TaxTMI 
TaxTMI 
2026 (5) TMI 767
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....te Debtor - M/s Gemini Engi. Fab. Private Limited and Respondent No.1 - Kisaan Steels Pvt. Ltd. had entered into several purchase orders between December 2021 and June 2022 for the supply of forgings and other materials. It is claimed by the Appellant that R1 failed to adhere to the agreed delivery timelines and supplied defective goods, which led to multiple disputes between the parties. Numerous correspondences were exchanged between the parties which shows pre-existing dispute regarding quality, penalties and financial reconciliation. Appellant - Corporate Debtor had also imposed penalties on R1 for its breaches and reconciliation of accounts was going on. Respondent No.1 - Kisaan Steels Pvt. Ltd. had issued a demand notice under Rule 5 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 claiming an outstanding amount of Rs. 6,13,53,270/-. Appellant - Corporate Debtor in its rely on 14.07.2023, denied the liability and cited existence of pre-existing dispute and defective supplies. But despite this evidence of ongoing disputes NCLT admitted under Section 9 application relying on an email dated 01.11.2023, which was misinterpreted as an admission ....
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....cts, thereby placing the Respondent in major financial distress. In fact, the Petitioner has acknowledged existence of disputes between parties owing to initiation of pre-mediation proceedings before the District LEGAL Services, authority, Civil Court, compound, Surajpur, District, Gautam Budh Nagar, Delhi. 5. Prior to the issuance of the Demand Notice under Section 8 of the Code, the Corporate Debtor had intimated Respondent No. 1 on more than one occasion as to the existence of disputes between the parties. 6. These disputes were raised by the Corporate Debtor on account of delay in supply and defective goods. Respondent No. 1 had also initiated proceedings under the Commercial Courts Act, 2015 prior to filing the Company Petition, which evidences pre-existing disputes between the parties. Perusal of paragraph 28 of the Reply filed by Respondent No. 1 to the present Appeal itself reveals allegations and counter allegations and pre-existing disputes between the parties. 7. NCLAT in the matter of Praveen Kumar Sharma v. Arcee Trading Corporation & Anr. [NCLAT Comp Appeal No. 213 of 2020 @Para 13] has held that when there are clear documents raising disputes, it is not appr....
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....ets out of the clutches of the Code" 12. Respondent No. 1 has not placed any material on record whereby the Appellant - Corporate Debtor can be said to have unambiguously admitted the operational debt claimed. The Corporate Debtor's communications clearly indicate an intention to settle the matter, but this intention is conditional upon the proper reconciliation of accounts. In the absence of such reconciliation, it would be inappropriate to conclude that the debt is undisputed or that the Corporate Debtor is liable for the amount claimed by Respondent No. 1. In fact, the Corporate Debtor has, on multiple occasions, more particularly vide its communications dated 11.03.2023 and even during the meeting held on 02.03.2023, questioned the amounts claimed on the basis that the same needed to be cross-checked/ verified. It was made clear to Respondent No. 1 that payments were always subject to reconciliation of accounts by the Corporate Debtor. 13. In accounting, reconciliation is the process of ensuring that two sets of records are in agreement. It has been held by the Hon'ble NCLAT in the matter of Amit Wadhwani v. M/s Global Advertisers & Anr. [NCLAT Comp Appeal No. 616....
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....)(d) of the Code. 17. Rule 6(1) of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 ("said Rules") read with Form 5 mandates that a Petition filed under Section 9 of the Code be filed by the Operational Creditor or person authorized to act on behalf of the Operational Creditor. Similarly, Rule 23(2) read with Rule 26 of the National Company Law Tribunal Rules, 2016 requires a Petition/ Application to be filed and signed/ verified by an "Authorized Representative of the Applicant. Such an "Authorization" would necessarily mean a specific authorization by the Board of Directors of such Operational Creditor to initiate CIRP of a Corporate Debtor. [Refer Shantilal Khushaldas and Brothers Pvt. Ltd v. Smt. Chandanbala Sughir Shah & Anr. 1992 SCC OnLine Bom 83 (Para 31, 33); Palogix Infrastructure Pvt Ltd. vs ICICI Bank Ltd. 2017 SCC Online NCLAT 266 (Para 36, 45); Rajendra Narottamdas Sheth & Anr. V. Chandra Prakash Jain and Another (2022) 5 SCC 600 (Para 14); M Sai Eswara Swamy v. Siti Vision Digital Media Pvt. Ltd. [NCLAT Comp Appeal No. 706 of 2021] (Para 6)]. 18. In the present case, the NCLT has failed to appreciate that the signatory of Respon....
