TaxTMI 
TaxTMI 
2025 (2) TMI 1981
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....tional Creditor- Appellant for initiation of Corporate Insolvency Resolution Process ("CIRP" in short) of the Corporate Debtor-Respondent. Aggrieved by the impugned order, the Appellant has come up with the present appeal. 2. We have heard Shri Krishnendu Datta, Ld. Sr. Advocate for the Appellant and Shri Virendra Ganda, Ld. Sr. Advocate, representing the Respondent. 3. Giving a brief factual overview of the present matter at hand, Shri Krishnendu Datta, Ld. Sr. Advocate for Appellant submitted that M/s Chemical Suppliers India Ltd-Operational Creditor is in the business of supplying chemical products and had entered into a business arrangement with M/s GLS Films Industries Pvt. Ltd .- Corporate Debtor for supply of chemicals. Goods were supplied by the Appellant-Operational Creditor from time to time and invoices were raised. The Operational Creditor had sent eight invoices dated 27.03.2021 to 26.07.2021 amounting Rs 1,72,04,137/- to the Corporate Debtor for goods received by them. Since the Corporate Debtor had defaulted in making payment of invoices within 60 days from the date of delivery, the Appellant had charged interest @24% p.a. as per invoice conditions which amount....
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.... vs Gospell Digital Technologies Co. Ltd. in CA(AT)(Ins) No.583 of 2024 wherein it has been held that once debt confirmation is made by the Corporate Debtor under invoices submitted by the Operational Creditor, it tantamount to valid and proper admission of debt and default in the eyes of law. 5. Refuting the contentions made by the Appellant, Shri Virendra Ganda, Ld. Sr. Counsel of the Respondent submitted emphatically that the Adjudicating Authority had rightly rejected the Section 9 application on coming to the conclusion that there was a pre-existing dispute between the parties. It was submitted that the Operational Creditor had supplied two consignments of chemical solvents on 09.04.2021 and 10.04.2021 which were not of the requisite quality and standards which in turn led to defective printing of plastic films causing huge loss to the Corporate Debtor. Even the subsequent batch of goods delivered on 21.06.2021 continued to remain defective and hence returned to the Operational Creditor. It was also submitted that sample of the material was sent to a third-party lab by the Respondent which carried out due tests and reported suspended particles in the solvent supply by the O....
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....rongly contended that all such issues ranging from damages caused to the Respondent due to supply of contaminated material and quantum of debt etc are triable issues which are already pending adjudication before the Civil Court which amounts to a pre-existing dispute. The Ld. Counsel for the Respondent also asserted that an Operational Creditor can justifiably seek initiation of CIRP only where no real dispute exists between parties and the provisions of IBC cannot be turned into a debt recovery proceeding to jeopardise the functioning of a solvent and healthy Corporate Debtor. 7. We have duly considered the arguments advanced by the Learned Sr. Counsels for both the parties and perused the records carefully. 8. Before we come to our analysis and findings, we would like to bear in mind the guiding principles laid down by the Hon'ble Supreme Court in Mobilox Innovations Put. Ltd. Vs. Kirusa Software Private Limited (2018) in C.A. No.9405 of 2017 and the relevant paras are extracted as hereunder: "33 ...... What is important is that the existence of the dispute and/ or the suit or arbitration proceeding must be pre-existing i.e. it must exist before the receipt of ....
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....st of "existence of a dispute", it is clear that without going into the merits of the dispute, the appellant has raised a plausible contention requiring further investigation which is not a patently feeble legal argument or an assertion of facts unsupported by evidence. The defense is not spurious, mere bluster, plainly frivolous or vexatious. A dispute does truly exist in fact between the parties, which may or may not ultimately succeed, and the Appellate Tribunal was wholly incorrect in characterizing the defense as vague, got-up and motivated to evade liability." 9. Coming to the statutory scheme as contained in Sections 8 and 9 of the IBC, we notice that Section 8 requires the Operational Creditor, on occurrence of a default by the Corporate Debtor, to deliver a Demand Notice in respect of the outstanding Operational Debt. Section 8(2) lays down that the Corporate Debtor within a period of 10 days of the receipt of the Demand Notice would have to bring to the notice of the Operational Creditor of the existence of dispute, if any. Section 9(1) of IBC further provides that if the Operational Creditor does not receive payment from the Corporate Debtor or notice of the dispute u....
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....no denial by them with respect to the amount claimed by the Appellant of Rs 1.72 Cr. Thus, by their own computation, the Corporate Debtor had themselves admitted and acknowledged their liability of Rs 1.72 Cr which represented the principal outstanding amount. Their computation in the said tabular chart however does not reflect the interest amount claimed by the Appellant as per the terms and conditions mentioned on the invoices. As per these terms and conditions, the Corporate Debtor was required to pay interest @24% p.a. in the event of delay on the payment of invoice amount beyond prescribed number of days. Basis this calculation, the interest amount of Rs 1,20,89,086/- for delay in payment was claimed by the Appellant. It is the case of the Appellant that since an aggregate amount of Rs 2.92 Cr. including principal and interest remains unpaid, default also stands established. Furthermore on 01.07.2021 credit was given for Rs 35.59 lakhs by way of credit note and a sale discount by journal entry of Rs 1.66 Cr was given on 31.07.2021 as placed at page 68 of APB. We notice that while the credit note of Rs 35.59 lakhs has been reflected by the Respondent in their computation, th....
