TaxTMI 
TaxTMI 
2026 (3) TMI 109
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.... into several transactions with the Respondent and the parties identified by the Respondent. The Appellant and the Corporate Debtor entered into amendment to the Master Agreement on 25.04.2017. Auditors of the Operational Creditor on 23.04.2018 had sent audit confirmation letter to the Corporate Debtor asking the Corporate Debtor to confirm the amount as mentioned in the said letter which is owed by the Operational Creditor to the Corporate Debtor. Appellant had sent a notice on 02.06.2020 to the Corporate Debtor claiming dues which legal notice dated 02.06.2020 was replied by the Corporate Debtor- M/s. BTM Exports Limited on 19.06.2020 denying the claim. The Operational Creditor thereafter on 06.12.2019 issued a notice under Section 8 of the IBC claiming an amount in default of Rs. 6,94,33,151/. The said notice of demand was immediately replied by Corporate Debtor on 14.12.2019 denying its claim of Rs. 6,94,33,151/-. Operational Creditor thereafter filed an application under Section 9 on 22.07.2020 to which reply was filed by the Corporate Debtor. Rejoinder as well as sur-rejoinder was also filed by the Appellant. An IA No.1227 of 2022 was filed by the Appellant to file additional....
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....gainst M/s. Essline Engineers and Consultants Private Limited has been dismissed then application filed against M/s. BTM Exports Limited was liable to be dismissed is erroneous. Adjudicating Authority was required to advert to the materials on record and return a finding. 5. Learned Counsel for the Respondent submits that there is no operational debt in existence in Part-IV of Section 9 application. No date of default having been mentioned application deserves to be dismissed on that ground. In the application, different amounts have been claimed by the Appellant as outstanding from time to time. Own audit confirmation letter dated 28.04.2018 issued by the Operational Creditor to M/s. BTM Exports Limited clearly mentioned that dues payable by Operational Creditor to BTM is Rs. 5.88 Crores. It is submitted that when there was own balance confirmation shows dues on Operational Creditor, the application filed by the Operational Creditor deserves rejection. It is submitted that the Corporate Debtor has given a notice of dispute immediately after receiving demand notice and notice of dispute having been issued, there was no occasion for admitting Section 9 application. Counsel furthe....
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....ority dated 15.11.2021 by which application filed by the Appellant against M/s. Essline Engineers and Consultants Private Limited has been rejected but the observation of the Adjudicating Authority that serious allegation of fraud and forgery has been made in pleading which Adjudicating Authority did not adjudicate and Adjudicating Authority is not expected to ascertain veracity of documents produced. On making the said observation in paragraph 6, application has been dismissed. 8. Although Adjudicating Authority ought to have returned relevant finding but in the facts of the present case which has been noticed by the Adjudicating Authority itself in the impugned order, we are of the view that the present is a case where Section 9 application deserves to be rejected. Adjudicating Authority noticed that the Corporate Debtor has made allegation of fraud and forgery against the Operational Creditor. Adjudicating Authority has referred to case of the Corporate Debtor that in own audit confirmation letter dated 23.04.2018, an amount of Rs. 5,88,85,999/- was noticed to be payable by the Operational Creditor to the Corporate Debtor. Adjudicating Authority has also noticed that the bala....
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....ansactions and in paragraph 7 of the legal notice, following has been stated:- "7. After adjusting the dues payable by our client to Addressee no. 5, BTM is liable to pay Rs. 6,94,33,151/- to our clients. The details to the receivables is given in a separates table and marked as Annexure - A. Our client repeatedly demanded the payments from you addressees, however, in spite of repeated demands, addressee nos. 1 and 5 have not paid the said amount." 10. The said legal notice was also replied by the Corporate Debtor by letter dated 19.06.2020 again claiming that there are no dues on the Corporate Debtor. It was after the aforesaid reply dated 19.06.2020, demand notice dated 06.12.2019 and Section 9 application was filed in July 2020. Thus, there was written communication between the parties prior to issuance of demand notice dated 06.12.2019, which proved pre-existing dispute. 11. In the reply which was filed to Section 9 notice Corporate Debtor has subsequently pleaded denying the claim. 12. IA No.1227 of 2022 was filed wherein in paragraph 3, it was pleaded that the total owed amount by the Corporate Debtor is Rs. 3,22,84,414/- and by the application, the said doc....