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....ayment was contingent upon the acceptance of and adherence to the consequences sheet shared with the officers of Respondent No.1. Clearly, the NCLT has not fully considered the contents of the email dated 1st November 2023 in its entirety, which is essential to understanding the actual context and intention behind the Corporate Debtor's statement. 23. The NCLT was not justified in isolating a single sentence from the email dated 1st November 2023 and interpreting it in a manner that disregards the remainder of the document. The remaining content of the email clearly demonstrates that there was an ongoing dispute between the parties, which should have been duly considered in the NCLT's assessment. The mere fact that the Corporate Debtor mentioned it would make payment of the balance amount does not necessarily imply that the amount claimed by Respondent No. 1 became due. Even assuming, without admitting, that the Corporate Debtor acknowledged that the amount claimed by Respondent No. 1 was due and payable, such acknowledgment was explicitly conditional, as it was subject to the acceptance of the consequences sheet. As such, this cannot be interpreted as an unequivocal adm....
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....e, is not a voluntary or conscious act of acknowledgment of debt, but merely compliance with statutory tax withholding requirements. The function of TDS is limited to the collection of income tax at source and does not reflect any admission of the amount due or the existence of an enforceable financial obligation. There is no element of consent or agreement in TDS deductions that would give rise to a legal inference of liability. It is an administrative act and not a contractual or evidentiary acknowledgment. 26. Similarly, any reference to GST, including issuance of invoices that carry GST or any payments made toward GST liabilities, are regulatory compliances under the Goods and Services Tax law and are intended only to ensure correct reporting and collection of indirect taxes. It is well established that the filing of GSTR-1 returns is a statutory requirement under the CGST Act and does not constitute an admission of liability or acknowledgment of a jural relationship between the parties. 27. The presence of GST in documentation or accounting entries does not imply acceptance of liability towards the recipient of such services or goods. GST is charged and collected by law,....
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....rporate Debtor against proper acknowledgement of the invoices. The Corporate Debtor never returned any goods or raised any complaint against the goods supplied to them by the Respondent No.1. 32. As soon as the goods were ready for dispatch, the goods were inspected by an agency duly appointed by the Corporate Debtor itself. Upon receiving the approval for the quality of the goods from the duly appointed testing agency of the Corporate Debtor, the goods were delivered by the Respondent No.1 to the desired address of the Corporate Debtor. Respondent No.1 issued various Invoices against each purchase order issued by the Corporate Debtor. The details of the invoices are mentioned herein below: - S. No. Purchase Order No. Invoice No. Date Amount (In Rs.) 1. GEF/PO/079/22-23 KS/22-23/0533 30.06.2022 4,83,800/- 2. GEF/PO/053/22-23 KS/22-23/0937 31.08.2022 21,35,799/- 3. GEF/PO/326/21-22 KS/22-23/0664 21.07.2022 49,60,597/- KS/22-23/1616 09.12.2022 25,77,120/- 1 KS/22-23/0099 22.04.2022 51,04,535/- KS/22-23/0362 31.05.2022 10,86,315/- &nb....
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.... part of the Corporate Debtor as per the CGST Rules. 34. The Respondent No.1 consistently followed up with the Corporate Debtor for the release of the outstanding admitted payment of Rs. 6,13,53,270.70/-(Rupees Six Crore Thirteen Lakh Fifty-Three Thousand Two Hundred Seventy and Seventy Paisa Only), but the Corporate Debtor failed to pay the same. The Respondent No.1 further vide e-mail dated 07.01.2023 asked for the outstanding payment from the Corporate Debtor and further informed that the Respondent No.1 was undergoing cash crunch and requested to release the payment. The Respondent No.1 met with the Corporate Debtor on 24.01.2023 at the head office of the Corporate Debtor in Mumbai. Further, the Respondent No.1 vide email dated 11.02.2023 informed the Corporate Debtor that the last consignment was also dispatched and requested to release the outstanding payment. The Respondent No.1 further requested the Corporate Debtor to release the outstanding payment of Rs. 6,13,53,270.70/- (Rupees Six Crore Thirteen Lakh Fifty-Three Thousand Two Hundred Seventy and Seventy Paisa Only). The Corporate Debtor vide email dated 23.02.2023 asked the Respondent No.1 to visit the office of the ....
