Park|MG Road|Sector 26| Gurugram, Haryana-122002" 20. On 30.10.202....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hat the Demand Notice is part of a stratagem devised by Your Client in collusion with Giga, is also clear from the issuance of a Demand Notice by Giga on 18.11.2023 (i.e. shortly after Your Client's email dated 30.10.2023, Annexure 5 to the Demand Notice). Moreover, and most crucially, the Demand Notice conceals the notice dated 20.11.2023 issued by Our Client to Your Client with regard to the very amounts which are now falsely claimed as 'operational debt' in the Demand Notice. As may well be within Your Client's knowledge, Our Client has already taken steps for initiation of appropriate criminal proceedings in respect of these actions on the part of Your Client in collusion with Giga and KK Spun. 2. Without prejudice to the rest of the contents of this response, you will note that Your Client would be well advised to forthwith withdraw the Demand Notice under Section 8 of the Insolvency and Bankruptcy Code, 2016 ("IBC") for the reason that the existence of a dispute since October 2023 (if not before) is self evident from the contents of the said Notice itself. Annexures 3, 4 and 5 of your Demand Notice, cumulatively seen, establish without a doubt the exi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....o question of any set-off of any payment due to the Operational Creditor as against M/s Giga Pipe Systems India LLP. 13. Accordingly, on 30.10.2023, the Operational Creditor wrote an email to the Corporate Debtor i:ntimating the Corporate Debtor that there exist no transactions between the Operational Creditor and M/s Giga Pipe Systems India LLP, and therefore, the two entries relating to M/s Giga Pipe Systems India LLP shown in the ledger reconciliation statement of the Operational Creditor are -wrong and baseless and ought to be rectified. However, neither any response was received from the Corporate Debtor nor did the Corporate Debtor rectify the accounts or repay the excess payment of Rs. 3,05,95,276/-." 23. The above pleadings of the Operational Creditor itself notice the email sent by the CD dated 27.10.2023 and dispute raised by the Operational Creditor with regard to two entries in the ledger, clearly proves that there was pre-existing dispute between the parties, which is reflected from pleading of the Operational Creditor itself in Section 9 application. Learned Counsel for the Respondent has contended that there was no contractual relation betwe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ect to outstanding from M/s Giga Pipe Systems India LLP; M/s E.K. Khan Contractor and M/s Maverick Developers & Colonisers Pvt. Ltd. (Operational Creditor herein). At page 805 and 806 of the Appeal guarantees were given by Giga Pipe Systems is noted and at page 806 following statement has been noticed: "Obligation under this Guarantee include the outstanding from the following parties (Unconditionally) 1. M/s GIGA PIPE SYSTEMS INDIA PRIVATE LIMITED (23AAOFG9685K1ZM) 2. M/s E.K. KHAN CONTRACTOR (09ABRPI2880G1ZA) 3. M/s MAVERICK DEVELOPERS & COLONISERS PRIVATE LTD (08AABCM2580M127) The Transaction for above parties shall from time to time be defined as per the purchase order and the Coverall MOU signed with GIGA PIPE SYSTEMS INDIA PRIVATE LIMITED. SIGNED AND DELIVERED by Sd/- M/S OFB TECH PRIVATE LIMITED. (Through its Authorised Signatory) For : M/s Giga Pipe Systems India Private Limited For Giga Pipe Systems Inida Pvt. Ltd. (Authorised Signatory Stamp) Sd/- Director" 26. Learned Counsel for the Respondent has placed reliance on the judgment of this Tribunal in Rah....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Client ever raised any invoice upon our Client for the alleged payment of its outstanding dues. Therefore, issuance of the Demand Notice under reply to our Client is nothing but a sham exercise of your Client to illegally enrich itself at the hands of our Client. It is submitted that not just your Client is trying to abuse the process of law but has also not informed you the above facts and has got the instant Notice under reply issued by you by distorting the original facts which is in grave violation of law." ...... 7. It is also submitted without prejudice that to the limited knowledge of our client there is in fact "existence of dispute" between your Client and/HTEPCCPL and it is only because there is an existence of dispute between your Client and HT EPCCPL that you have manifestly issued the captioned notice to our Client just to illegally enrich itself by distorting true facts. Hence, issuance of the present notice is nothing but an afterthought with a view to illegally enrich your Client at the cost of our Client." (emphasis supplied) 35. Initially a Section 8 Notice was issued to the Hindustan Thermal - EPC, which was later on withdrawn and f....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t of Rs. 105,62,05,167/ out of which Hindustan Thermal made the majority payment leaving the outstanding amount to Rs. 16,08,00,632/-. Here, since the invoices were raised by the applicant against Hindustan Thermal, the payment (major) were received by the applicant from Hindustan Thermal and even the Work Order was received by the applicant from Hindustan Thermal, then we fail to understand as to for what reason the applicant has filed the present application against the respondent instead of filing the same against Hindustan Thermal even after sending the demand notice under section 8 of the Code. Merely because the respondent tried to reconcile or settle between the applicant & Hindustan Thermal or merely because the work completion was signed by the respondent being the owner of the project does not entitle the respondent to be liable for the outstanding amount. There is no privity of contract between the applicant and the respondent. 14. Be that as it may, without going into any other details as to whether there is pre-existing dispute between the applicant and Hindustan Thermal; or, whether or not there was any delay in completion of the work by the applicant, we are....