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M/s Sri Pitambara Enterprises Versus M/s Valeda Herbals Pvt. Ltd.

2017 (8) TMI 424 - NATIONAL COMPANY LAW TRIBUNAL, NEW DELHI

Corporate Insolvency process in respect of Respondent corporate debtor - Insolvency and Bankruptcy Code, 2016 - Held that:- The term “dispute" has to be given a wide meaning and shall contained all type of dispute related to amount of debt or quality of goods. In the present matter, the corporate debtor never admitted the claim of the operational creditor and had raised its own counter claim against the operational creditor. As discussed above corporate debtor has raised dispute with sufficient .....

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not be construed as an expression of opinion on the merit of the controversy and the right of the Applicants before any other forum shall not be prejudiced on account of dismissal of instant application. - COMPANY PETITION NO. (IB)-117(ND)/2017 - Dated:- 14-7-2017 - MS. INA MALHOTRA AND S.K. MOHAPATRA, JJ. For The Operational Creditor : Kunal Sabharwal, Adv. For The Respondent : Ajay Kohli and Ms. Priyanka Ghorawat, Advs ORDER 1. This is an application filed under section 9 of the Insolvency an .....

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defended the application by filing its reply on 04.07.2017. 3. It is the case of the applicant that the applicant operational creditor was appointed by the corporate debtor as its super stockiest for Chandigarh, Punjab, Haryana and Himachal Pradesh in terms of appointment letter dated 12.11.2013. The corporate debtor agreed to give a margin of 8% plus 2% (transportation) of the company invoice value to the operational creditor. As per the terms of the payment, the first supply of the products b .....

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IRST FLOOR, BRAR BAZAR, M.S. ENCLAVE, DHAKOLI, ZIRAKPUR, DIST. MOHALI, PUNJAB-160104, MOB.-9501595712 Subject: Appointment as a Super Stockist. Dear Sir, This is to inform you that in consideration of the credentials represented in your application dated 12th November 2013, you have been appointed as a Super Stockiest, herein after known as 'SS' in this document, for the Area/Town: Punjab, Himachal Pradesh, Haryana for Beauty Parlour and Retail segments of marketing of Valeda Herbal Pvt. .....

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provided to him from SS. The Super Stockiest should not give more than 21 days credit facility to the distributor against cheque. 5. Octroi: The octroy will be reimbursed only on producing the original octroi receipt. 6. Replacement: The damage and expired stock replacement will be purely on the approval of the authorised company's officer in writing. 7. Form C: When sale is made against C Form the same shall be submitted to the Company within 90 days from the date of invoice otherwise the S .....

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done from SS to the company at email sales a veledalife.in and a copy marked to the Area Sales Manager & National Sales Manager at nsm a valedalife.in. 10. Notice Period: Both SS or Company may terminate this agreement with one month's notice in writing and settlement will be made accordingly thereof on terms said herein/specified by the Company from time to time on invoices or otherwise. 11. Jurisdiction: Subject to Delhi jurisdiction only. The above said terms are final as on dated 12t .....

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oducts to the operational creditor and the operational creditor would further supply same to the distributor and the distributor in turn to the Retailers. In some cases it is stated that the supplies were made directly by operational creditor, such as to canteens. 6. Applicant further submitted that as per the commercials designed by the corporate debtor, all expenses towards marketing/promoting and salary of employees of the corporate debtor was to be paid by the operational creditor, who subse .....

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ge the requests of the operational creditor as corporate debtor at the initial stage collected the entire payments including profits of the operational creditor and was least troubled at the apathy of the operational creditor. 8. It is further submitted that the operational creditor on request of corporate debtor supplied products to the canteens (AWWA and ITBP), the corporate debtor appoint a beauty Advisor at AWWA Chandimandir to promote its products. However, the Beauty Advisor resigned from .....

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erational Creditor to take back the dead stock of the products. 9. Further, there were some Distributors/Retail outlet in the market who were holding the products supplied by the Operational Creditor as there is no sale due to lack of market support from the Corporate Debtor. It is alleged that the Corporate Debtor simply dumped its products in the market and the aim of the Corporate Debtor has been fulfilled once it gets the payment of its products from the Operational Creditor. 10. It is the c .....

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y operational creditor to the corporate debtor seeking payment of dues of ₹ 17,03,797 with 18% interest, in reply of which the corporate debtor on 24.01.2017 sent a letter in which the corporate debtor denied the debt and raised a counter claim of ₹ 46, 88,832. 12. A demand notice under section 8 was also issued to the corporate debtor on 13.02.2017, in reply of which the corporate sent a further reply dated 02.03.2017, in which a claim of ₹ 12,87,002/- has been raised by the c .....

