Tax Management India. Com
                        Law and Practice: A Digital eBook ...

Category of Documents

TMI - Tax Management India. Com
Case Laws Acts Notifications Circulars Classification Forms Manuals SMS News Articles
Highlights
D. Forum
What's New

Share:      

        Home        
 

TMI Blog

Home List
← Previous Next →

2019 (11) TMI 422

..... dicating Authority) Rules, 2016 - HELD THAT:- The facts and circumstances of the case, when examined in the light of extant provisions of Code and the law leaves no iota of doubt that the Corporate Debtor has comrnitted Debt and default in question, which is established by the Petitioner. And there is neither pre-existing nor post-existing dispute made out by the Corporate Debtor. The Adjudicating Authority is satisfied that the instant Application/ petition is complete proviso 2 of Section 9 of the Code ; there is no payment of operational debt; the demand notice in question is delivered and no notice of dispute was received by the Petitioner; a qualified Resolution Professional by name Mr. Deepak Saruparia is suggested as Interim Resolution Professional to conduct the CIRP in respect of Corporate Debtor. Application admitted - moratorium declared. - C.P. (IB) NO. 260/BB/2019 - 24-10-2019 - RAJESWARA RAO VITTANALA, JUDICIAL MEMBER For the Petitioner : Ajit Anekar and Ms. Urvi Vaidya. For the Respondent : Dhyan Chinnappa, Sr. Counsel, Chinmay. J. Mirji and Ms. Charitha. V. ORDER Per: Rajeswara Rao Vittanala, Member (J) 1. The Company Petition bearing is filed by M/ s. CloudWalker S .....

X X X X X X X

Full Text of the Document

X X X X X X X

..... dated 16th January, 2017, 7th March, 2017 and so on and made prompt payment for the same. The LED TVs were sold at a Net Landing Price (NLC). Thereafter, the Corporate Debtor avoided taking delivery of the LED TVs with feeble excuses of lack of warehouse space. The Operational Creditor in good faith warehoused the said LED TVs for a temporary period on behalf of the Corporate Debtor. There was no delay in delivery of the said material, on the other hand, the Corporate Debtor delayed in collecting the LED TVs and in some instances did not collect them at all. (4) In an attempt to gain more profit out of the goods ordered, coerced the Operational Creditor to offer a discount on the LED TVs, which were already imported and warehoused by the Operational Creditor, on behalf of the Corporate Debtor. The Operational creditor facing huge losses and a liquidity crunch agreed to offer the said discount on the condition that the Corporate Debtor forthwith take delivery of the remaining LED TVs purchased by him and make payment for the same. The Operational Creditor has paid excess customs and duties beyond the NLC since the LED TVs were still in the customs warehouse, as the Corporate Debtor .....

X X X X X X X

Full Text of the Document

X X X X X X X

..... tice dated 8th June, 2019 under Section 8 of the Code, which was received by the Corporate Debtor on 13th June, 2019. However, there has been no reply to the same. The Corporate Debtor has not raised any disputes with regard to the amount outstanding to tl-.e Operational Creditor at any point in time. It is alleged that the Corporate Debtor, has consistently and persistently failed, omitted and neglected to discharge its admitted and acknowledged debt and liability to the Operational Creditor despite vigorous follow ups, by repeated requests and reminders, adopted by this Operational Creditor and the Corporate Debtor is unable to pay its debts too even after the receipt of statutory notice as required by the Code. (8) In view of the foregoing, it is apparent that the Corporate Debtor Company is commercially insolvent and is unable to pay its debts. The Corporate Debtor Company is not economically viable and poses a threat to commercially morality. In such circumstances, it is prayed that the Adjudicating Authority may be pleased to permit the Operational Creditor to proceed against the Corporate Debtor Company in Insolvency Resolution proceedings. 3. The Respondent/ Corporate Debto .....

