TaxTMI 
TaxTMI 
2026 (3) TMI 36
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....nt's Case 2. On 14.12.2020, the OC sent a 'Letter of Interest' to the CD for procuring 55,000 quintals Molasses for the season 2019 - 20 & 2020 -21 from the sugar mill of the CD. The said procurement was to take place in two tranches i.e., 27,500 quintals for the season 2019 - 20 @ Rs. /- 450 per quintal + GST and 27,500 quintals for the season 2020 - 21 @ Rs. /- 555 per quintal + GST. 3. Thereafter on 15.12.2020, CD issued a sale order confirming the procurement and requested the OC to issue the purchase order (Page 32 of the Appeal). Thereafter, the Appellant issued a Purchase Order No. 4500015 to the CD whereby the CD was asked to supply the said quantity of molasses. It is to be noted here that in terms of the purchase order, an ad-hoc advance payment of Rs. 2,02,63,750 was made to the CD. 4. On 06.03.2021, the sale order was unilaterally cancelled by the CD and till then only 18,771.35 quintal molasses were supplied to the OC. As the balance quantity was not supplied, the CD was to refund an amount of Rs. 1,08,02,731/- to the OC. (Page 34 of the Appeal). But after several reminders, the CD failed to pay the advance amount back to the OC. Around 19 reminders were sent ....
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....022, Co. Appeal(AT) (Ins.) No. 924 of 2021, which was also on the very similar facts. 8. It is a settled position that a pre-existing dispute can only be considered to be proven, if it exists prior to the issuance of the demand notice and that the CD has denied the liability. In the present case, there is no proof of pre- existing dispute and in-fact the CD has admitted its liability. A perusal of the pleadings clearly demonstrates the malicious conduct of the CD and how it has attempted to mislead this Appellate Tribunal and avoided making payments of the amount in default by conveniently manufacturing a fictitious, false and non - existent narrative. The same can be corroborated from the following: • The fact pertaining to alleged spontaneous combustion on 22.07.2021 in the plant of CD was never communicated by the CD to the OC, until issuance of demand notice, i.e., 31.05.2022, irrespective of the fact that the OC was continuously following up with the CD for the refund of the unpaid operational debt. It is submitted that there is absolutely no rationale as to why the CD would conceal the same, if the molasses that were damaged included the molasses allegedly ear....
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....m 5 by the OC is complete in all respects and in compliance of the requisites of the IBC and the Rules and Regulations thereunder. j) The OC is ready and willing to propose the name of an Insolvency Professional to be appointed as Interim Resolution Professional. Respondent's case 10. The statutory notice under Section 8 of the Insolvency and Bankruptcy Code, 2016 was issued by the Appellant on 31.05.2022 and the present petition was filed on 20.08.2022, which is the initiation date of the present alleged insolvency proceedings. The claim of the Operational Creditor on the initiation date is less than the threshold limit of Rs. 1 Crore as defined under Section 4(1) of IBC, which is necessary for maintaining a petition under Section 9 of the Code. This fact has been admitted by the Operational Creditor in its petition. 11. Under Section 9 of IBC, an Operational Creditor is entitled to file an application for initiation of Corporate Insolvency Resolution Process (CIRP) provided the quantum of default / debt is Rs. 1 Crore or above, as is mandated under Section 4(1) of IBC as well as there is no pre-existing dispute between an Operational Creditor and the Corporate D....
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....02.2024. 17. Admittedly, in the present case, the Operational Debt, as is claimed by the Appellant is Rs. 94,88,845/- (since an amount of Rs. 13,13,886/- has already been paid out of the total amount Rs. 1,08,02,731/- claimed before the institution of the present petition), which is less than the mandatory minimum threshold of Rupees One Crore which is necessary to maintain a petition under IBC. Pertinently, the ledger filed by the Appellant along with the present appeal also indicates that the amount sought to be recovered from the Respondent is less than the minimum threshold of Rupees One Crore. 18. This Hon'ble Tribunal has consistently held that a petition under Section 9 of the Insolvency and Bankruptcy Code is not maintainable where the alleged operational debt falls below the statutory threshold of Rs. 1 crore on the date of filing of such petition. The Respondent places reliance on the following case laws in support of its contention: • Kavindra Kumar & Ors. vs. M/s Design Pvt. Ltd. Company Appeal (AT) (Insolvency) No. 1272 of 2023) (Para - 17, 19). • Devika Resources Pvt. Ltd. vs. MAA Mansha Devi Alloys Pvt. Ltd. Company Appeal (AT) (Insolv....