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7,002/- with interest @ 18% per annum against the applicant. 14. It is further submitted by the corporate debtor that invoking jurisdiction of the Tribunal, is a mere tactics to arm twist the corporate debtor, so that the Corporate debtor will not be able to institute appropriate recovery proceeding to recover the said claim from the, operational creditor. 15. It is also their case that the Respondent Company does not fall within the scope and ambit of the definition of Corporate Debtor , as con .....

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y decline in sales at the end of the distributors and/or retailers appointed by the applicant is a direct result of shortcomings in decisions taken by the applicant. 17. It is further emphasised that any replacement of the product can only be made in two conditions firstly, damage of products and secondly in case of expiry of shelf life of product . Even in these two conditions the applicant could at best sought for replacement of the products and that too subject to the discretion of the author .....

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itted that the Respondent company was under no obligation to reimburse any cost or expenses incurred by the applicant towards marketing, display, promotion of the products, payment of the salaries or towards payment of expenses towards hiring of beauty advisors. Further, it is submitted that some debit notes were for alleged shortage/damage of material and alleged rate difference. The respondent company upon the assessment come to further conclusion that the expenses/costs that were depicted to .....

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. Heard the parties and perused the case records including additional documents filed by the applicant. 21. It is seen from the case records that the claim of the operational creditor is not admitted but disputed by the corporate debtor which is evident from the reply of the legal notice dated 21.01.2017 and reply to demand notice dated 02.03.2017. Respondent company has contended that as no principal sum is payable by them to the applicant, the question of payment of any interest also does not .....

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s by third parties and for the lack of promotional efforts for sale of products etc. Disputes on the aforesaid issues have been specifically raised for consideration. Moreover it is the case of respondent that as per the mutually agreed contract payment in respect of subsequent orders should have been made within a period of 21 days thereof. Therefore, the claim of applicant for set off /adjustment of ₹ 27,66,664/- at a belated stage is clearly a violation of the agreed terms of the contra .....

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ted that all the replacement claimed has not been approved by the authorised officer of the Respondent Company. In such scenario it can only be said that the claim of operational debts in question are not free from dispute. 23. Sub-section (6) of Section 5 of the code defines dispute , to include, unless the context otherwise requires, a suit or arbitration proceedings relating to: (a) existence of amount of the debt; (b) quality of goods or services; (c) breach of a representation or warranty. .....

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does a 'dispute' and 'existence of dispute' means for the purpose of determination of petition under Section 9 of The Code. Hon'ble Appellate Tribunal observed and held as follows:- 17. For the purposes of Part II only of the Code, some terms/words have been defined. Sub-section (6) of Section 5 defines dispute , to include, unless the context otherwise requires, a dispute pending in any suit or arbitration proceedings relating to: (a) existence of amount of the debt; (b) qu .....

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ited to only two ways of disputing a demand made by the operational creditor, i.e. either by showing a record of pending suit or by showing a record of a pending arbitration. The intent of the Legislature, as evident from the definition of the term dispute , is that it wanted the same to be illustrative (and not exhaustive). If the intent of the Legislature was that a, demand by an operational creditor can be disputed only by showing a record of a suit or arbitration proceeding, the definition o .....

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the pendency of the suit or arbitration proceedings,' the result is disputes, if any, applies to all kinds of disputes, in relation to debt and default. The expression used in sub-section (2) of Section 8 of the 'I & B Code' 'existence of a dispute, if any,' is disjunctive from the expression 'record of the pendency of the suit or arbitration proceedings'. Otherwise, the words 'dispute, if any', in sub-section (2) of Section 8 would become surplus usage. 2 .....

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hellip;……… 25. The true meaning of sub-section (2)(a) of Section 8 read with sub-section (6) of Section 5 of the I & B Code' clearly brings out the intent of the Code, namely the Corporate Debtor must raise a dispute with sufficient particulars. And in case a dispute is being raised by simply showing a record of dispute in a pending arbitration or suit, the dispute must also be relatable to the three conditions provided under sub-section (6) of Section 5 (a)-(c) only .....

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same, being pending prior to the notice of demand under sub-section 8 of the 'I & B Code'. It is afundamental principle of law that multiplicity of proceedings is required to be avoided. Therefore, if disputes under sub-section (2)(a) of Section 8 read with sub-section (6) of Section 5 of the 'I & B Code' are confined to a dispute in a pending suit and arbitration in relation to the three classes 20 under sub-section (6) of Section 5 of the I & B Code it would violat .....

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