X X X X X X X

Full Text of the Document

X X X X X X X

..... eement clearly states that, the Respondent shall place Purchase Order ("PO") for the supply of the products and the Petitioner shall accept or reject the same. All orders for the products are placed with the Respondent by way of Pos' as detailed above. The Respondent submits that the Respondent has received all the products in accordance with the PO raised by them from the period of January, 2017 to April, 2018 and has made prompt payments for the products received by them. The Respondent has no outstanding due amount payable to the Petitioner. Further, the Petitioner has failed to produce any of the PO's or invoices in support of its alleged claims, this clearly shows that the alleged claim of is false and the same is denied by the Respondent. (4) It is further submitted that, the Clause 2(g) of the Supply Agreement states as follows: "2. Ordering, Planning and Delivery Schedule (g) Unless othenvise agreed by the Flipkart in writing, deliveries to the place of destination until their formal acceptance by Flipkart shall be made at the risk and costs of the Supplier, including all expenses of packaging, storage and transportation of products i.e. deliveries sh .....

X X X X X X X

Full Text of the Document

X X X X X X X

..... 39;s claim. In the absence of full-fledged trial, this Petition cannot be adjudicated and the same deserves to be dismissed. The present Petition is nothing but a sheer abuse of process of law. Despite the receipt of payment by the Respondent in accordance to the invoices raised by the Petitioner, the Petitioner has attempted to misuse IBC at its whims and fancies. The Petitioner is trying to use insolvency proceedings under Section 9 of the IBC, 2016 as a coercive step to arm twist the Respondent to succumb to the illegal demands of the Petitioner. Moreover, it is trite in law that matters related to disputed transactions involving questions of facts, apart from detailed investigation of evidences and trial of the matter are required to be adjudicated under a Civil Suit before the appropriate Court of law and that the IBC cannot be used as the tool to abuse and threaten bona fide Companies such as the Respondent. The very initiation of the present petition by the Petitioner is with the sole motive of making illegal gains by suppressing material facts and playing fraud upon this Tribunal. (6) It is submitted that the Respondent has without prejudice to its rights and contentions ch .....

X X X X X X X

Full Text of the Document

X X X X X X X

..... xports (Private) Limited, Mangalore and Ors vs. Coffee Board, Bangalore, 2001(4) KarlJ 158 at Paras 14, 15 and 16 Ramgad Minerals and Mining Pvt. Ltd and Ors., Vs. Vectra Advanced Engineering Pvt. Ltd., MANU/KA/6261/2018 at Paras 35, 36, 37 & 38 Parmod Yadav and Ors., Vs. Divine Infracon Pvt. Ltd., MANU/NL/0136/2018 at paras 10 and 11. 4. The Petitioner, has filed Rejoinder dated 13th September, 2019, to the said reply filed by the Respondent by inter-alia contending as follows: (1) The Respondent, for the first time has raised the issue of deficiency of service, which is a mere afterthought in order to avoid initiation of CIRP, though all the requirements under the Code for initiation of CIRP are satisfied and complied with by the Operational Creditor (2) The Balance sheet produced at Annexure XI clearly shows that the Corporate Debtor is incurring huge losses and thus statement that it is profit making Company is ex facie false to their own knowledge. Though the Petitioner is not denying that it has received some amounts from the Corporate Debtor for supply of LED TVs, the instant petition is filed for the defaults arise out of non-payment of balance dues, which the Corporate .....

X X X X X X X

Full Text of the Document

X X X X X X X

..... o.1BB1/1PA-001/1P- Professional, Resolution Regn. P00660/2017-18/ 11689, who has also filed written Consent in Form-2 dated 31.07.2019, by inter declaring that he is eligible to be appointed as a Resolution Professional in respect of the Corporate Debtor and that there are no disciplinary proceedings pending against him with the Board or ICAI. Therefore, he urged the Adjudicating Authority to admit the case by initiating CIRP as prayed for. 8. Shri Dhyan Chinnappa, learned Senior Counsel for Respondent, on the other hand, has seriously opposed the admission of the case by raising various averments as mentioned in the Statement of Objection and affidavit as briefly stated supra. He has also pointed out that there is no operational debt and he has relied upon Section 5(21) and Section 3(11) of the Code in respect of the debt claim etc. He has also submitted that even though the basic document ie the Supply Agreement dated 29th December, 2016 is not in dispute, several terms of the Agreement are not complied with by the Operational Creditor in order to claim the amount. He has relied upon the following judgements rendered in the following cases: • Greenhills Exports (Private) Lim .....

