TMI Blog2020 (10) TMI 918X X X X Extracts X X X X X X X X Extracts X X X X ..... etition is maintainable - If a dispute truly exists in fact and is not a hypothetical or an illusory one, then, the Adjudicating Authority is to reject the Application. A defence being a mere bluster can also be rejected by an Adjudicating Authority . It cannot be lost sight off that an unpaid Demand Notice is evidence of Debtor s inability to pay its debts for the purpose of bankruptcy proceedings and it is a just ground for a creditor to justify the filing of the petition. An Adjudicating Authority is not to decide how much due is. Further, an Adjudicating Authority is required to examine before admitting or rejecting an application u/s 9 of the Code as to whether the dispute raised by the Corporate Debtor qualify as a dispute as defined under sub-section (6) of Section 5 and whether notice of dispute given by the Corporate Debtor satisfies the conditions prescribed in sub-section (2) of Section 8 of the Code. Further, the existence of an undisputed sum is a condition precedent for initiating Corporate Insolvency Resolution Process - In the present case, no reply was issued to the Demand Notice dated 06.04.2018 of the First Respondent / Operational Cr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the petitioner. It is also a matter of record that the Corporate Debtor has made a part payment and amount of ₹ 17,74,977/-. Thus, there is remaining balance of ₹ 9,42,841/- as on 22.09.2017. The Petitioner, by filing rebuttal document has refuted the allegation of the Corporate Debtor in respect of low quality of goods and defective material and produced copies of communication through email / WhatsApp screenshot for perusal of this Court along with its rebuttal documents which shows that there was certain communication/correspondence entered between the Petitioner and the Corporate Debtor for making enquiry about the supply of material to be procured (i.e. M.S. steel angle) from the petitioner company the same was duly delivered to the Respondent / Corporate Debtor. Thereafter, the Petitioner demanded for making payment of the supplied goods. The Respondent through its representative (Director) Mr. Rajubhai Panchal merely respondent by making such comment / remark in WhatsApp screen I will call you later . Thus, on being frequently requested by the Petitioner, the Corporate Debtor made only such evasive reply that he would make call to the Petitioner later and but ne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d and only INR 9,42,841 being the balance sum to be paid since 22.09.2017. 5. It is the case of the Appellant that the Demand Notice under Form 3 and 4 dated 06.04.2018 was duly served and that the total amount of Debt mentioned therein was INR 18,63,840. However, in the Application before the Adjudicating Authority the total sum was mentioned as INR 27,17,818 and the discrepancy in the amount leads to the conclusion that post payment of INR 17,74,977 only a sum of 88,863 was left, which is less than the threshold limit of INR Rs. one Lakh. 6. The stand of the Appellant is that the amount in default as specified in the Demand Notice is to be in consonance with the Application filed and the invoices sent. In the present case, if the total sum is taken to be INR 18,63,840 and the balance sum paid is taken as INR 17,74,977, then the sum in default cannot be what is being claimed i.e. INR 9.42 Lakhs and it will be INR 88,863. Therefore, because of the default in Demand Notice which ought to have been noticed by the Adjudicating Authority , the impugned order is to be set aside. 7. The Corporate Debtor before the Adjudicating Authority in its reply had mentioned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chnologies Private Ltd. wherein it was held that the amount in default as specified in the Demand Notice must be in consonance with the Application filed and the invoices sent but, in this case there is a serious discrepancy and a fatal error in the total amount of Debt between the Demand Notice and the application filed under Section 9 of the I B Code. 11. It is represented on behalf of the Appellant that if the amount due, if taken to be the sum as mentioned in the Demand Notice , then, the sum remains to be paid to the First Respondent / Operational Creditor is less than Rs. one Lakh and as such, the Insolvency could not have been triggered. 12. The Learned Counsel for the Appellant comes out with a plea that the amount specified in the default notice i.e. the statutory notice is the trigger point and if the amount described therein is faulty and subsequently, the First Respondent / Operational Creditor seeks to correct the defect and increase the sum of default, it is a clear case of after thought and the same cannot be permitted. Also that, the notice on the basis of Section 8 of the I B Code, from the beginning of proceedings, in the present case a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the e.mail dated 22.08.2020 (vi) True copy of the e.mail dated 16.07.2020 (vii) True copy of the letter dated 17.04.2017 (viii) True translated copy of the notice dated 02.04.2019 issued by VUDA regarding sealing of the premise (ix) True translated copy of the FIR dated 09.08.2020 on the file of Police Station Jawahar Nagar, Vadodara (x) Proof of service of additional affidavit and these additional documents came to the knowledge of the Appellant after passing of the impugned order by the Adjudicating Authority and that the Appellant was precluded from filing the same before the Adjudicating Authority . 16. Further, the Appellant / Applicant was genuinely unable to file the aforesaid documents before the Adjudicating Authority to show that there was a pre-existing dispute in regard to the quality of steel materials supplied and in the interest of justice, the additional documents in question ought to be received by this Tribunal in the present Appeal. Added further, the documents in issue goes against the admission of Corporate Insolvency Resolution Process and the civil death of the Corporate Debtor . 1st Respondent Submissions 17. The default mentioned in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 07.06.2017 400000 07.06.2017 400000 13.06.2017 35627 124 24.07.2017 859796 11.09.2017 50000 469 15.09.2017 133045 FY2017-18 Total 1863840 885627 Grand Total 2717818 1774977 20. The aforesaid table clearly exhibits that the sum in default is ₹ 9,42,841/- and it is the same amount that was specified in the demand notice as wel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he copy of an invoice demanding payment of such amount to the corporate debtor in the form set out in Rule 5 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 read with Form 3 or 4, as the case may be [Section 8(1)]. Within a period of 10 days of the receipt of such demand notice or copy of invoice, the corporate debtor must bring to the notice of the operational creditor the existence of a dispute and/or the record of the pendency of a suit or arbitration proceeding filed before the receipt of such notice or invoice in relation to such dispute [Section 8(2)(a)]. 