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TaxTMI 
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2026 (4) TMI 160
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....ent/Operational Creditor, resulting into initiation of the CIRP process as against the Appellant. 2. Ld. Senior Counsel for the Appellant contends that the impugned order directing admission of the corporate debtor into CIRP is bad in the eyes of law on account of the following; (i) Since the jurisdiction of Ld. NCLT under Section 9 of the I & B Code, 2016, is a summary jurisdiction and it lacks the authority to weigh and test evidence and to scrutinize the intrinsic dispute of facts, the same shouldn't have been resorted to for the purposes of considering and allowing of the application under Section 9 of the I & B Code, 2016, particularly when the controversy involves a bundle of disputed facts which require a detailed appreciation and evaluation of evidence. (ii) Secondly, since, owing to the given set of facts and circumstances, the controversy happens to be an explicit case of a pre-existing dispute, it is not permissible to admit the application under Section 9 of the I & B Code, 2016, to direct commencement of CIRP as against the Corporate Debtor. 3. The facts of the case that has been brought before this Appellate Tribunal by the parties to the a....
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....certain identified products equivalent to the said amount to Respondent-1 from time to time for distribution through online channels of APPARIO Retail and Flipkart under the terms and conditions of the said MoU, that the agreement shall continue to be in force unless terminated by either party with 60 business days' prior written notice to the other party, that in case of termination the CD will audit the stock in hand at the warehouse of the OC and will lift the saleable products and settle the amount within 60 days from the receipt of such products (SKU) and that in case of disputes arising from this agreement, it will be resolved through mutual discussion and the unresolved disputes will be referred to for Arbitration and the award passed by the sole Arbitrator / Arbitral Tribunal shall be final and binding upon the parties. 7. In accordance with the terms of the said MoU, respondent-2 (OC) became the exclusive online distributor of the CD and transferred a sum of Rs. 1,85,00,000/- towards the advance to the CD. Further, as per mutual agreement, the C&F account, was closed and the net amount to the tune of Rs. 1,07,50,967/- payable to the OC as per the ledger as on 21.05.2021....
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....be enclosed with this MoU. 4. The Party of 2nd Part is holding stock of CNF which was earlier transferred by Party of 1st Part on Stock Transfer note under the arrangement vide CNF Agreement dated 10/12/2020. The Party of 2nd Part will arrange to move the said stock immediately at the time of signing of this MoU. 5. That the party of the 1st Part shall raise purchase order LF/PO/21-22/005 Dated 21 March 22 for purchase of unsold stock of LUMIFORD and Party to the 2nd part shall raise invoice Sl/COSR/5702 Dated 21 March 22 on party to the 1st part for total unsold stock which are in good condition. 6. That the party to the 1st part shall issue a receipt duly signed by the authorized signatory with company seal for the stock taken from the warehouse of the party to the 2nd part, the Party to the 1st part shall pay the invoice amount within 45 days from the date of receipt of the stock. 10. The aforesaid extract of the termination agreement dated 15.03.2022, which has been duly signed by the Appellant herein, would amount to a clear admission of liability, which would be payable by the Corporate Debtor to the Operational Creditor, as per the admitted term....
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....ort of 16.02.2022 and when the stock, on the basis of the audit report dated 16.02.2022, was admittedly delivered on 25.03.2022 and no comments have been made then or thereafter till the receipt of the demand notice by Respondent-1 (OC), the stand being taken by the Appellant in the instant company appeal alleging that the stock which was returned to be unsold, were not in a good condition is altogether carving out a new case, which is contrary to the records submitted by the Appellant. 15. Besides that, the Appellant would be bound by its own terms and conditions of the Memorandum of Understanding dated 21.05.2021 and termination agreement dated 15.03.2022, owing to the fact that after the conduct of the audit for the purposes of return of the unsold stock as per clause 19.1 of Memorandum of Understanding, it was agreed that the Respondent No. 1 would duly issue a receipt signed by the authorized signatory with the company seal for the stock taken from the warehouse of the 2nd party and shall pay the invoice amount within 45 days. The binding nature of the said condition too stands admitted by the Appellant. 16. What is more surprising is that the Appellant has been consiste....