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....ated 25.08.2021 also, it has been decided that the threshold limit of Rs. 1 Crore will be applicable for application filed u/s. 7 or 9 on or after 24.03.3020 even if default is of a date earlier than 24.03.2020. With the above stated decision of this Hon'ble Tribunal, it is quite evident that the threshold limit would be applicable on the date of filing of application, and not on the date on which the default has occurred. 25. The Appellant has also included interest @ 24% p.a. in the operational debt mentioned in Part IV of the application under Section 9 of IBC. The NCLT observes that there is no express agreement between the Appellant and the Respondent for computing interest due to any delay in refund of the advance amount to be paid by the Respondent. Further the Appellant could not produce any documentary evidence justifying charging of the interest. The NCLT relied upon judgment of this Hon'ble Tribunal in the case of Prashant Agarwal Vs. Vikas Parasrampuria (Company Appeal (AT) (Ins) No.690 of 2022) holding that both, the principal debt and interest on delayed payment will be considered to assess maintainability in case the interest was stipulated in invoice. In the pres....
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....ely since the molasses is a controlled commodity and is sold strictly under statutory supervision, the Respondent acted fully in accordance with regulatory directions and even refunded the proportionate salvage value on account of loss occurred due to an unforeseen accident. Therefore, the petition filed by the Appellant under Section 9 of IBC and the present appeal is totally untenable. 30. It is evident from the foregoing facts that a clear and bona fide pre- existing dispute existed between the Appellant and the Respondent well before the issuance of the demand notice and the filing of the petition under Section 9 of IBC. In view of such pre-existing dispute, the invocation of the insolvency process is impermissible and the petition under Section 9 is not maintainable in law and was rightfully rejected by the NCLT. 31. It has been time and again clarified by various Courts / Tribunals including the Hon'ble Supreme Court of India {in the matter of Mobilox Innovations Private Limited vs. Kirusa Software Private Limited (2018 1 SCC 353)} that whenever there is an existence of real dispute, the provisions of IBC cannot be invoked. 32. The NCLT vide Impugned Order dated 02.0....
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.... of money but resolution of insolvency and maximization of assets of a Corporate Debtor. The Appellant is deliberately misusing the proceedings under IBC as a recovery proceedings, with the clear intent of circumventing the payment of court fees that would have been obligatory had a recovery suit been filed before a Civil Court. This frivolous and malicious strategy adopted by the Appellant demonstrates a calculated attempt to evade financial obligations as well as simultaneously opting for a shortcut approach to exert undue pressure and coerce the Respondent by choosing to approach the NCLT for recovery of an alleged debt (which is neither due nor payable) over the appropriate Civil Court. 36. The Respondent as on date is a going concern and is able to pay off its liabilities arising out of usual course of business as well as paying the salaries of 1130 number of employees / staff / labour (contractual or otherwise) and dues of the famers supplying sugarcane to the Respondent. As on date, approximately 40,000 number of farmers are dependent on the Respondent as they are supplying sugarcane to the Respondent since last 2-3 decades. The turnover of the Respondent (sugar mill) in ....
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....or the season 2019 - 20 and 27,500 quintals for the season 2020 - 21. Thereafter on 15.12.2020, CD issued a sale order confirming the procurement and requested the OC to issue the purchase order. An ad-hoc advance payment of Rs. 2,02,63,750 was made to the CD. But, on 06.03.2021, the sale order was unilaterally cancelled by the CD and till then only 18,771.35 quintal molasses were supplied to the OC. As the balance quantity was not supplied, the CD was to refund an amount of Rs. 1,08,02,731 to the OC. But after several reminders, the CD failed to pay the advance amount back to the OC. Consequently, on 31.05.2022 the OC was constrained to send a demand notice u/s. 8 of the IBC to the CD. Pursuant to the issuance of Demand Notice, the CD apart from sending a reply dated 11.06.2022 to Demand Notice also transferred an amount of Rs. 13,13, 886/- (alleging it to be payment for the entire operational debt i.e. Rs. 1,08,02,731/) on the pretext that there was a "spontaneous combustion" at the plant of the Corporate Debtor on 22.07.2021 due to which certain quantities of molasses were damaged which included the balance quantity of molasses that was allegedly earmarked for the OC. ln the sai....
