TaxTMI 
TaxTMI 
2026 (3) TMI 853
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....ppeal are: i. The corporate debtor M/s. Al-Dua Food Processing Pvt. Ltd. issued purchase orders to the operational creditor M/s. Ashu Agencies, a proprietorship firm for purchasing the kraft paper reels. ii. Operational creditor after receiving oral purchase order from the corporate debtor forwarded the same to manufacturer company and as per directions of the corporate debtor got material directly supplied to the corporate debtor in the Financial Year 2017-18 & 2018-19. iii. Various transactions took place. Part payments were made by the corporate debtor towards the goods received. A demand notice under Section 8 of the Insolvency and Bankruptcy Code, 2016, (for short the Code or the IBC) was issued on 25.07.2019 claiming a debt of Rs. 2,48,46,299/-. iv. Corporate debtor after receiving the demand notice sent a reply dated 05.08.2019 stating that liability and debt has been transferred to M/s. MK Overseas Pvt. Ltd. New management has been taken over on 07.07.2018. The company is not liable to pay any amount to the operational creditor and operational creditor was advised to approach M/s. MK Overseas Pvt. Ltd. for payment of amount. The liability....
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....ll not take any further steps." Reply has been filed in the appeal to which the rejoinder has also been filed. 3. We have heard learned Sr. counsel Mr. Abhijeet Sinha appearing for the appellant and learned counsel Mr. Abhinav Prakash appearing for the respondent No.1. Learned counsel Mr. Rishi Singhal has appeared for respondent No. 2. 4. Learned counsel for the appellant challenging the order impugned submits that there was no operational debt payable to the operational creditor under Section 41 of the Contract Act, 1872 when promisee has accepted to receive its debt from M.K. Overseas Pvt. it cannot proceed against the corporate debtor. Learned counsel for the appellant has relied on Section 41 of the Contract Act 1872 for discharge of the liability. It is further submitted that contract between the parties stood novated under which the corporate debtor is discharged from its liabilities to pay debt and liability to pay debt was on M.K. Overseas Pvt. Ltd. It is submitted that no objection letter dated 30.06.2018 was relied by the corporate debtor in its reply but no rejoinder was filed disputing the letter. Operational creditor having accepted to receive its balance amount....
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....an Sharma' Vs. 'Jai Lakshmi Solvents Pvt. Ltd. & Ors.' in [Comp. App. (AT) (Ins.) No.66/2017] submitted that corporate debtor by entering into any agreement cannot transfer its liability of debt to third-party. Share Purchase Agreement between the MK Overseas Private Limited and new promoters of the corporate debtor cannot transfer the liability of debt. The operational creditor was not part of the Share Purchase Agreement. Adjudicating authority has rightly come to the conclusion and finding that it was the corporate debtor in connivance with MK Overseas Pvt. Ltd. attempted to extinguish its liabilities, which was nothing but a collusive arrangement with the objective of defrauding creditors, including the operational creditor. 6. We have considered the submissions of the counsel for the parties and perused the records. 7. From the pleadings of both the parties, following facts are not disputed between the parties: I. In pursuance of the purchase order issued by the corporate debtor, appellant has supplied kraft paper reels to the corporate debtor in the Financial Year 2017-18 and 2018-19. The corporate debtor has made part payments against the supplies, which were ....
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.... Pvt. Ltd. For Ashu Agencies (Authorised Signatory)" 10. In the reply which was filed by the corporate debtor to Section 9 application, the said letter has also been mentioned. It is useful to notice paragraphs 4 and 5 of the reply, which is as follows: "4. That the management of the corporate debtor was taken over by its present management from its earlier management w.e.f. 08.07.2018 and it was tagreed by its earlier management that the liability of its certain sundry creditors including the present operational creditor be transferred to their holding company M/s MK Overseas Pvt. Ltd. and the said transferred liability shall be borne and paid by their holding company M/s MK Overseas Pvt. Ltd. M/s MK Overseas Pvt. Ltd. has shown the above said credit balance of the operational creditor in its ledger account being maintained by it in the name of the corporate debtor and a copy of the Statement of Account of Al Dua Food Processing Pvt. Ltd. (TRF) i.e. the corporate debtor for the period upto 01.04.2018 to 07.07.2018 is annexed as Annexure 3. 5. That the operational creditor sent a letter dated 30.06.2018, to the earlier management of t....