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....ronic Money Transfer/whatever mode through bank money transfer". This too will amount to be an acknowledgement of the liability to pay the amount due as per the notice of 19.06.2023. 19. The Ld. Counsel for the Respondent-1 has further submitted that in reply to its email dated 21.10.2022 regarding payment of the outstanding amount, the Corporate Debtor had stated by email dated 02.11.2022 that they are taking steps to clear the outstanding amount. The relevant statement reads as "We had hoped to complete all the formalities within six months, during our discussions but due diligence as a significant process is taking time thereby delaying the infusion of funds. We are certainly on the job, and our commitment to clearing the outstanding remains with the same determination that was there during our discussion". This email communication by the Appellant of 02.11.2022 would once again amount to be an admission of liability and an amount of debt due to be paid by the Corporate Debtor to the Respondent/Operational Creditor. 20. Primarily, Ld. Sr. Counsel for the Appellant has confined himself to describing the controversy as a case of pre-existing dispute on account of terminat....
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....e Debtor to remit the amount or the efforts made by them to pay the amount, and Ld. NCLT relies on it to arrive at the finding that the said email amounts to an admission of liability of debt and on that basis proceeds to pass orders for commencement of Section 9 proceedings, it cannot be contended that the Ld. NCLT should not have scrutinized those documents and relied upon them to order commencement of CIRP under Section 9 of the I & B Code, 2016 and instead should have directed the parties to approach a civil court to determine the rights and liabilities of the respective parties. 22. In the instant case, the terms of C&F agreement dated 10.12.2020, the terms of the Memorandum of Understanding dated 21.05.2021 and the terms of the Termination Agreement are not disputed by either party. On a conjoint reading of all these documents, the admission of debt and default at the hands of the Corporate Debtor is clearly established. If based upon this analysis, Ld. Tribunal comes to a conclusion that, there exists an element of default, and passes an order for commencement of the CIRP process. It cannot be said that, the Ld. Tribunal has erred at law in any manner, by deciding the mat....
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.... indicate an admission of an existence of debt and default. Otherwise, if there was no debt in default, or if the Corporate Debtor wants to deny the contents of the demand notice, it will not venture into any efforts of negotiation. Negotiations itself will be synonym to the admission of default. In that view, under these circumstances and particularly, when read with the successive agreements on record, it could be said that, when almost the controversy at hand was an admitted controversy and it required only a limited assessment of the documents, it could not be said that the Ld. Tribunal had exceeded in the exercise of its jurisdiction as perceived by the Ld. Sr. Counsel for the Appellant by alleging that the proceedings under Section 9 of the I & B Code, 2016, is a summary proceedings and therefore, Ld. NCLT should not have ventured into detailed appreciation of the evidence and records. Hence this question, as argued by the Ld. Senior Counsel for the Appellant, is answered against him. 26. Ld. Senior Counsel for the Appellant has contended, that there happens to be a pre-existing dispute. The literal connotation of the word "dispute" in itself imbibes that there has had to ....
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....The Ld. Senior Counsel for the Appellant had attempted to cast a doubt to the proceedings under Section 9 of the I & B Code, 2016, while giving an interpretation to the contents of their reply to the demand notice. The reply to the demand notice dated 03.07.2023 in itself doesn't reflect an absolute denial by the Corporate Debtor of its liability to pay the amount under the terms of the agreement dated 10.12.2020, the MoU dated 21.05.2021 and the termination agreement dated 15.03.2022. The termination agreement very clearly sets out the amount that needs to be paid by the CD. The subsequent agreement of 16.08.2022, entered into between parties, also confirms the dues to be paid by the CD and attempts to work out a modality as to how it can be repaid by the CD. The relevant part as contained in Clause 7 of the agreement dated 16.08.2022 is extracted hereunder: - (7) The party to the first part owes an amount to the party to the second part as per the MoU dated 15/3/2022 executed by both the parties. As per the MoU dated 15/03/2022 the party to the first part has consented to adjust the part of due amount, i.e. Rs. 1,00,00,000/- (Rupees one crore) in the form of stock as....