TaxTMI 
TaxTMI 
2026 (7) TMI 1283
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....e Application under Section 9 of the code preferred by the appellant seeking, interalia, initiation/ commencement of Corporate Insolvency Resolution Process of the respondent i.e. corporate debtor and allowing the application filed by the Corporate Debtor/Respondent seeking, interalia, permission to file additional documents after conclusion of final arguments of both the parties. 2. The Appellant - Uniworth Enterprises LLP claims an undisputed operational debt of Rs. 2,83,84,205/- comprising principal of Rs. 2,32,60,608/-and interest of Rs. 51,23,597/-) for pharma packaging materials supplied to the Corporate Debtor - Starco Metaplast Private Limited between August and November 2021. The Appellant argues that the NCLT erred in concluding a "pre-existing dispute" based on the Corporate Debtor's claims of non-supply and related debit notes, especially since the Corporate Debtor continued to place orders and failed to substantiate claims for a significant portion of the alleged non-supplied goods. 3. The Appellant is aggrieved of NCLT allowing of the Corporate Debtor to file additional documents (WhatsApp chats and a letter to Oxyzo Financial Services) after the conclusion ....
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....ocuments which was objected to by the Operational Creditor on the point of maintainability and issuance of notice. On 09.05.2025, the impugned order was passed by the NCLT rejecting C.P.(IB) No. 176 of 2023 i.e. Section 9 application and further allowing I.A. No. 4625 of 2024 which was the application for additional documents. 6. The Appellant - Operational Creditor claims that the maintainability of IA No. 4625/2024 was not argued and it was dismissed and the documents placed in this IA were relied upon by the Adjudicating Authority while dismissing Section 9 Application. 7. Appellant claims that the so-called a pre-existing dispute is not a bonafide or truly pre-existing dispute which was raised prior to the issuance of the demand notice dated 23.01.2023. The Operational Creditor is seeking for payment of goods actually supplied which is 1,35,567 kgs. and for non-supply of 85,250 kgs. of material for which debit note amounting to Rs. 40,84,275/- was allegedly issued does not constitute a bonafide or truly pre-existing dispute. The Appellant further claims that the Corporate Debtor continued to place purchase orders even after the alleged dispute arose indicating acceptance ....
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....orporate Debtor did not adhere to the proposed settlement agreement which involved the Operational Creditor issuing a credit note of Rs. 40,84,725/- upon the CDs commitment to make payment of Rs. 191,80,733 or issue post-dated cheques. This non-compliance further demonstrate the CDs default and lack of bonafide intention. Therefore, the order passed by the NCLAT dated 09.05.2025 has to be set aside. 15. Respondent claims that the payment received from the Respondent were adjusted against earlier invoices leaving the claimed amount as outstanding and forming the basis of the Section 9 Application is misleading as the earlier invoices against which such alleged adjustments were made pertain to Covid 19 period and specifically barred by Section 10A of the Code. The respondent brings to our notice that the Operational Creditor had claimed payment against invoices raised between the 05.08.2021 and 09.11.2021. During this period the Respondent had made payments amounting to Rs. 2,24,19,103/-. Out of this Rs. 1.98 Cr. was paid against the very invoices relied by the Operational Creditor in its Section 9 Application. This reduces the total amount which is outstanding to be less than one....
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....ten submissions. Respondent claims that the Appellant has for the first time in its rejoinder claimed that the Operational Creditor had adjusted towards the pending dues of the Respondent without disclosing that the earlier invoices during the Covid 19 period and barred under Section 10A of the Code. 19. Respondent also brings to our notice that since the Appellant had questioned the authenticity of the documents of Oxyzo Financial Services Limited, it had to get the confirmatory documents from them and for that reason there was a delay in submitting the additional documents. 20. Respondent also claims that Operational Creditor falsely claims that it was never informed that the payments were made against specific invoices mentioned in the Application for this purpose the Respondent has relied upon WhatsApp chat and emails between the Appellant - Operational Creditor and Respondent showing communication of payment of Rs. 1.15 Cr. against specific purchase orders / invoices. Respondent contends that the Operational Creditor has not denied the authenticity of the WhatsApp chats, the only defence is that a delay in filing the same. Analysis and Evaluation 21. We have heard ....