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....has relied on the judgement of the Hon'ble Supreme Court in 'Lala Kapurchand Godha & Ors.' Vs. 'Mir Nawab Himayatalikhan Azamjah', reported in [1962 SCC OnLine SC 412], 'Citibank N.A.' Vs. 'Standard Chartered Bank' reported in [(2004) 6 SCC 1], and Madras High Court judgement in 'Chegamull Suganmull Sowcar' Vs. 'V. Govindaswami Chetty & Ors.' reported in [1928 SCC OnLine MAD 260]. Judgement of the Hon'ble Supreme Court in 'Lala Kapurchand Godha & Ors.' (supra), where suit was filed for recovery of Rs. 9,99,940/- towards amount due with regard to certain jewellery sold to the defendant. A payment of Rs. 20,00,000/- was made towards full satisfaction of the claim. Receipt was also issued mentioning the receipt of amount in full and final payment of the balance. In the above context, Hon'ble Supreme Court in paragraph 5 of the judgement laid down following: "5. Then there was an appeal by the respondent which was heard by the appellate court (Chagla, C.J. and Mody, J.). By its judgment dated 15-4-1958 the appellate court came to a contrary conclusion and held that on the evidence, oral and documentary, given in the case it was clearly established that the appellants accepted ....
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....he Contract Act, 1872. Section 41 has been interpreted by the Hon'ble Supreme Court in the said judgement. It was held that when a promisee has accepted satisfaction from third-party it cannot insist on satisfaction of its claim of the promissor as well. It was held that Section 41 applies where a contract has in fact been performed by some person other than person bound, thereby. In paragraph 46 of the judgement of the Hon'ble Supreme Court, following was laid down: "46. The Special Court fell in error in applying Section 41 of the Indian Contract Act to the facts of the present case. Attempt on the part of Scb to place reliance on Section 41 of the Contract Act is completely misplaced in the facts of the case as has been held by this Court in Citi Bank [(2004) 1 SCC 12] . Section 41 of the Contract Act only provides that the promisee cannot have double satisfaction of its claim i.e. from the promisor as well as a third party. It does not give a cause of action to the promisee, but, to the promisor, to contend that the promisee who has accepted satisfaction from the third party cannot insist on the satisfaction of its claim from the promisor as well. The case of Citibank ....
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....ry under the section. What it contemplates is actual performance of the original promise. According to the section, performance by a stranger, accepted by the promisee, produces the result of discharging the promisor, although the latter has neither authorised nor ratified the act of the third party.' 52. The learned Special Court fell in error in holding that Section 41 of the Contract Act would be more appropriately applicable. Section 41, for the reasons set out above, would not be applicable to the facts of the present case. It also fell in error in holding that Citibank did not plead complete discharge from performing its obligation in terms of Section 63. In our opinion, Citibank has specifically pleaded that it stood discharged from the performance of the original obligation on the delivery of SGLs to Scb, which were asked for and accepted by Scb for reasons best known to it. Scb instead of the original satisfaction accepted another satisfaction, deemed fit by it, in terms of Section 63 of the Indian Contract Act." 15. Learned counsel for the appellant has relied on the judgement of the Madras High Court in 'Chegamull Suganmull Sowcar' (supra), in which case Madr....
