TMI Blog2020 (4) TMI 511X X X X Extracts X X X X X X X X Extracts X X X X ..... kh 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. Merely because the 'Corporate Debtor' has disputed the claim by showing that there is certain counter claim, it cannot be held that there is pre-existence of dispute - when the facts of the instant case are considered, it is observed that having received the statutory notice u/s 8 from the Operational Creditor, the Corporate Debtor had sent a reply within 10 days of receipt of the notice. This Adjudicating Authority is satisfied that the Operational Creditor has proved its case by placing evidence that default has occurred for which the Corporate Debtor was liable to pay - Petition admitted - moratorium declared. - CP (IB) NO. 450/9/HDB/2019 - - - Dated:- 5-2-2020 - K. Anantha Padmanabha Swamy, Judicial Member And Dr. Binod Kumar Sinha, Technical Member N. Harina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts due and payable failed to make the payment of the invoices on their respective due dates. However, in the beginning, the Corporate debtor paid the freight charges on 20-7-2016, 12-8-2016 and 17-8-2016. Later on, the Corporate Debtor ignored to pay the freight charges and showed the debit note raised by the operational creditor as payments of invoices. vi. That the Operational Creditor has tried all means to communicate with the Corporate Debtor to get the admitted outstanding dues. vii. In view of the aforesaid mentioned circumstances and admitted liability of the Corporate Debtor, Operational Creditor issued a Statutory Demand Notice dated 29-1-2019 under section 8 of the Code read with Rule 5 (Demand notice by Operational Creditor) of the Insolvency and Bankruptcy Rules, 2016, calling upon the Corporate Debtor to unconditionally repay the unpaid operational Debt (in default) in full within 10 days from the receipt of the Notice. viii. On receipt of such notice, the Corporate Debtor gave its response vide its letter dated 6-2-2019 and admitted its liability against the invoices but disputed the amount claimed by the operational creditor. Thereafter, the operational cre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Brix. Brix is standard method to measure the solids percentage in a given sample. It is denoted in % of liquid chicory supplied. The minimum Brix is 72 % as mentioned in the purchase orders placed on all suppliers including the Operational Creditor. In addition, the liquid chicory should be totally free from foreign particles and foreign matter as their presence even in negligible quantities would affect the overall quality of the spray dried chicory which is meant for export markets. ii. In the course of its business, the Corporate Debtor has been procuring liquid chicory and roasted chicory cubes from the Operational Creditor since April, 2016. In the supplies made during 2016-17, there were shortages in quantity as well as supply in damaged drums the value of which comes to ₹ 42,595/-. The Corporate Debtor immediately informed the Operational Creditor about the shortage in quantity as well as damaged drums vide e-mails dated 6-9-2016 and 27-9-2016 and raised debit notes dated 3-9-2016; 27-9-2016. iii. During the year 2017-18, the corporate debtor had procured liquid chicory and roasted chicory cubes from the operational creditor as well as one M/s. Murali Krishna ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , a sum of ₹ 6,00,101/- was not considered and the corporate debtor sent an e-mail dated 12-9-2018 to the operational creditor about the same. The email dated 12-9-2018 is enclosed as Annexure-IV to the counter affidavit. Insofar as supplies made under invoices No. 198 dated 24-11-2018 and 21 dated 22-12-2018, there was issue of low Brix and the corporate debtor addressed a mail dated 27-12-2018 is bringing to the notice of the operational creditor about the low Brix and the value not considered was ₹ 97,269/-. The mail dated 27-12-2018 is enclosed as Annexure V to the counter-affidavit. Photographs evidencing poor quality of supplies made by the operational creditor are enclosed as Annexure VI to the counter-affidavit. v. Though the corporate debtor repeatedly brought the quality issues to the notice of the operational creditor, it did not bother to take any remedial measures. On the contrary, it assured the corporate debtor about the quality of liquid chicory supplied by it and on the basis of such assurances, the corporate debtor manufactured spray dried chicory and exported the same. Subsequently the corporate debtor has received complaints from overseas buyer th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed heavy loss of business besides losing its reputation as a quality supplier of instant chicory. viii. With regard to the allegation that the operational creditor has been maintaining a running account and that an outstanding amount of ₹ 58,83,226/- is due and payable by the corporate debtor, it is submitted that while it is true that there was a running account, the corporate debtor denies that it owes any amount to the operational creditor much less the amount of ₹ 58,83,226/- as alleged or at all. In fact, the corporate debtor has from the beginning raised debit notes on the operational creditor for low quality, shortage of supplies, low Brix, damaged drums and sent several e-mails in this regard. The corporate debtor also called upon the operational creditor to depute its representatives to ascertain the quality issues raised by it and also to reconcile the accounts. Though the operational creditor has received the e-mails, it did not bother to respond to any of them. Nor did it bother to have the accounts reconciled. If the accounts are reconciled, then it would become obvious that the corporate debtor does not owe any amounts of the operational creditor and on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resent petition filed by the operational creditor is motivated and mala fide and it is misusing the mechanism provided under the Insolvency and Bankruptcy Code to extract monies that are not due at all from the corporate debtor. The operational creditor instead of having the accounts reconciled has rushed to the Hon'ble Tribunal on false and trumped up charges. The corporate debtor has raised serious issues of quality, shortages, low Brix and rejection of goods by overseas buyers due to low quality liquid chicory supplied by the operational creditor. In view of