TaxTMI 
TaxTMI 
2026 (9) TMI 202
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....t. Hence we have got no other option except to proceed to hear the Company Appeal itself on its merits. 3. Brief facts, which could be culled out from the records of the Company Appeal are that, the Appellant is an international trading company, and it executed a contract with the Respondent for supply of 300 Metric Tonnes of Indian raw cotton Grade SLM, valued at a invoice value of USD 453,177.57 to M/s. Ada Fios in Portugal and consequent to it, executed an international shipment contract on 16.12.2016, with the Respondent. 4. The Appellant contends that, during the execution of the contract, disputes arose between the parties pertaining to the quality of 291 Metric Tonnes of goods supplied by the Respondent and consequently, the parties agreed to settle the controversy in which the Respondent was to pay an amount of USD 74,342 to the Appellant. 5. Its upon the aforesaid settlement, the appellant on 30.06.2017, raised a debit note in the name of the Respondent, the Corporate Debtor for USD 74,342, which was acknowledged by the Corporate Debtor / Respondent vide its correspondence of 28.07.2017, admitting their liability. The relevant portion of the said e-mail by the Res....
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....dged the existence of a debt and had assured to remit the amount at the earliest, by stating that, they were anticipating for certain approvals, and upon the completion of the necessary formalities, they would be making the payment of 73,000 USD plus amend charges. This communication of 07.12.2017, would yet again amount to be an admission by the Respondent of their liability, as would be apparent from its contents which are extracted here under: We are only liable to Portugal claim and Phungphu claims. We will and shall not allow to remit the balance payments as stated by you. If you threaten us about sharing the internal business issue to organisations you mentioned we also need to look for legal angle against PDC damages done to us along with breach of general agreement. We once again inform that we are waiting for certain approvals and we shall do the payment of 73000+ Amend charges. If you want to cut the string and let it loose its completely upto your state. We are already facing issues in pakistan market due to that Rehan Shoukat and your way of handled things and we shall also go in the same way with Posco to canvas what you have done to us. 11. When t....
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....dent for a debt of 74,342 USD, which became payable by the Corporate Debtor, to the Appellant in terms of the settlement agreement, and which was defaulted on 20.09.2017. 14. Notices were issued on 06.07.2018 on the proceedings under Section 9 of I&B Code, in which the Respondent filed their reply on 19.07.2018 making vague assertions pertaining to the sustainability of the proceedings, on the ground that, there happens to be a pre-existing dispute, which, the Appellant contends, were raised for the first time without establishing the same. Pleadings were exchanged and written submissions were preferred by the parties. 15. It is at a belated stage of the Section 9 proceedings, that certain additional documents were served on the Appellant by the Respondent, through a memo dated 11.09.2018, and the same was filed before Learned NCLT only on 27.11.2018 after several specific orders by Learned NCLT and that too, unsupported by an affidavit. The said affidavit was later on supplied in December 2018. After the exchange of pleadings, the application under Section 9 of the Code was rejected by the impugned order dated 11.09.2019 passed by the Tribunal. Hence the Company Appeal. 1....
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.... to seek initiation of CIRP. He has contended that Learned NCLT wrongly took a view that since the settlement agreement of 01.09.2017 showed the existence of certain disputes with regards to the quality of the goods, the matter has to be settled through arbitration route and not through the provisions of the Code because the said dispute stood settled in form of an agreement to pay USD 74,342/- and it has been acknowledged by the Respondent from time to time, without disputing its quantum and payability. 18. The Appellant has further contended that, Learned NCLT has erred in holding that initiation of CIRP is for benefit of all creditors and not for the benefit of the Appellant alone as the dispute on hand is in personam and as per the ratio laid down by Hon'ble Apex Court in B002 Allen and Hamilton Inc. Vs. SBI Home Finance Limited & Ors (2011) 5 SCC 532, such disputes are to be settled through arbitration route as provided in the agreements and not through adjudication under the Code. He has submitted that Learned NCLT erred in holding that the Appellant was required to produce evidence that the Respondent owed payment to other creditors which is not envisaged under the Co....
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....ging the impugned order one by one. The finding which has been recorded by the Learned Tribunal in para-10 of the impugned order about the effect of the existence of an arbitral clause, taking it as to be creating a hurdle in invocation of the proceedings under Section 9 of the Code is an absolute misinterpretation of the settled law for the reasons extended hereafter. It is not in doubt that remedy under arbitration is a remedy, which has been settled between the parties on the basis of the unanimity of thought and expression given in the shape of a arbitration clause and that is exclusively a personal arrangement by consensus, made between the two contracting parties, which are acceptable to them, the invocation of which would only be subject to satisfying the conditions under the terms of the contract. Given the fact that, the existence of an arbitration clause, as already observed by us is a private legal remedy and is not statutorily prescribed under law to be mandatorily resorted too, any arrangement for resolving of a dispute by way of an arbitration clause which is a private legal remedy, will not deprive the Appellant to invoke a statutory remedy, which is otherwise reserv....
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....er laws as provided under Section 238 of the IB Code needs no elaboration. In that view, notwithstanding the fact that the alleged corporate debtor filed an application under Section 8 of the 1996 Act, the independent consideration of the same dehors the application filed under Section 7 of IB Code and materials produced therewith will not arise. The adjudicating authority is duty-bound to advert to the material available before him as made available along with the application under Section 7 of IB Code by the financial creditor to indicate default along with the version of the corporate debtor. This is for the reason that, keeping in perspective the scope of the proceedings under the IB Code and there being a timeline for the consideration to be made by the adjudicating authority, the process cannot be defeated by a corporate debtor by raising moonshine defence only to delay the process. In that view, even if an application under Section 8 of the 1996 Act is filed, the adjudicating authority has a duty to advert to contentions put forth on the application filed under Section 7 of IB Code, examine the material placed before it by the financial creditor and record a satisfaction as ....
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....f the Code, is that the debt owed to him has to be in nature of an operational debt, which is a claim arising out of provision of goods, services, employment or govt dues. Learned Tribunal held the Appellant to be 'not an Operational Creditor' on the grounds that, he didn't provide any goods and services to the Corporate Debtor. However this is absolutely contrary to the facts because as per terms of the contract and the settlement agreement, it clearly stated that the parties were engaged in the transaction of supply of raw cotton, which amounts to provision of the goods, as per Section 5 (21) of the I&B Code and therefore the amount that fell due to be paid in the course of such transaction will have to assume the character of operational debt. If we look into the settlement agreement dated 01.09.2017, the contents of the said agreement clearly state that, the basis of the claim between the parties was on account of certain disputes in relation to the goods that were supplied. In that view of the matter, and in the light of the definition given under Section 5 (21) of the Operational Debt, the amount agreed to be paid by the Respondent which arose of supply of the goo....