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.... are the subject matter of the present application. As per the averments of the Corporate Debtor, it has submitted that an amount of Rs. 1,98,00,000/- has been remitted by the Corporate Debtor to the Operational Creditor against these specific invoices, which are being alleged as an unpaid amount of Rs. 2,83,84,205/-as per Part-IV of Form 5 by the Applicant. The Applicant has submitted that the amounts credited by the Corporate Debtor were adjusted by the Operational Creditor against back-dated invoices on the basis of the First-In-First-Out (FIFO) method, towards the alleged pending dues. However, it is pertinent to observe that the documentary evidence on record clearly indicates that the payments were made by the Corporate Debtor against specific and identified invoices. In such circumstances, the contention of the Applicant-that the said payments were appropriated towards older dues based on the First-In-First-Out (FIFO) method-- cannot be sustained. The adjustment of funds in a manner contrary to the express remittance instructions, particularly when specific invoices have been discharged, is untenable in the present proceedings. Accordingly, the plea of the Applicant stands d....
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....ten communications with my client. That your team and my client were a mutual agreement which was quite beautifully summarized in an email received from your team on 04th January 2023. The above mail can be further numerated as following: • Your firm will issue a credit note of Rs. 40,84,275/- (amount equivalent to debit note number GST/03, GST/04, GST/05, GST/06, GST/07, GST/08, GST/09 Dated 01/12/2021 of my client); • My Client will make the payments to you for balance amount in monthly instalments with each instalment of Rs. 15,00,000/- with last instalment to be the difference in monthly intervals. 14. That believing the said representation, assurance and commitment made by your team, my client was assured but till day the credit note from you is not yet received by which the post-dated cheques could not be issued. 15. That it is submitted that from December 2021, my client has been continuously following-up with your team to provide a credit note equalling the losses my client. 16. That, for the reasons stated herein, you are liable to pay too my client not only Rs. 40,84,275/- and other losses and damages of Rs. 55,00,000/-....
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.... Section 8 demand notice, it is accepted by the Corporate Debtor that they were maintaining a running account, which is extracted as below: XXX 12. That as per your demand notice your demand is totally wrong and disputed because my client maintaining a running account in which my client has paid more than Rs. 9,03,97,920.98 to you since April 2020 and Rs. 12917/-is paid on 31/03/2022 in form of TDS. The payment always made on account which is more than Rs. 9,03,97,920.98 as a lum sum and not paid invoice to invoice so it cannot say that the invoices for payment in question are not paid. Hence your demand notice is totally unjust and disputed considering the above mentioned payments made by my client. 13. That It is further point out that the above demand from your organization is already under dispute and on the said dispute; you admittedly, have had various oral and written communications with my client. That your team and my client were a mutual agreement which was quite beautifully summarized in an email received from your team on 04th January 2023. XXX Thus, we find that the Corporate Debtor itself had accepted, had admitted the position that there wa....
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....ht of appropriation lies with the creditor if the debtor does not indicate in what manner the debt is to be discharged. In such circumstances the creditor has a lot of scope for exercising his rights in such a manner as to put himself in the most advantageous position. It is also a well-settled business practice that in a debt where the principal amount is outstanding and interest has also accrued on the debt, sums paid by the debtor are applied by the creditor first to the interest. 34. To further canvass the argument that the payments were made on an invoice basis and not on a running account basis, the corporate debtor had produced additional documents to show that the financial service provider had discounted the invoices and transferred the money to the account of the operational creditor. 35. We have also gone through a letter on record which is issued by the respondent issued by them to the financial service provider, namely Oxyzo Financial Services Pvt Ltd, with whom they were having a facility of disbursal of purchased finance facilities sanctioned in their favour, which provided certain credit limit to them. Obviously, such service is based on invoices which were ra....