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....1 from the Molasses Controller & Excise Commissioner as well as the failure of the Appellant to lift the balance quantity of 36228.65 quintals of molasses within the validity period (which is between 23rd January 2021 and 11th February 2021), the Corporate Debtor was constrained to issue a cancellation letter dated 6th March 2021 to the Appellant. In terms of the purchase order, the entire material was to be lifted between the period of 23.01.2021 to 07.02.2021. Despite the material (i.e. Molasses) being available for lifting, the Appellant only lifted part of the material during the said time period not for any fault of the Respondent and the said fact has not been disputed by the Appellant. The Respondent was in no position to permit the Appellant to continue to lift the molasses earmarked for the Appellant due to misdeeds of the Appellant. Respondent also brings to our notice that out that Molasses are by-product of sugar, sale of which is regulated through a statutory regime and permission for sale of Molasses (by a sugar mill) is granted by the Molasses Controller and Excise Commissioner only. The Respondent was holding on to the Molasses which was earmarked for the Appellant ....
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.... Ld. District Consumer Dispute Redressal Commission, Baghpat, however, the Ld. District Consumer Dispute Redressal Commission, Baghpat instead of adjudicating the Complaint on merits, erroneously and without any application of mind rejected the legitimate and lawful Complaint filed by the Respondent vide Order dated 19.03.2024, interalia, observing that the Ld. District Consumer Dispute Redressal Commission, Baghpat does not have the necessary jurisdiction to adjudicate the claim of the Respondent. The said order dated 19.03.2024 was subsequently challenged by the Respondent before the Ld. State Consumer Redressal Commission, Lucknow, Uttar Pradesh who vide its Judgement dated 30.04.2024 allowed the Appeal filed by the Respondent herein and directed the Ld. District Consumer Dispute Redressal Commission, Baghpat to adjudicate the Complaint of the Respondent on merits. Thereafter an amount of Rs. 13,13,886/- was paid to the Appellant after sale of burnt molasses was carried out by the Insurance Company through an e-auction process (by an independent agency) under the supervision of Excise Commissioner (since Molasses is a controlled product and sale/purchase of same is done only thr....
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.... Limited vs. Kirusa Software Private Limited, 2018 (1) SCC 353 has held that that whenever there is an existence of real dispute, the provisions of the IBC Code 2016 cannot be invoked. We find that there exists bonafide dispute between the parties i.e. the Appellant and the Respondent in the facts and circumstances of the case. Therefore, the petition filed by the Appellant loses its sanctity in the eyes of law and was rightly dismissed by the Impugned Order. 49. The appeal can be dismissed on the grounds of pre-existing dispute itself, as noted herein earlier by us. However, there is another dimension which has been brought before us which is being delved into herein after. 50. The Appellant raises a concern that whether the Corporate Debtor/Respondent (SBEC Sugar Limited) by unilaterally transferring some amounts to the Appellant/OC can intentionally reduce the operational debt below the threshold limit after the receipt of the demand notice, but before the filing of the application under Section 9 of the IBC. Herein the amount of default mentioned in the demand notice was Rs. 1,08,02,731/-. However, upon the receipt of the demand notice, the Respondent/Corporate Debtor uni....
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....f IBC necessary for maintaining a petition before the NCLT under Section 7, 9 and 11 of IBC is to be ascertained on the date of filing of the said petition i.e. the 'initiation date' as is defined under Section 5 (11) of IBC and not on the date of sending of the Demand Notice under Section 8 of IBC. We note that the date of sending the Demand Notice under Section 8 IBC is of no relevance as far as ascertaining the threshold limit is concerned, since the scheme of Code clearly establishes that the threshold limit for instituting a petition under Section 9 of IBC on the date of filing of such petition shall be Rs. 1 Crore or above and not the date of sending the Demand Notice under Section 8 of IBC. Furthermore, it is a fact that it is Part II of the IBC (which deals with Insolvency Resolution and Liquidation for Corporate Person) which will only come into operation if the Operational Creditor (Appellant herein) meets the minimum threshold of Rs. 1 Crore after 24.03.2020, meaning thereby, there is no right to initiate Corporate Insolvency Resolution Process after 24.03.2020 when minimum default is admittedly less than Rs. 1 Crore and therefore the petition filed by the Appell....