TaxTMI 
TaxTMI 
2026 (5) TMI 1309
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....ry to be noticed for deciding this appeal are: (i) The Appellant is in business of distribution of IT and electronic products and is authorised distributor of various IT companies including Apple. The Respondent is reseller of electronic products to customers procured from various distributors including Appellant. (ii) Appellant supplied various electronic goods of various manufacturers including Apple to the Respondent subject to terms and conditions as agreed between the parties. Respondent used to issue balance confirmation from time to time. (iii) On 30.09.2020, the Respondent issued a stamped balance confirmation informing the balance payable by Respondent to the Appellant as on 30.09.2020. (iv) Standard Sales Terms and Conditions of Ingram were accepted by Respondent on 25.02.2021, in pursuance to which Appellant supplied various electronic goods including iPhone 11, iPhone 12 as well as iPad by invoices dated 03.03.2021 to 16.03.2021, totalling to an amount of Rs. 7.33 Crores. Supplies were duly accepted by the Respondent. Each invoice contained payment term of 21 to 30 days. (v) On 11.05.2021, Appellant sent an email to the Respo....
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.... the Appellant is not obliged to discharge. (x) On 07.08.2021, Appellant issued demand notice under Section 8 of the I&B Code claiming total amount of debt of Rs. 5,70,79,189.27/- including Principal Amount of Rs. 5,39,20,029/- with interest of Rs. 31,59,159/- as on 11.06.2021. The demand notice was served but no reply to demand notice was received from the Respondent. (xi) An application under Section 9 was filed by the Appellant on 24.09.2021 against the Respondent claiming an amount of Rs. 5,70,79,189.27/- relating to invoices issued between 03.03.2021 to 16.03.2021. 11.06.2021 was claimed as date on which amount fell due. In Section 9 proceeding, reply was filed by the Respondent on 06.04.2022. (xii) On 08.03.2022, a notice was issued by the Respondent to Apple India Pvt. Ltd. and the Appellant for invocation of arbitration. Notice dated 08.03.2022 for invocation of arbitration was replied by the Appellant refuting the notice and contending that Appellant not being party to the Agreement signed between Respondent and Apple India Pvt. Ltd., Respondent was asked to withdraw the name of the Appellant. (xiii) The Respondent had filed a proceeding....
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....goods' sent by the Operational Creditor to the Corporate Debtor. The Corporate Debtor had filed an application bearing I.A. No. 4884/2022 to place on record the Report of the Local Commissioner dated 21.06.2022, who was appointed by the Hon'ble High Court of Delhi vide its Order dated 25.04.2022 stating that the 563 units of unsold inventory of iPhone 8 were put to inspection, out of which 562 units were found to be defective or 'dead on arrival'. It is further observed that the I.A. No. 4884/2022 was withdrawn by the Corporate Debtor, since it is not directly related to the instant case. It is made clear that we have not taken into account the contents of the Report of the Local Commissioner. However, the factum of calling Report and thereafter submitting the same before the concerned court indicate the existence of dispute about quality of the goods. 14. .......... However, in this regard, we observe that the Operational Creditor itself has filed a copy of the aforesaid Section 11 application before us, which indicate that the Corporate Debtor (Petitioner) had filed the Section 11 application against both the Apple India Pvt. Ltd. (Respondent No. 1) and I....
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....spute with regard to above supplies. The bank guarantee given by the Corporate Debtor was invoked by the Appellant of Rs. 2 Crores on 19.05.2021 towards the part-payment of outstanding, which has never been challenged by the Corporate Debtor. The cheques for balance amount of Rs. 5,39,20,029/- was issued on 24.05.2021 which was a clear acknowledgement of the outstanding amount. Cheque was dishonoured, hence, the Appellant issued notice on 02.06.2021 under Section 138 of NI Act. Reply to Section 138 notice was given by the Corporate Debtor on 21.06.2021 where certain counter claims have been claimed by the Corporate Debtor which counter claim relate to unsold iPhone 8 of 2018 laying with the Corporate Debtor and certain backend discount which were to be claimed by the Corporate Debtor against Apple India. The counter claim raised in reply dated 21.06.2021 is clearly a moonshine defence and were not any kind of dispute with regard to supply made by the Appellant in 2021. In fact, in the reply dated 21.06.2021, the Corporate Debtor sought set off claim of Rs. 5.39 Crores of the Appellant from the Counter claim by claiming balance of Rs. 7.05 Crores. In the reply notice dated 21.06.202....