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....ed account. In such a situation, the argument of the Respondent that it was a running account and the Appellant cannot adjust the payments made against the current invoices, against the earlier outstanding is unsustainable. 40. Basis the record and also CD's own admission, we find that such an argument cannot be accepted that it was not a running account. We do not find that this is an issue of dispute. Rather it is an admitted position of the Corporate Debtor that it was a running account. 41. To canvass that there is a dispute, the Corporate Debtor has provided another dimension that the appellant has deliberately failed to disclose that the earlier invoices, against which such alleged adjustments were made pertained to the COVID period and were specifically barred by Section 10A of the Insolvency and Bankruptcy Code, 2016, along with its proviso. In the application under Section 9, the Operational Creditor claimed payment against invoices raised between 5 August 2021 and 9 November 2021. However, the Operational Creditor suppressed a material fact from the Hon'ble NCLT, namely, that during the period 5 August 2021 to 23 November 2021, the Respondent had already made pa....
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....outstanding for a longer period than the subject invoices. In relation to raising the defence of the invoices falling under the prohibited period of Section 10 A does not stand since the subject invoices are not within the said period. 43. We agree with the arguments of the Appellant and we find that the defence is illusory, moonshine and a sheer afterthought and cannot constitute a pre-existing dispute. 44. The Respondent has also claimed that there is deficiency of service due to short supply and therefore there is a dispute and the Respondent has relied upon the judgment of Swiss Ribbons Private Limited & Anr. v. Union of India and Ors (2019) 4 SCC 17. Moreover, the Appellant has contended that the parties were attempting to reconcile the accounts in November 2022, which does not demonstrate any dispute. Furthermore, the Operational Creditor is claiming only the amount with respect to the goods that have been supplied i.e. 135567 kgs only and this was conveyed to the Corporate Debtor vide email dated 05.09.2021. 45. The Respondent also claims that they had issued debit notes for an amount of Rs. 40,84,275/- and which in turn has been admitted by the Appellant. The Appel....
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....thermore, it was in the context that the Operational Creditor has described some of the documents as forged and fabricated in its rejoinder before the Adjudicating Authority. The respondent wanted to clarify, and for that reason it had filed additional documents. We do not find these objections to be sustainable, and we overrule these objections. 48. With respect to claim of interest, the respondent claims that interest cannot be claimed as the Operational Creditor had itself claimed Rs. 1,91,80,773/- as final settlement of payments. The Appellant on the other hand, brings to our notice that the invoice document already mentioned the applicable delay interest. 49. With respect to the claim of damages of Rs. 55,00,000/- the Appellant brings to our notice that there is no justification and it cannot be set off. With respect to the filing of the claim for the damages and pre-litigation mediation. The Appellant brings to our notice that mediation was initiated after demand notice was delivered on 09.02.2022. 50. The Adjudicating Authority while passing the impugned order has come to a conclusion that the application filed by the Appellant - M/s Uniworth Enterprises LLP under S....
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.... demand notice issued by the corporate debtor. Furthermore, assuming that the claim of the Operational Creditor is only Rs. 1,91,80,773, which is admitted by the Corporate Debtor in the final settlement of payments, still it is meeting the threshold as provided under Section 4 of the IBC. The petition meets the criteria even after the so-called damages as claimed by the corporate debtor. Furthermore, there is no dispute with respect to the quality of goods and services. The only issue was with respect to short supply of goods for which there was an agreement between the two parties for issuance of a debit note to be raised by the corporate debtor dated 01.12.2021 for Rs. 40,84,275/- towards alleged price difference in 85,250 kgs. With respect to the other issue of whether it was a running account between the operational creditor and the corporate debtor, we find that there was an admission of a running account in the reply of Section 8 demand notice issued by the Corporate Debtor. Furthermore, the statement of accounts also reflects that payments were made on an ad-hoc basis. We also find that there were no instructions issued by the Corporate Debtor to the Operational Creditor tha....