X X X X X X X

Full Text of the Document

X X X X X X X

..... / averments on behalf of the Corporate Debtor clearly established that on order made by the Corporate Debtor, the Operational Creditor got imported the goods in question which was duly communicated to the Corporate Debtor too and due to shortages of warehouse facilities by the Corporate Debtor, it could not take delivery of those goods resulting in paying excess excise duty by the Operational Creditor. And the Corporate Debtor cannot simply deny this fact without substantiating contrary. The Corporate Debtor also accepted that it has withheld approximately an amount of ₹ 42,96,668/- towards deficiency in services by the Petitioner. 10. With regard to debt and default in question, the parties have exchanged various emails , which are placed at Annexure IV to VII (page no.43 to 81) of the Petitioner, which inter-alia state that due to the shortage of slot, the Corporate Debtor could not lifting the stock. It is relevant to point out here that one email dated 16.10.2017, sent by Shri Jagdish Rajpurohit from M/S. CloudWalker Streaming Technologies Private Limited (Petitioner) to the Shri Santosh U Kamath (CCC-VS) and to Ms. Sakshi Khandelwal (Senior Manager - Business Development .....

X X X X X X X

Full Text of the Document

X X X X X X X

..... 1.12.2017, Shri Jagdish Rajpurohit from M/S. CloudWaIker (Petitioner) sent an email to Ms. Sita Subramanian (BGM-VS) from M/S. Flipkart India Pvt. Ltd., (Respondent), which reads as under: "Hi Sita, With reference to the pickup view for the inventory in hand for Nov- Feb we have now executed the shipments for November as per orders received. Please see attached excel sheet for status of the pickup plan given by FK to us at the start of the month. However there is a shortfaZZ of approx. ₹ 50 Lacs in the November Pick up. As you know the new NLC around is linked to FK pickup plan and was agreed not to be below these numbers. I know this is the first month of the plan but I am just raising a flag here since we are now entering December and there is a pickup plan of₹ 47,416,OOO from FK which we are planning to execute and I requests you to please support in this by including the shortfall also in December so we come on track. We are now facing a an acute situation of full inventory and no cash flow for the past 2 months due to the non-pick up which is also raising concerns from out bank with whom we have shared your pickup plan and have to ensure this is achieved to av .....

X X X X X X X

Full Text of the Document

X X X X X X X

..... aseless and not tenable, and thus they are liable to be rejected. 13. In support of the petition, Mr. Jagdish Rajpurohit, Director and Authorized signatory of the Operational Creditor Company, has filed an Affidavit dated 28th June, 2019, by inter alia stating that the Operational Creditor has issued a Demand Notice in Form -2, dated 08.06.2019, under Section 8 of the Code to the Respondent, and the same was received by the Respondent on 13.06.2019. However, the Respondent did not choose to respond the said demand notice. Therefore, the Respondent has failed to bring the notice of the Petitioner/Operational Creditor an existence of a dispute or a pendency of suit or arbitration proceedings filed before the service of the Demand Notice. There is no substantive proceeding initiated by the Corporate Debtor either before or after receipt of demand notice. Furthermore, the Respondent/ Corporate Debtor has failed to repay the unpaid operational debt as specified in the Demand Notice sent by the Petitioner/ Operational Creditor. Another supporting affidavit dated 8th July, 2019 confirming the same. The Operational Creditor has claimed for total of amount of ₹ 26.95 Cr. Consisting of .....

X X X X X X X

Full Text of the Document

X X X X X X X

..... order of this Adjudicating Authority, has remitted the case to the Adjudicating Authority by interalia observing as follows: "The Appellant - M/S. Next Education India Pvt. Ltd. (Operational Creditor) filed an application under Section 9 of the 'Insolvency and Bankruptcy Code, 2016' against M/S. K12 Techno Services Private Limited (Corporate Debtor), the Adjudicating Authority (National Company Law Tribunal), Bengaluru Bench by impugned order dated 20th December, 2018 rejected the Application on the ground of 'existence of dispute'. The Appellant brought on record (Forn 5) of 'debt' and 'default'. It is also brought on record the Demand Notice U/ s. 8(1) of the 'J&B Code' was issued on 8th August, 2017. The Adjudicating Authority on the ground that the Respondent has filed reply on 8th September 2017 to the Demand Notice noticed that several disputes had been raised. They have also annexed several correspondences about the defective services provided by the Appellant. However, when we asked, the learned Counsel for the Respondent could not lay hand on any of the correspondence to show that prior to Section 8 notice, the Respondent ( .....

