2026 (4) TMI 1674

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....esale distribution business of sugar by purchasing sugars from the Sugar Manufacturers and supplying the same to the various food industries and such other manufacturers. 2. The Respondent / Corporate Debtor i.e., M/s. The Indian Sugars and Refiners Limited is a Sugar Manufacturer Unit, situated in Karnataka. The case of the Appellant / Operational Creditor is that, owing to certain business transactions, which were entered into between the parties (though pleaded to be orally), certain amount fell due to be paid, hence the Operational Creditor vide its correspondence of 13.05.2015, is said to have requested for refund from the Corporate Debtor / the Respondents herein, of a sum of Rs. 21,08,835 allegedly due because of the reason for non-supply of approximately 880 metric tonnes of sugar, which the Respondent / Corporate Debtor was supposed to supply under the oral purchase order of 21.04.2015 and which it was unable to supply to the OC. 3. The Appellant had come up with the case before Learned Adjudicating Authority, that, the Respondent / Corporate Debtor had in their response of 15.05.2015, had rather acknowledged the debt due and their liability to pay the amount due, be....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....ade till 23.04.2016, when further supplies from the Respondent / Corporate Debtor came to a halt due to the critical financial crunch faced by the Corporate Debtor. 7. The Appellant came up with the case that, despite the assurance extended during the negotiations by the Corporate Debtor on 15.05.2015 and despite the assurances that were given by the Corporate Debtor at the stage of the additional supply of 1400 metric tonnes, the default persisted ever since 13.05.2015 and therefore, he issued demand notice under Section 8 of I&B Code on 20.06.2018, against the Respondents / Corporate Debtor and that in response to the demand notice issued under Section 8 on 20.06.2018, the Corporate Debtor/ Respondents herein, sent a reply on 03.07.2018, which has to be taken as to be an admission of liability by the Corporate Debtor, to refund the amount paid as advance for the supply of sugar on 21.04.2015. The question here would be as to whether the reply of the Respondent / CD dated 03.07.2018 to the demand notice dated 20.06.2018 can be taken as to be an admission of debt liability and could be taken as to be an acknowledgment for the purposes of determining the aspect of limitation. ....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....the industry practice as it suffered loss because of keeping stocks unnecessarily. 11. Thus, the Corporate Debtor came up with the case that, since they have forfeited the amount, it would not fall to be a debt due to be paid, because under the terms of industry practice, failure to lift the balance stock within a period of one week will attract the forfeiture clause and if the forfeiture clause comes into play, the amount thus forfeited will not fall to be a debt due to be paid, which could have enabled the Appellant / Operational Creditor to initiate proceedings, under Section 9 of the Code, by issuance of notice under Section 8 of I&B Code. 12. To dilute the stand taken by the Corporate Debtor / the Manufacturer, the Operational Creditor / the Appellant, herein, in the proceedings before the Learned Adjudicating Authority, had referred to the various correspondences and the responses that were given by the Corporate Debtor contending thereof that, it would be an admission of debt, based on the business transactions as orally entered into between the parties and it would be an admission of their inability to supply the remaining quantity of sugar. The same has been countere....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....the shape of a "pre-existing dispute" and that too pertaining to a refund of advance paid towards the purchase of sugar, which will not be falling to be under the definition of debt as provided under the I&B Code. 16. Under the aforesaid backdrop, the impugned order as rendered by the Learned Adjudicating Authority, particularly in context of the finding recorded is in consonance to the principles laid down by the judgement of Hon'ble Apex Court in the matter of Mobilox Innovations Pvt Ltd Vs Kirusa Software Pvt Ltd., reported in 2018 Volume 1 SCC Page 353, and does not appear to be suffering from any error. The relevant para-40 of the aforesaid ratio is extracted here under: "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 ....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....into play. 19. We have already considered that, there had been a settlement, even after the issuance of a letter of 13.05.2015, where the Operational Creditor has raised a demand of the amount due under the purchase order of 21.04.2015. After the settlement there had been a fresh revival of business transactions and fresh orders had been placed. The conditions for revival of the subsequent business transactions and placement of the fresh subsequent purchase order were based under an assurance of deducting the amount that had earlier fallen due to be paid under the advances paid by the Operational Creditor for the purchase of the sugar, will amount to be an occurrence of a pre-existing dispute between the parties, which has been settled under certain terms. In that eventuality, the bar comes into play in the light of the principles laid down by the Hon'ble Apex Court in the Judgment of M/s. Innoventive Industries Ltd vs. ICICI Bank & Anr., reported in 2018 Volume 1 SCC Page 407, particularly in context of Para 29, where it has been observed that unlike the provisions contained under Section 7 of IBC, Section 9 cannot be invoked for the purposes of recovering of a defaulted am....