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....ciliation clearly shows that no sum is due from us to you." 13. We need to notice the law laid down by the Hon'ble Supreme Court in reference to Section 9 application. The Hon'ble Supreme Court in "Mobilox Innovations Pvt. Ltd. vs. Kirusa Software Pvt. Ltd.- Civil Appeal No.9405 of 2017" has laid down following in paragraph 40:- "40 It is clear, therefore, that once the operational creditor has filed an application, which is otherwise complete, the adjudicating authority must reject the application under Section 9(5)(2)(d) if notice of dispute has been received by the operational creditor or there is a record of dispute in the information utility. It is clear that such notice must bring to the notice of the operational creditor the "existence" of a dispute or the fact that a suit or arbitration proceeding 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 a....
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.... [Section 8(2)(a)]. What is important is that the existence of the dispute and/or the suit or arbitration proceeding must be pre-existing i.e. it must exist before the receipt of the demand notice or invoice, as the case may be. In case the unpaid operational debt has been repaid, the corporate debtor shall within a period of the selfsame 10 days send an attested copy of the record of the electronic transfer of the unpaid amount from the bank account of the corporate debtor or send an attested copy of the record that the operational creditor has encashed a cheque or otherwise received payment from the corporate debtor [Section 8(2)(b)]. It is only if, after the expiry of the period of the said 10 days, the operational creditor does not either receive payment from the corporate debtor or notice of dispute, that the operational creditor may trigger the insolvency process by filing an application before the adjudicating authority under Sections 9(1) and 9(2). This application is to be filed under Rule 6 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 in Form 5, accompanied with documents and records that are required under the said form. Under Rule....
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....ct the application if the notice of dispute has been received by the operational creditor or there is a record of dispute in the information utility [Section 9(5)(ii)(d)]. Section 9(5)(ii)(d) refers to the notice of an existing dispute that has so been received, as it must be read with Section 8(2)(a). Also, if any disciplinary proceeding is pending against any proposed resolution professional, the application may be rejected [Section 9(5)(ii)(e)]. 34. Therefore, the adjudicating authority, when examining an application under Section 9 of the Act will have to determine: (i) Whether there is an "operational debt" as defined exceeding Rs 1 lakh? (See Section 4 of the Act) (ii) Whether the documentary evidence furnished 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 one of the aforesaid conditions is lacking, the application would have to be rejec....
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....have seen, in the case of a corporate debtor who commits a default of a financial debt, the adjudicating authority has merely to see the records of the information utility or other evidence produced by the financial creditor to satisfy itself that a default has occurred. It is of no matter that the debt is disputed so long as the debt is "due" i.e. payable unless interdicted by some law or has not yet become due in the sense that it is payable at some future date. It is only when this is proved to the satisfaction of the adjudicating authority that the adjudicating authority may reject an application and not otherwise.' *** 42. This being the case, is it not open to the adjudicating authority to then go into whether a dispute does or does not exist? 43. It is important to notice that Section 255 read with the Eleventh Schedule of the Code has amended Section 271 of the Companies Act, 2013 so that a company being unable to pay its debts is no longer a ground for winding up a company. The old law contained in Madhusudan [Madhusudan Gordhandas & Co. v. Madhu Woollen Industries (P) Ltd., (1971) 3 SCC 632] has, therefore, disappea....
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....g. Ltd. v. Overseas Infrastructure Alliance (India) (P) Ltd., (2021) 10 SCC 483" has laid down following in paragraphs 19 and 21:- "19. It could thus be seen that this Court has held that one of the objects of IBC qua operational debts is to ensure that the amount of such debts, which is usually smaller than that of financial debts, does not enable operational creditors to put the corporate debtor into the insolvency resolution process prematurely or initiate the process for extraneous considerations. It has been held that it is for this reason that it is enough that a dispute exists between the parties. 21. It is thus clear that once the operational creditor has filed an application which is otherwise complete, the adjudicating authority has to reject the application under Section 9(5)(ii)(d) IBC, if a notice has been received by operational creditor or if there is a record of dispute in the information utility. What is required is that the notice by the corporate debtor must bring to the notice of operational creditor the existence of a dispute or the fact that a suit or arbitration proceedings relating to a dispute is pending between the parties. All that the a....