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....hich have been filed by the Respondent on 08.05.2026, Respondent has also filed a copy of award dated 13.09.2025 and copy of notice dated 21.02.2025. No liberty was granted to the Respondent to file any document along with the Written Submission. Filing of document along with Written Submission which document were not part of the record of the appeal cannot be approved. Documents which have been filed along with the Written Submission being not part of the record of the appeal cannot be looked into for any purpose nor need any consideration. 6. The law with respect to Section 8 and 9 of the I&B Code and the scope and ambit regarding considering existence of dispute between the parties with reference to Section 9 application has been settled by the Hon'ble Supreme Court in its judgment in Mobilox Innovations Private Ltd vs Kirusa Software Private Ltd (2018) 1 SCC 353, where in Para 24 and 40 following was laid down: "24. The scheme under Sections 8 and 9 of the Code, appears to be that an operational creditor, as defined, may, on the occurrence of a default (i.e., on non- payment of a debt, any part whereof has become due and payable and has not been repaid), deliver a d....
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....tion 9 application filed by the Appellant. 8. Application under Section 9, as noted above, was based on invoices issued by the Appellant to the Respondent between 03.03.2021 to 16.03.2021 which are sale of the iPhone 11 and 12 series mobile phones as well as iPads of Rs. 7.33 Crores. Said supplies were duly received by the Respondent and without any objection and as pleaded by the Appellant the said materials have already been sold by the Respondent. The sale was made by the Appellant, who is a distributor of the Apple to the Respondent, who is a reseller of the Apple items. The Sale Terms and Conditions have been brought on the record as Annexure A-3 of the Appeal, which terms and conditions were agreed by the Respondent on 25.02.2021. The Clauses of said Sales Terms and Conditions stipulates that relationship of the parties was that of Independent Contractors. Clause 13 of Sales Terms and Conditions is as follows: "13. RELATIONSHIP OF THE PARTIES. Purchaser's relationship with Ingram will be that of an independent contractor. Purchaser will not have, and will not represent that ii has, any power, right or authority to bind Ingram, or to assume or create a....
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....e stock sheet for SRN. The intention to clear all payables is one of our fundamentals- though in this case we are just requesting the mode of settlement to be by way of SRN rather than RTGS. Regds raman bathla" 11. Subsequently, the Appellant again sent an email asking the Respondent to share the payment plan of Rs. 7.33 Crores. Email dated 15.05.2021 sent by the Appellant to Respondent is as follows: "On Sat, May 15. 2021 at 3:49 PM Mishra, Biplav wrote: Dear Raman As per team call held on 13th may, you have to share the payment plan of 7.33Cr on 14th May, 2021, but till time we are not getting any payment plan from your side Pls share the payment plan today Regards Biplav" 12. On 17.05.2021, Respondent sent an email to the Appellant. Email dated 17.05.2021 indicates that Respondent has Apple inventory worth Rs. 20 Crore in hand, they will be able to share a more specific plan once lockdown opens and they have a better picture of sales and collection. Email dated 17.05.2021 is as follows: "From: raman bathla Sent: Monday, May 17, 2021 12:34 PM To: Mishra, Biplav Cc: bathlatelet....