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....amount of Rs. 85,000/- in cash. The facts of payment of Rs. 35,00,000/- and Rs. 85,000/- by the MK Overseas Private Limited were not before the adjudicating authority nor had been pleaded. The operational creditor in its reply in the appeal has disputed the nature of transaction with MK Overseas Private Limited. Be that as it may, even if submission of the appellant is accepted that amount of the Rs. 35,00,000/- and Rs. 85,000/- has been paid by the MK Overseas Private Limited, that cannot be held to be discharge of promise which was made by the corporate debtor by third-party i.e., MK Overseas Private Limited, so as to discharge the corporate debtor. Thus, present is a case where corporate debtor cannot be held to be discharged by virtue of Section 41 of Contract Act, 1872. 17. We also need to notice the submission of the appellant based on Section 62 of the contract that is a novation of the Contract Act, 1872. Section 62 of the Contract Act, 1872 provides as follows: "62. Effect of novation, rescission, and alteration of contract.-If the parties to a contract agree to substitute a new contract for it, or to rescind or alter it, the original contract, need not be perf....
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....eaning of Section 25(3) of the Contract Act, 1872 is unenforceable. Thus, submission on behalf of the corporate debtor that corporate debtor was entitled for benefit of Section 62 of the Contract Act, 1872 does not commend us. 20. The present is a case where goods were supplied which has been received and utilised. It was not even pleaded on behalf of the corporate debtor that amount is not due, rather corporate debtor itself in his pleading has claimed that amount of Rs. 2,47,69,431/- was due on the corporate debtor, which according to the appellant has been transferred to MK Overseas Private Limited. We may also notice the reply to the demand notice which was issued by the corporate debtor after receipt of the demand notice dated 25.07.2019. The reply to demand notice dated 05.08.2019 is as follows: "Dated: 05.08.2019 1. Shri Ashu Chaudhary M/s Ashu Agencies Reg. Office at: Jain Mandir Wali Gali, Bima Nagar Soor Mill. G.T Road, Aligarh (U.P). 202001 And also at: Shaura No. 25, Nangla Murari Sarcol, G.T. Road, Aligarh (UP) 202001 2. Mr. Tarun Aggarwal. Advocate, Chamber No.533, 1 Floor, Western Wing, Tis....
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..... Yours truly, For Al Due Food Processing Pvt. Ltd. Authorized Signatory" 21. Thus, what was pleaded in reply to the demand notice is that the amount is payable by MK Overseas Private Limited, neither the amount was disputed nor supplied goods were disputed. We may in this context also refer to the judgement of this Tribunal relied by the counsel for the respondent in 'Chetan Sharma' (supra), in which case appeal was filed by the corporate debtor against the order admitting Section 9 application. The claim of novation of contract was also pleaded on behalf of the corporate debtor. In the above case, also there was Memorandum of Understanding (MoU) to which the operational creditor was not party. This Tribunal in the above case held that unilateral transfer of liability does not constitute a dispute. The creditor can always transfer its asset to an assignee but borrower cannot transfer its liability of debt to a third-party. In paragraph 15, 17 and 18, following was held: "15. It is a settled law that unilateral 'transfer' of liability does not constitute a 'dispute' within the meaning of Section 5(6) of the 'I&B Code'. The 'dispute' under Sect....
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....ate debtor and MK Overseas Private Limited are liable to be proceeded under appropriate criminal provisions. When we look into the operative portion of the order, there are no directions to forward the copy of the order to the IBBI for considering/initiating any proceedings for proceeding in criminal proceeding against the corporate debtor and the MK Overseas Private Limited. We thus are of the view that apprehension of the appellant is misconceived, the impugned order cannot be read as issuing any direction for initiating any criminal proceeding or any proceeding under appropriate criminal provisions. The observation in the paragraph 16 of the order that both the corporate debtor and MK Overseas Private Limited are therefore liable to be proceeded under criminal provisions need to be deleted. 24. Learned counsel for the appellant during his submissions submitted that corporate debtor is a company with a turnover of 1700 crore earning foreign exchange of 1500 crore and employees over 1200 persons. In the synopsis in paragraph J following has been pleaded: "J. The Corporate Debtor is a company with a turnover exceeding Rs 1700 crores, earning foreign exchange of about Rs....