X X X X X X X

Full Text of the Document

X X X X X X X

..... erving as follows: "M/S Gupshup Technology India Pvt. Ltd. (Operational Creditor) filed application under Section 9 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as 'J&B Code') against 'M/S Interpid Online Retail Pvt. Ltd. ' ('Corporate Debtor') which having rejected by Adjudicating Authority (National Company Law Tribunal), Bengaluru Bench, by order dated 8th November, 2018, the present appeal has been preferred by the Appellant. 2. According to the Appellant, it entered into Agreement with Respondent - M/S. Interpid Online Retail Pvt. Ltd., on 8th October, 2014. The Agreement was for a period of one year and as per Clause 3.2 of the Agreement, it would get auto renewed for further period of one year each unless terminated by either party. As per Clause 4.2 of the Agreement, the Appellant would send monthly invoices to the Respondent for the fees accrued in the previous month in accordance with the terms set out in Schedule 3. Thereafter, the Respondent would verify the invoices from the Appellant and thereafter pay such valid invoices within 15 business days. Further, as per Clause 4.5 of the Agreement, the Respondent was li .....

X X X X X X X

Full Text of the Document

X X X X X X X

..... g balance was 57,86, 148/-. The Respondent vide its email dated 5th September, 2017, requested the petitioner to furnish supporting documents in support of its claim, followed by specific reply dated 24th October, 2017 to the above legal notice, by inter alia, raising dispute of claim. Therefore, it is clear that when the Respondent has disputed the amount, as the amount is more than ₹ 1 lakh, the application under Section 9 cannot be rejected. From the aforesaid provision of the Limitation Act, it is clear that the application is maintainable within three years from the date when the right to apply accrues. Since, the Insolvency and Bankruptcy Code, 2016 has come into effect since 1st December, 2016, we hold that the application is not barred by limitation. The Adjudicating Authority while passing the order, failed to appreciate the facts and erroneously held that there is a pre-existing dispute and the claim is barred by limitation. For the reasons aforesaid, we set aside the impugned order dated 8th November, 2018 and remit the case to the Adjudicating Authority for passing appropriate order taking into consideration the records submitted by the Appellant in the light of d .....

X X X X X X X

Full Text of the Document

X X X X X X X

..... agreement in question, and the respondent, on the contrary made claim against the petitioner. Ultimately, the parties in the first instance have to reconcile their own statement of accounts before approaching the Tribunal to invoke provisions of IBC, 2016. The Petitioner, instead of finalising the disputed amounts, has filed the instant Company Petition on untenable grounds. The question of excess payment, and set-off as claimed by the respondent has to be examined in an appropriate proceeding in a case filed in accordance with the law, and the issue cannot be adjudicated in the instant Company Petition. Therefore, we are of considered opinion that there is a dispute with regard to debt in question, and thus it is not a fit case to admit. " 2. The Respondent- 'M/S. Nitesh Estates Limited'- ('Corporate Debtor') has taken plea that it has informed the Appellant by e-mail dated 27th February, 2017 that there are serious issues with respect to the engagement with the Appellant, but such e-mail does not relate to any pre-existing dispute. VWtatever the stand taken by the 'Corporate Debtor' before the Adjudicating Authority, are afterthought which is after r .....

X X X X X X X

Full Text of the Document

X X X X X X X

..... it 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. In case the unpaid operational debt has been repaid, the corporate debtor shall within a period of the self-same 10 days send an attested copy of the record of the electronic transfer of the unpaid amount from the bank account of the corporate debtor or 8 send an attested copy of the record that the operational creditor has encashed a cheque or otherwise received payment from the corporate debtor (Section 8(2)(b)). It is only if, after the expiry of the period of the said j o days, the operational creditor does not either receive payment from the corporate debtor or notice of dispute, that the operational creditor may trigger the insolvency process by filing an application before the adjudicating authority under Sections 9(1) and 9(2). This application is to be filed under Rule 6 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 in Form 5, accompanied with documents and records that are required under the said form. Under Rule 6(2), the applicant is to dispatch by registered post or speed post, a copy of th .....