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....eproduced below for the kind perusal of this Hon'ble Tribunal: - "2. Subsequently, there were two telephonic talks after our second meeting, wherein you had agreed to formally send your final proposal to us which never reached us. Our email communication has reference to this discussion but the actual details from you were never shared." Further, the content of the email dated 28.03.2023 sent by Corporate Debtor is being reproduced below for the kind perusal of this Hon'ble Tribunal: - "Dear Sir, your acceptance on the detail calculation sheet of consequences is still awaited. Provide the same so that balance payment shall be released." It is pertinent to mention that the Respondent No.1 had to consistently request them to release the said document or payment for the admitted due amount. However, the Corporate Debtor failed to share the same and release the admitted debt. 38. The Operational Debt was Rs. 6,13,53,270.70/- (Rupees Six Crore Thirteen Lacs Fifty Three Thousand Two Hundred Seventy and Seventy Paise Only), which the Corporate Debtor has failed to clear till date. 39. Since the Corporate Debtor failed to clear the admitted op....
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....rence to any disputes in the said email raises a serious doubt as to the Corporate Debtor's claim of pre-existing disputes. In our considered view, the Corporate Debtor cannot approbate and reprobate at the same time and the admission of debt is clear. This Tribunal, therefore, finds that the Corporate Debtor has failed to demonstrate a genuine dispute as contemplated under Section 5(6) of the Code. Consequently, the application under Section 9 of the Code is maintainable, notwithstanding the arbitration clause in the Purchase Orders. 43. It is noted that as per the daily order dated 30.08.2024, the Corporate Debtor had submitted a settlement offer to the Operational Creditor, and this Tribunal had granted time to the Operational Creditor to consider the same. However, the settlement terms proposed by the Corporate Debtor were found unacceptable. The counsel for the Operational Creditor further submitted that the Operational Creditor wishes to proceed with the present application under Section 9 of the Code. 44. In view of the above submission and based on the findings recorded in paragraphs 25 to 42 above, this Tribunal is satisfied that: a) The applicatio....
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....admitted to the outstanding debt of Rs. 3,97,44,173.70. It is pertinent to mention that the Corporate Debtor has also admitted the outstanding debt amount in the email correspondences dated 01.11.2023 between the parties. These repeated admissions on the part of the Corporate Debtor substantiate the validity of the initiation of Insolvency proceedings against the Corporate Debtor, affirming that such actions are both proper and in accordance with the law. 45. All Purchase orders issued by the Corporate Debtor were duly complied to the best of the satisfaction of Corporate Debtor, with goods delivered within the stipulated time frame and received by the Corporate Debtor after meticulous verification by its appointed testing agency. The issues purportedly raised by the Corporate Debtor concerning the delivery timeline and quality of the goods in the present appeal are, in fact, vague and lack substantive evidence on record to support such claims. The Corporate Debtor never released the funds for the Work Orders as per the agreed timelines. One such example being email dated 11.02.2023, the contents of the said email are being reproduced herein: - "Dear Sir, Refer....
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....btor could have raised such frivolous allegations before the Adjudicating Authority instead of raising fresh allegations before the Hon'ble Appellate Tribunal. The Appellant is raising fresh allegations against the Respondent No.1 that have never been pleaded before the Ld. Adjudicating Authority that are against the legal principles. It is submitted that the Appellant cannot change the fate of the impugned order, thereby raising new contentions before this court by way of an appeal. Further, it is pertinent to mention that the appellate jurisdiction involves re-hearing on law as well as on fact. Therefore, it can be concluded that the introduction of new allegations or evidence can be construed as a fundamental alteration of the established facts of the case. 49. The alleged issue of authority under the Board Resolution is merely a typographical error that does not alter or affect the insolvency proceedings initiated against the Corporate Debtor in any manner. The error in the Board resolution is a curable one. The Demand Notice was sent by the Advocate duly authorized by the Respondent no.1 and the Petition under Section 9 was also filed by the same Advocate duly authorize....
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....ference number GEF/PO/326/21-22 dated 08.12.2021. 52. The said instance is evidence of the conduct of the Corporate Debtor towards the Respondent no.1, and the aforementioned purchase order issued by the Corporate Debtor, is the single one that took more than 8 months to finalize. The Respondent No.1 cannot be penalized for the delays caused by the Corporate Debtor. 53. As mentioned in the above paragraphs no. 26 & 27 of the present reply, it is amply clear that the Corporate Debtor failed to provide the requisite information, drawings and other necessary information and further kept changing the drawings from time to time thereby delaying the initiation of the manufacturing process. That the Respondent No.1 was duly complying with the timelines decided between the parties, however, it was the Corporate Debtor who was consistently delaying the necessary approvals and making amendments to already approved order of forging work. 54. The goods were supplied to the Corporate Debtor after receiving due approval from an independent agency assigned by the Corporate Debtor themselves to inspect the quality of the goods before the dispatch. It is also pertinent to mention that the ....
