TaxTMI 
TaxTMI 
2026 (4) TMI 759
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....nch (Court II) (hereinafter, 'the NCLT'), by Chemical Suppliers India Private Limited, the respondent herein, under Section 9 of the Insolvency and Bankruptcy Code, 2016 ['the Code'], against GLS Films Industries Private Limited, the appellant. 3. The case of the respondent was that it had supplied chemicals to the appellant over a period of time and a sum of Rs.2,92,93,223/- was due and payable to it as on 26.05.2021. Demand notice dated 11.11.2021 was issued by it under Section 8 of the Code. In response, the appellant addressed email dated 06.12.2021 disputing the claim. The respondent thereupon filed the subject application under Section 9 of the Code. The appellant contested the proceedings claiming that there was a pre-existing dispute between the parties prior to issuance of the demand notice. According to it, the respondent had supplied two consignments of solvent on 10.04.2021 and 11.04.2021 respectively at its factory premises at Gurugram but the same were found to be defective. This was brought to the notice of the respondent, which promised that it would do better. Basing on the said representation, the appellant claimed to have sourced some more solvent supplies fro....
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....and for Rs.4,60,05,397/-. The NCLT also noted that the appellant had lodged a police complaint on 27.09.2021, long prior to issuance of the demand notice, raising the issue of the defective quality of the supplies made by the respondent and its pressure tactics in seeking payment therefor under threat of suicide. Therein, the appellant had also referred to the fact that it called upon the respondent to come for reconciliation of accounts but to no avail. 7. On a conspectus of these facts, the NCLT opined that there was a plausible dispute raised by the appellant, which was not disclosed by the respondent upfront in its application. The NCLT also took note of the counterclaim of the appellant that it was due and payable a sum of Rs.70,09,430/-. The NCLT opined that the respondent had approached it to recover its alleged dues and that was not the objective of the process provided under the Code. The NCLT, accordingly, concluded that there existed a dispute between the parties prior to issuance of the demand notice which necessitated a detailed investigation of documents and adducing of evidence by all concerned, which was beyond the scope of its summary jurisdiction under the Code....
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....application related to developments and events after receipt of the demand notice dated 11.11.2021 and could not be taken into consideration for the purpose of determining whether there was any pre-existing dispute. 10. The NCLAT was also of the opinion that the failure of the appellant to point out the defects in the supplies within seven days from the date of delivery was sufficient to hold that its contentions in that regard were nothing but a moonshine defence. The NCLAT rejected the contention urged by the appellant that levy of interest on the alleged delayed payment would be a disputed issue in itself. The NCLAT noted that the police complaint lodged by the appellant referred to the respondent's demand for Rs.4.60 crore as its outstanding dues but accepted the plea of the respondent that it had made a mistake in its email dated 10.09.2021 while making that demand and that it had clarified on 09.12.2021 that it had failed to adjust the sum of Rs.1.66 crore. The NCLAT further noted that the respondent's demand notice mentioned Rs.2.92 crore as being due and payable to it and not Rs.4.60 crore, which showed that adjustment of Rs.1.66 crore had been taken care of. 11. The ....
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....Rs.1,66,89,770/- was made therein only on 31.07.2021 as a 'sale discount' without reference to the appellant's letter dated 10.12.2020. The credit entry of Rs.35,59,982/- marked 'sale return' was made on 01.07.2021 in relation to the supplies rejected by the appellant on 21.06.2021. The ledger account also discloses that debit notes were raised for interest on delayed payments only from 25.08.2021. The ledger account of the appellant for the FYs 2020-21 and 2021-22, which was also filed by the respondent along with said counter, disclose that the debit entry for Rs.1,66,89,770/- was made on 31.03.2021, with the endorsement that the account had been debited due to 'stringent smell and impurity in solvents'. The ledger account also discloses that a debit was raised on 21.06.2021 for Rs.35,59,982/-, in relation to the material that was rejected and returned on that day. That apart, debit entries were made on 22.06.2020 and twice on 31.03.2021 due to 'short quantity received'. The discrepancies between the ledger accounts are, therefore, quite patent. Further, the respondent's eight invoices that were relied upon by the NCLAT added up to a sum of Rs.1,72,13,065/- and not the sum of Rs.....
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....icate for them. These admissions of the Director did not relate to post-CIRP events but had reference to pre-CIRP issues relevant to this case. The NCLAT, therefore, ought not to have eschewed them from consideration. 17. Once the respondent admitted that written correspondence commenced only after disputes arose, and the first such written correspondence dated back to 10.12.2020, long prior to issuance of the demand notice on 11.11.2021, this was sufficient in itself to show that there were pre-existing disputes between the parties. When the appellant sought reconciliation of accounts in that context and the respondent failed to oblige, its demand for a sum of money in excess of Rs.1 crore would not be sufficient to meet the threshold for maintaining an application under Section 9 of the Code. More so, when the respondent had raised a demand for Rs.4.60 crore just two months prior to issuance of the demand notice and clarified the same only on 09.12.2021, that is almost a month after issuance of the demand notice. This confusion and lack of clarity on the part of the respondent in deciding as to what was the amount allegedly due to it, clearly supports the case of the appellant....
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.... dispute between the parties or the record of pendency of a suit or arbitration proceedings filed before the receipt of demand notice in relation to such dispute and in the event, any of the aforestated conditions was not fulfilled, the application of the operational creditor would have to be rejected. 20. In Sabarmati Gas Limited vs. Shah Alloys Limited (2023) 3 SCC 229, this Court considered the scope of the word 'reconciliation' and applying the definition in Black's Law Dictionary, 10th edition, this Court opined that the apt meaning suitable to the situation in relation to accounting would mean an adjustment of amounts so that they agree, especially by allowing for outstanding items. This Court referred to the observations in Mobilox (supra) that it is not necessary that the Court should be satisfied that the defence of a pre-existing dispute is likely to succeed and it is enough if such a dispute exists between the parties. Per this Court, what is to be seen is whether there is a plausible contention requiring investigation for the purpose of adjudication for it to satisfy the requirement of a pre-existing dispute. 21. Given the obtaining facts and the aforestated settl....