the above, it is submitted that there are no merits in the present application and the same is liable to be dismissed. On the other hand, if the petition is admitted, it would cause irreparable injury to the corporate debtor which is financially healthy and sound. As such the present petition is vexatious and is liable to be dismissed as such. 6. The Petitioner/OC has filed its written submissions and Rejoinder reiterating the averments made in the petition and further prayed to allow the Application 7. The Corporate Debtor filed its sur-rejoinder written submissions in which it repeated, re iterated and re-affi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orporate Debtor also enclosed with the above reply, a statement of a/c showing the amount due from them to the Operational Creditor at ₹ 40,46,021.94/- as against the claim made of ₹ 58,83,226/- by the Operational Creditor. Thus, the Corporate Debtor itself admitted the liability to the tune of ₹ 40,46,021.94/- in their reply to the Statutory Notice u/s.8 of IBC. Although, they stated that they reserve their right to lodge claim if any for supply of inferior quality material, they did not mention anything about any pre-existing dispute. 13. Sec.8 of the IBC 2016 stipulates as under: Section 8: Insolvency resolution by operational creditor: 8. (1) An operational creditor may, on the occurrence of a default, deliver a demand notice of unpaid operational debtor copy of an invoice demanding payment of the amount involved in the default to the corporate debtor in such form and manner as maybe prescribed. (2) The corporate debtor shall, within a period of ten days of the receipt of the demand notice or copy of the invoice mentioned in sub-section (1) bring to the notice of the operational creditor- (a) existence of a dispute, 1[if any, or] record of the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion utility (section 9(5)(i)(d)), or that there is no disciplinary proceeding pending against any resolution professional proposed by the operational creditor (section 9(5)(i)(e)), it shall admit the application within 14 days of the receipt of the application, after which the corporate insolvency resolution process gets triggered. 16. Further as to what are the relevant facts to be examined by the Adjudicating Authority while examining an application under section 9, Hon'ble Supreme Court held as under: 34. Therefore, the adjudicating authority, when examining an application under section 9 of the Act will have to determine: (i) Whether there is an operational debt as defined exceeding ₹ 1 lakh? (see section 4 of the Act) (ii) Whether the documentary evidence furnished with the application shows that the aforesaid debt is due and payable and has not yet been paid? and (iii) Whether there is 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 in relation to such dispute? If any one of the aforesaid conditions is lacking, the appli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... As opposed to this, an operational creditor means a person to whom an operational debt is owed and an operational debt under section 5(21) means a claim in respect of provision of goods or services. 28. When it comes to a financial creditor triggering the process, Section 7 becomes relevant. Under the explanation to section 7(1), a default is in respect of a financial debt owed to any financial creditor of the corporate debtor- it need not be a debt owed to the applicant financial creditor. Under section 7(2), an application is to be made under sub-section (1) in such form and manner as is prescribed, which takes us to the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016. Under Rule 4, the application is made by a financial creditor in Form-1 accompanied by documents and records required therein. Form-1 is a detailed form in 5 parts, which requires particulars of the applicant in Part I, particulars of the corporate debtor in Part II, particulars of the proposed interim resolution professional in part III, particulars of the financial debt in part IV and documents, records and evidence of default in part V. Under Rule 4(3), the applicant is to dispatch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . v. Nitesh Estates Ltd. [2019] 111 taxmann.com 425 as under : In the present case, as we have observed that there is no record to suggest pre-existence of dispute with regard to the services rendered by the Appellant, we hold that the application under section 9 should not have been rejected by the Adjudicating Authority on the ground that the dispute about the quantum of payment cannot be determined. The Respondent disputed that the alleged debt is not the amount as shown in the Form. However, on mere dispute of amount, the application under section 9 cannot be rejected, as in terms of section 3(6) which defines 'claim' to mean a right to payment even if it is disputed. The Hon'ble Supreme Court in Innoventive Industries Ltd. v. ICICI Bank (supra) noticed the definition of 'claim' and held that even if the right of payment is disputed, the Code gets triggered the moment default is of rupees one lakh or more (section 4). In the circumstances, in absence of any pre-existing dispute, it was not open for the Adjudicating Authority to reject the application under section 9. 20. In the light of the above discussion, when the facts of the instant case are c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e day this order is passed. 23. This Adjudicating Authority hereby appoint Mr.Chillale Rajesh, IBBI/IPA-001/IP-P00699/2017-2018/11226 as IRP. The IRP is directed to take charge of the Respondent Corporate Debtor's management immediately. He is also directed to cause public announcement as prescribed under section 15 of the Insolvency and Bankruptcy Code, 2016 within three days from the date the copy of this order is received, and call for submissions of claim in the manner as prescribed. 24. The moratorium is hereby declared which shall have effect from the date of this Order till the completion of Corporate Insolvency Resolution Process, for the purposes referred to in Section 14 of the I B Code, 2016. It is hereby ordered to prohibit all of the following, namely:- (a) The institution of suits or continuation of pending suits or proceedings against the Corporate 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 forec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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