X X X X X X X

Full Text of the Document

X X X X X X X

..... l creditor or there is a record of dispute in the information utility (Section 9(5)(ii)(d)). Section 9(5)(ii)(d) refers to the notice of an existing dispute that has so been received, as it must be read with Section Also, if any disciplinary proceeding is pending against any proposed resolution professional, the application may be rejected (Section 9(5)(ii)(e))". From the aforesaid decision, it is clear that the existence of dispute must be pre-existing i.e. it must exist prior to issuance of the demand notice or invoice. If it comes to the notice of the Adjudicating Authority that the 'operational debt' is exceeding Rs. I lakh and the application shows that the aforesaid debt is due and payable and has not been paid, in such case, in absence of existence of a dispute between the parties or the record of the pendency of a suit or arbitration proceeding filed before the receipt of the demand notice of the unpaid 'operational debt', the application under Section 9 cannot be rejected and is required to be admitted. 9. In "Innoventive Industries Ltd. v. ICICI Bank and Ann- (2018) 1 SCC 407", the Hon'ble Supreme Court while explaining the provisions of .....

X X X X X X X

Full Text of the Document

X X X X X X X

..... nts, records and evidence of default in part V. Under Rule 4(3), the applicant is to dispatch a copy of the application filed with the adjudicating authority by registered post or speed post to the registered office of the corporate debtor. The speed, within which the adjudicating authority is to ascertain the existence of a default from the records of the information utility or on the basis of evidence furnished by the financial creditor, is important. This it must do within 14 days of the receipt of the application. It is at the stage of Section 7 (5), where the adjudicating authority is to be satisfied that a default has occurred, that the corporate debtor is entitled to point out that a default has not occurred in the sense that the "debt", which may also include a disputed claim, is not due. A debt may not be due if it is not payable in law or in fact. The moment the adjudicating authority is satisfied that a default has occurred, the application must be admitted unless it is incomplete, in which case it may give notice to the applicant to rectify the defect within 7 days of receipt of a notice from the adjudicating authority. Under sub-section (7), the adjudicating .....

X X X X X X X

Full Text of the Document

X X X X X X X

..... the application under Section 9 after notice to the Respondent, so that the Respondent may get an opportunity to settle the matter prior to the admission of the application. The appeal is allowed with aforesaid observations and directions. No costs. 17. So as far the willingness of the Respondent to settle the issue in question is concerned, both the parties have not come with any concrete settlement of the issue. Moreover, it is open to the parties to settle the issue, even after admission of the case, by filing an Application UIs. 12 A of Code. However, the instant Petition cannot be kept it pending for settlement of the issue, as the case was filed as early as on 22nd July, 2019, and the Adjudicating Authority has granted several opportunities to the parties to settle the issue especially the Corporate Debtor claimed it is solvent Company and initiating CIRP against it, would have serious devastating effect on its operations. The Code, under provisions of section 9, inter-alia prescribes time lines for either for admission or rejection of case for 14/7 days, as the case may, therefore, the Adjudicating Authority cannot keep the case pending for the that purpose. 18. The above f .....

X X X X X X X

Full Text of the Document

X X X X X X X

..... rate debtor including execution of any judgment, decree or order in any court of law, tribunal, arbitration panel or other authority; b. transferring, encumbering, alienating or disposing of by the corporate debtor any of its assets or any legal right or beneficial interest therein; c. any action to foreclose, recover or enforce any security interest created by the corporate debtor in respect of its property including any action under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002; d. the recovery of any property by an owner or lessor where such property is occupied by or in the possession of the corporate debtor. e. The supply of essential goods or services to the corporate debtor as may be specified shall not terminated or suspended or interrupted during moratorium period. f. The provisions of sub-section (I) shall not apply to such transaction as may be notified by the Central Government in consultation with any financial regulator. g. The order of moratorium shall have effect from the date of such order till the completion of the Corporate Insolvency Resolution Process. h. The IRP is directed to follow all extant provisi .....

X X X X X X X

Full Text of the Document

X X X X X X X

 

 

← Previous Next →

 

 

|| Home || About us || Feedback || Contact us || Disclaimer || Terms of Use || Privacy Policy || Database || Members || Refer Us ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.
|| Blog || Site Map - Recent || Site Map ||