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.... 14. In view of the above discussion, this Bench is of the considered view that there exists a dispute between the parties prior to the issue of the demand notice, which necessitates a detailed investigation of documents and adducing of evidence from the all concerned, which is beyond the scope of the summary jurisdiction of this Adjudicating Authority." It is clear from a plain reading of paragraphs 13 and 14 above of the impugned order that the Adjudicating Authority came to the conclusion that there was pre- existing dispute between the two parties warranting further investigation which was beyond the remit and scope of the summary jurisdiction of this Adjudicating Authority and hence dismissed the Section 9 application. 16. We now proceed to examine the various pre-existing disputes which have been raised by the Respondent. One of the principal grounds for dismissal of the Section 9 petition by the Adjudicating Authority is an e-mail dated 16.10.2021 complaining about the defective materials supplied by the Operational Creditor. Though this letter has been noticed at paragraph 9 of the impugned order, at the cost of repetition, we wish to reproduce the same as h....
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....ing dispute. However, it was rebutted by the Appellant that they had already issued a credit note to the Corporate Debtor of Rs 1.66 Cr. qua these supplies. This adjustment entry had not only been made in their own ledger account but the Corporate Debtor had also incorporated the credit note in their ledger account of 31.03.2021. When we see the ledger account of the Corporate Debtor as placed at page 145 of APB, we find this entry of Rs. 1.66 Cr. where in the remarks column against this entry, it is clearly shown that the adjustment was on account of "stringent smell & impurity in solvents". This shows that there is a clear admission on the part of the Corporate Debtor that the Operational Creditor had incorporated the credit note of Rs 1.66 Cr albeit with a subsequent caveat that the original credit note was not delivered. This fact has also been clearly recorded by the Adjudicating Authority at para 10 of the impugned order wherein it has been recorded: "Further, the respondent has submitted that though upon repeated objections, the Appellant incorporated the credit note of Rs 1.66 crore, however, the Original of the said Credit Note and tax paid note was not delivered to it .......
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....unishable u/ s 420 of IPC. You have been sending me threatening mails since last 2-3 months although I have asked you on numerous times to come to the factory and reconcile the accounts but somehow you did not want to come and face the reality. We have lost so many business opportunities due to poor quality of chemicals supplied by you during last 2-3 years. Since business are done on good faith basis and due to your association with us since last 4-5 years we have given you so many chances and you have also accepted the rejections by issuing us Credit notes and giving rebates on rates for supplies from time to time. Now you are taking advantage of our good relation and have started harassing me and my Directors by issuing demand notices, sending wrong statement of accounts and charging exorbitant interests. Rest assure we will take necessary action against you if you do not come to the factory and reconcile the accounts and take stock of rejected materials lying with us since last 7-8 months." (Emphasis supplied) 21. When we look at the above letter, we find that the Corporate Debtor has mentioned about omission of the credit note for Rs 1.66 Cr. However, when we lo....
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....ice served by the Adjudicating Authority would not constitute a prior and pre-existing dispute contemplated under law as a defence to the initiation of Corporate Insolvency Resolution Process more so when the contemporary record in regard to transactions between the Corporate Debtor and the Operational Creditor at the time of delivery of goods or immediately thereafter does not demonstrate raising of any dispute with respect to quality of goods supplied by the Operational Creditor." 23. When we look at the material on record, we find that the Corporate Debtor had issued a debit note dated 31.12.2021 for Rs 2.42 Cr. as placed at page 173 of APB. The Corporate Debtor in their reply to the present appeal has reiterated at page 11 therein that a debit note was issued seeking adjustment of Rs 2.42 Cr. on 31.12.2021. Admittedly, the debit note bearing invoice No. PR 275/FY2122 amounting to Rs 2.42 Cr is dated 31.12.2021 which date is clearly after issue of Demand Notice. This debit note was therefore clearly issued by the Respondent after the date of filing of Section 9 application. Chronologically seen it would be misconstruing of facts to treat these debit notes as pre-existing disp....
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....est on delayed payment, once reflected in the invoice, the same acquires the character and nature of claim in terms of Section 3(6)(b) of IBC which includes a right to remedy for breach of contract under any law for the time being in force, if such breach gives rise to a right to payment, whether or not such right is reduced to judgment, fixed, matured, unmatured, disputed, undisputed, secured or unsecured. A liability or obligation in respect of such a claim which is due from any person is a debt in terms of Section 3(11) of IBC. We also find that the Operational Creditor had issued debit notes in respect of interest amount to the Corporate Debtor which have been placed from pages 60- 66 of the APB. Hence, we are not persuaded to accept the contention of the Respondent that levy of interest on delayed payment made the transactions disputed. 26. This now brings us to the reliance placed by the Adjudicating Authority on the police complaint of 27.09.2021 filed by the Corporate Debtor as a proof of pre-existing dispute. It was submitted by the Respondent that this Tribunal in Anil J Nemavaarkar Vs M/s Kumar Builders Mumbai Reality Put. Ltd. in CA(AT)(Ins)No. 330 of 2022, has held ....
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.... of the Managing Director of the Appellant- Operational Creditor in the said suit, the pre-existing dispute has been corroborated. This contention was opposed by the Appellant and contended that this cannot be treated as a pre-existing dispute since the civil suit was filed much after filing of Section 9 application. In support of their contention reliance has been placed on the judgement of this Tribunal in the matter of State Bank of India Vs Abhijeet Ferrotech Limited in CA(AT)(Ins) No.690 of 2023 wherein it has been held DRT proceedings which are still inconclusive cannot be a ground to hold Section 7 Application as barred. 30. When pointedly asked to clarify during our hearings, the Learned Sr. Counsel for the Respondent admitted that the cross-examination report in the civil suit which has been relied upon by the Respondent has not reached its culmination and that the additional documents pertaining to the civil suit filed by the Respondent on 23.04.2024 and 15.06.2024 before this Tribunal to corroborate pre-existing disputes did not form part of the records before the Adjudicating Authority. We are of the considered view that a Civil Suit filed after filing of Section 9 a....