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....h sides and also perused the materials on record. 60. Both sides were heard and orders were reserved earlier on 19th February 2026. Immediately after we had reserved the order, the Learned Senior Counsel for the Appellant submitted that he will also, without prejudice to his contention in this appeal, try to negotiate with the Respondent. We had noted that the Appellant is free to do the same. Thereafter, on 10th March 2026, we had noted that both parties may file a memorandum of settlement. Thereafter, on 1st April 2026, we had ordered that even though the case was pending for the pronouncement of judgment, the appellant had filed an affidavit along with the demand draft, offering to pay the sum whose default led to an admission of corporate debtor to CIRP in the petition filed by R1 under Section 9 of IBC. Even though, because of an interim order passed by this Tribunal, the IRP had not constituted the COC as yet, we had required the first respondent to file the memo of settlement for this Bench to move ahead in this matter, and the matter was listed on 15th April 2026. 61. On 21st April 2026, a statement was made before us that the respondent is not agreeable to filing a w....
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....buse of the IPC framework. The appellant further claims that the Appellant seeks to tender demand draft dated 23rd Feb 2026 towards the entire petition. Since the appellant is discharging the entire petition amount, nothing remains outstanding under the company petition. The appellant claims that the CD is a micro, small and medium enterprise and continues to use it as its own. The Appellant further claims that the R1 is abusing and misusing the provisions of the IBC despite being offered payment of the entire petition claim amount. And since petition under Section 9 of the IBC is not a recovery proceeding and cannot be misused to pressurize the CD into claiming monies that are bona fide disputed. 67. We observe that the procedure laid down in the code requires an initial demand notice, and an opportunity to settle the dues was very much available with the Appellant if it was bonafide interested to settle it. However, it did not avail of that opportunity and contested the claim before the Adjudicating Authority. The Adjudicating Authority did not accept the contention of the Appellant and passed an order admitting the Corporate Debtor into insolvency under Section 9. 68. In t....
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.... equipment and also liquidated damages. It has clearly worked out the balance amount payable to the two R1, which is indicated as Rs 3,84,63,113. 74. We observe that the email dated 26.06.2023 which was issued from Operational Creditor to the Corporate Debtor crystalizes the debt amount of Rs.6.13 Crores. Since the OC did not get any response, therefore, a notice under Section 8 on 01.07.2023 with respect to the amount of Rs. 6.13 Crores was issued. OC received the reply of the Corporate Debtor raising dispute with respect to some invoices. Accordingly, OC changed the amount in Section 9 petition restricting the debt and default to undisputed total amount of Rs. 3.97 crores. Later on OC received an email placed at page 198 in which the Corporate Debtor requested the respondent to accept the consequences sheet, so that the Corporate Debtor will pay. We observe that it is a pre-condition or a sort of a coercion. We note that in a worst-case scenario, the Corporate Debtor had to pay to the OC an amount of Rs. 3.97 crores qua which there was no dispute and which is above threshold. The consequence sheet is at page 200 APB, which confirms undisputed amount and which is signed by the ....
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....ebtor had insisted on accepting the consequence sheet prepared by the Appellant and it was a precondition for making a payment. We observe that by forcing the Operational Creditor to accept the consequence sheet and then only payment could be made is holding the Operational Creditor under a gun. 80. We have gone through the material placed on record and also basis the submissions and arguments made by both parties; we find that an undisputed amount has been crystalized which is signed and conveyed to the Operational Creditor to the extent of Rs. 3.84 Crores and which cannot be denied at this stage that there is a dispute with respect to this amount. Once the Corporate Debtor has accepted this amount, it cannot say that there is a pre-existing dispute. In fact, on the invoices on which some issues existed, it was related to delay in delivery for which LD has also been levied. We have perused the consequence sheet and we are satisfied that there is no dispute with respect to the contemporaneous calculations provided by the Corporate Debtor to the Operational Creditor. We are therefore, convinced that there is no pre-existing dispute. We observe that the appellant is trying to crea....