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....itled for. In the reply notice, the Respondent has also relied on Reseller Agreement between Respondent and Apple. Clause 14.5 of the said agreement has also been noticed in the reply, which is as follows: "14.5 Disposition of Products Upon Expiration or Termination Within ten (10) days after expiration or termination of the Agreement, Reseller will provide a list of all Authorized Products remaining in Reseller's inventory to Apple. Apple reserves the first right to purchase such Authorized Products, or shall instruct Reseller as to their disposition and Reseller shall promptly comply with Apple's instructions. If Apple decides to repurchase from Reseller new and unsold Authorized Products remaining in Reseller's inventory at the time of Agreement expiration or termination, the price will be either: (i) the price at which Reseller originally purchased such Authorized Product(s) from Apple if the Authorized Product(s) remain on Apple's then-current Apple Reseller Price List; or (ii) ten percent (10%) off the price at which Reseller originally purchased the Authorized Product(s) if the Authorized Product(s) are not on a then-current Apple Reseller Price List....
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....nbsp; 5,39,20,029/- 16. Thus, cheques were issued subsequent to invoices and were dated 24.05.2021. When we look into the reply dated 21.06.2021, in which reply issuance of Cheques by Respondent is not disputed rather the claim raised by the Respondent was with regard to unsold iPhone 8 inventory purchased in the year 2018 and backend discount claimed by the Respondent. Reply notice dated 21.06.2021 in essence was counter claim. In reply to notice under Section 138, there is no question of claiming any counter claim in 138 proceeding. The Adjudicating Authority relying on the counter claim raised by the Respondent in reply dated 21.06.2021 jumped to the conclusion that the dispute was already raised by Respondent in reply dated 21.06.2021. 17. Learned counsel for the Appellant has relied on judgment of Hon'ble Supreme Court in "(2022) 15 SCC 591, ZNK Traders Pvt. Ltd. vs. Kishore Shankar Signapurkar & Anr." to support his submission that dispute raised for the first time in reply to Section 138 in NI proceeding cannot constitute a genuine pre-existing dispute under Section 8 and 9 of the IBC. The Hon'ble Supreme Court in the above case was considering an appeal a....
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....lowing was held: "6. In the present case, it is not in dispute that there is a debt payable to the Operational Creditor and default on the part of the Corporate Debtor. The pendency of the case under Section 138/441 of the Negotiable Instruments Act, 1881, even if accepted as recovery proceeding, it cannot be held to be a dispute pending before a Court of law. Thereby we hold that the pendency of the case under Section 138/441 of Negotiable Instruments Act, 1881 actually amounts to admission of debt and not an existence of dispute. We find no merit in this appeal. It is accordingly dismissed. No Costs." 19. We also need to notice case relied by learned counsel for the Respondent. Learned counsel for the Respondent has placed reliance on judgment of the Hon'ble Supreme Court in "Innoventive Industries Ltd. vs. ICICI Bank & Anr., (2018) 1 SCC 407" for the proposition that the Hon'ble Supreme Court has recognised that proceedings before NCLT are summary in nature and disputed questions requiring details adjudication cannot be determined in insolvency jurisdiction. 20. There cannot be any dispute to the above proposition. In Section 9 proceeding, the Adjudicating Authori....
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.... for the Respondent in the arbitration proceeding pending in the ICC, London. Admittedly, the Corporate Debtor has continued the services of Mr. Montek Mayal after he left the Appellant's company on 14.01.2022 through its another business entity Osborne Partners. Agreement with Osborne Partners dated 01.06.2023 and payments made to Osborne Partners are all on the record. All these facts existed / happened much prior to issuance of demand notice i.e. 15.07.2024. Non- payment of invoices fully, which was raised by the Appellant is due to the reason as indicated in the reply notice as well as reply to the Section 9 application by the Respondent. 28. Hon'ble Supreme Court in "S. S. Engineers vs. Hindustan Petroleum Corporation Ltd. & Ors., 2022 SCC OnLine SC 1385" held that Operational Creditor can trigger CIRP process when there is an undisputed debt. In Para 32 following was held: "32. There are noticeable differences in the IBC between the procedure of initiation of CIRP by a financial creditor and initiation of CIRP by an operational creditor. On a reading of sections 8 and 9 of the IBC, it is patently clear that an operational creditor can only trigger the CIRP, ....