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 the demand notice or invoice, as the case may be. 25. The Learned Counsel for the First Respondent adverts to the decision of Hon ble Supreme Court in Macquarie Bank Ltd. V. Shilpi Cable Technologies Ltd., reported in (2018) 2 SCC page 674 wherein it is observed as follows:- 13. The first thing to be noticed on a conjoint reading of Sections 8 and 9 of the Code, as explained in Mobilox Innovations (P) Ltd. V. Kirusa Sof ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Corporation for the contract, the true copy of e.mail dated 01.10.2017 and 14.10.2017 and true copy of e.mail dated 16.07.2017 and the true copy of the letter dated 17.04.2017 that they do not bind it and also that none of this documents show that the dispute was raised by the Appellant with the First Respondent. 28. There is no pre-existing dispute in the instant case and it is very vital to note that no reply was issued to the demand notice of the First Respondent / Operational Creditor and in reality, the pre-existing dispute ought to have been in existence when the demand notice of the Operational Creditor as per Section 8(1) of the I B Code was issued by the Operational Creditor . In terms of the ingredients of Section 8(2) of the I B Code, the Corporate Debtor is to bring to the notice of the Operational Creditor about the existence of a dispute and / or the record of the pendency of a suit or arbitration proceeding filed before the receipt of such notice or invoice in relation to such dispute within a period of ten days from the date of receipt of such demand notice or copy of invoice(vide Section 8(2)(a) of the Code) 29. The First Respondent / Operati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce on an issue/point not raised in the pleadings and in case, such evidence has been adduced or a finding of fact has been recorded by the court, it is just to be ignored. Though it may be a different case where inspite of specific pleadings, a particular issue is not framed and the parties having full knowledge of the issue in controversy lead the evidence and the court records a finding on it. 32. The comments made by Indian Oil Corporation do not bind the First Respondent and the same cannot be put against it. The hand written note purportedly made by the Appellant s customer is part of an internal communication between the Appellant and their customer and that the First Respondent does not have any legal relationship with the Indian Oil Corporation . Except for the e.mails annexed as A7 in IA No. 2375 of 2020, all other documents were in possession of the Appellant much earlier to the date on which the order was reserved by the Adjudicating Authority and hence, it cannot be said that the Appellant was unable to submit the documents in question before the Authority. As such, the IA No. 2375/2020 seeking to place on record the additional documents is unsustainable in la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty seeking review of the order dated 26.08.2020 and the same is yet to be heard. 36. The second Respondent upon verification of the claim filed by the First Respondent had admitted a sum of INR 17,10,179/- inclusive of interest as on the date of initiation of CIRP. The financial statement and the extract of Books of Accounts of the Corporate Debtor as on 31.03.2019 shows an amount of INR 9,17,434/- as an outstanding one towards the First Respondent. Evaluation 37. At the outset, it is to be pointed out that in Form 3 (see Clause (a) of sub-rule (1) of rule 5) Form of Demand Notice/Invoice Demanding Payment Under the Insolvency and Bankruptcy Code, 2016 under the caption particulars of operational debt in S.No.1 the total amount of debt is mentioned as ₹ 18,63,840/- sales account (GST 18%) 22.09.2017. In S.No. 2, the amount claimed to be in default is described as 9,42,841/-(repayment due date 22.09.2017). 38. It comes to be known that an additional affidavit pursuant to an order dated 28.02.2019 passed by the Adjudicating Authority was filed by the Proprietor of the First Respondent, before the said Authority whereby and whereunder it was mentione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on that count, the action of the Adjudicating Authority is beyond its jurisdiction this Tribunal pertinently points out that the amendment in question was not in the character of varying the debt amount and very rightly the Adjudicating Authority while allowing the amendment to the main petition had observed that no prejudice would be caused to the Corporate Debtor by allowing the amendment in issue and, therefore, the contra plea taken on behalf of the Appellant is not acceded to by this Tribunal. 43. Be it noted, that in a given petition filed by the Operational Creditor there is a heavy burden on the Corporate Debtor to show that the dispute is a real and genuine one. Further, where a petition of the Operational Creditor was opposed by the Corporate Debtor on the ground that the dispute existed between the parties regarding the quality of the goods supplied but failed to raise the dispute within ten days of the receipt of Statutory Notice under Section 8 of the I B Code, it is held that the petition is maintainable. 44. If a dispute truly exists in fact and is not a hypothetical or an illusory one, then, the Adjudicating Authority is to reject the Appli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dent / Operational Creditor and that the aforesaid documents do not anywhere indicate that the dispute was raised by the Appellant with the First Respondent. To put it precisely, substantial grounds need to be established to show that the debt is disputed as per decision Feldman V. Nissim (2010 EWHC 1353. 49. At the Appellate stage, to remove certain lacunae in a litigant s record an additional evidence is not to be permitted. Further, the placing of letters / communications as additional documents in an Appeal squarely depend upon whether the same are required to a Tribunal to enable it to deliver a judgement. If the documents sought to be placed on record are absolutely unnecessary to decide the controversy between the parties are irrelevant for the issues to be decided, they cannot be permitted to be received. 50. Also, that the non-realisation of the importance of the documents due to inadvertence or lack of proper legal advice would not bring the case within the expression other substantial cause under order 41 Rule 27 of the Civil Procedure Code, as per decision Haryana State Industrial Development Corporation V. Cork Manufacturing Company reported in AIR ..... X X X X Extracts X X X X X X X X Extracts X X X X
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