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....d not have been said to be patently feeble legal argument. The order of the Adjudicating Authority rejecting Section 9 application was upheld. The above case is clearly distinguishable and does not held the Respondent in the present case. 23. The judgment of the Hon'ble Supreme Court in ZNK Traders Pvt. Ltd. (Supra) fully supports the submission of learned counsel for the Appellant that reply to notice under Section 138 of NI Act cannot be basis for coming to conclusion that there was any pre-existing dispute. Reply notice was only with respect to cheques dishonoured and the fact that cheques were issued by the Corporate Debtor to the Appellant is an acknowledgment of debt and there is nothing on the record to indicate that before issuance of cheques for the balance outstanding amount of Rs. 5,39,20,029/- any kind of dispute with regard to supply, quality of goods or any other aspect was ever raised. The claim of the Appellant as per invoices of 2021 were undisputed and were duly acknowledged by the Corporate Debtor, as noted above. 24. The Adjudicating Authority has not adverted to relevant emails communication between the parties which took place immediately after invoices ....
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....ngs in this matter are completed, list the main matter i.e. IB-629/ND/2021 for arguments on 10.03.2023." 26. When the Local Commissioner's report was not taken on record by the Adjudicating Authority since application itself was withdrawn, we fail to see any justification in relying on factum of calling report. Adjudicating Authority made following observation in Para 13: ".....However, the factum of calling Report and thereafter submitting the same before the concerned court indicate the existence of dispute about quality of the goods." Further, the above proceedings were after issuance of demand notice. 27. We are of the view that the above observation of the Adjudicating Authority was wholly erroneous. When the Local Commissioner's report, which relates to iPhone 8 inventory pertaining to sale in the year 2018, was not taken on the record by passing order dated 03.03.2023 by the Adjudicating Authority, reliance on the said report to find existence of dispute was wholly erroneous. Dispute about quality of goods regarding iPhone 8 was wholly irrelavant and cannot be approved. 28. Now coming to the third reason given by the Adjudicating Authority in para 14, as....
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....e learned Sole Arbitrator shall give the disclosure under Section 12 of the Act before proceeding with the reference. 6. The fee of the learned Sole Arbitrator shall be governed by Schedule IV of the Act. 7. The petition is allowed in the above terms." 29. Thus, the arbitration proceeding, consequent to order dated 20.01.2023, is between the Respondent and the Apple India Pvt. Ltd. in which proceeding the Appellant is not a party and has been deleted by the Delhi High Court. As noted above, notice for initiating said arbitration proceeding was issued by the Respondent much subsequent to filing of Section 9 application. The Adjudicating Authority also committed error in relying on the arbitration proceeding between the Respondent and the Apple India Pvt. Ltd., which proceeding were initiated much subsequent to filing of Section 9 application. On basis of the said arbitration proceeding the Adjudicating Authority erroneously observed that dispute raised in the arbitration proceeding substantiates the ground for the existence of some kind of dispute with respect to the amount payable by the Corporate Debtor. We are of the view that the above observation made in Pa....
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....p; 05Z0IW 30/09/2020 PAYMENT ON ACCOUNT 1,000,000.00 4 53102000853865 30/09/2020 30/10/2020 300920-1 158,214.06 5 531D2000853871 30/09/2020 30/10/2020 4433 1,636,689.35 TOTALS 1,794,903.41 4,829,698.00 (B) (C) CLOSING BALANCE AS ON 30/09/2020 (A+B-C) 1,802,930.06 NOTE: 1. CONTENTS OF THIS STATEMENT WILL BE CONSIDERED AS CORRECT, IF NO DISCREPANCY IS REPORTED TO THE COMPANY WITHIN 10 DAYS OF STATEMENT DATE. 2. INTEREST @ 2% PER MONTH IS PAYABLE ON THE PAYMENTS RECEIVED AFTER THE DUE DATE. 3. IN CASE OF ANY ACCOUNTING QUERIES YOU MAY MAIL TO [email protected] WITH DETAILS OF THE BRANCH YOU" CLOSING BALANCE AS ABOVE CONFIRMED BATHLA TELETECH PVT. LTD STAMP & SINGNATURE" 32. We are conscious that in proceeding under Section 9 what is required to be looked into to come to the conclusion there is pre-existing dispute or not is only whether allegati....