TMI Blog2020 (12) TMI 952X X X X Extracts X X X X X X X X Extracts X X X X ..... ication under Section 9 cannot be rejected and is required to be admitted. Whether the Dispute pertaining to the invoice of November 2017 was settled between the parties? - HELD THAT:- This Tribunal finds force in the contention of the Learned Counsel appearing for the Respondent that there is no cogent evidence that these amounts have been paid towards November 2017 transaction and that the Dispute was completely settled. Learned Counsel placed reliance on the email dated 30.01.2019 and 03.02.2019 to establish that the Dispute with respect to the November 2017 transaction was never resolved. There is an ongoing Dispute which is not specific to only November 2017 transaction. The email dated 08.02.2019 sent by the Operational Creditor to the Corporate Debtor categorically states that the issue was never settled, that nobody on behalf of the Operational Creditor had confirmed the closure of the matters; that the problem in the material supplied was on account of process malfunction at the end of the Corporate Debtor and that the Operational Creditor suffered huge losses and had instructed their office to stop future business with the Operational Creditor. The mat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... admittedly acknowledged the receipt of complaint dated 28.12.2017, agreed to take back the unused material of 9116.4 kgs. On perusal of the records it is also found that both the parties have exchanged number of emails regarding quality of the material, debit note raised on the petitioner by the respondent and rate of interest charged (page 70 114). Page No. 95 to the reply is an email addressed to the petitioner by the respondent regarding inconsistent quality of the goods supplied by the petitioner. 10. On perusal of the records it is also found that against the defective material supplied by the petitioner, respondent had issued debit notes. 11. In the instant application, from the material placed on record by the respondent, it is evident that there is/are pre-existing dispute regarding quality of the material supplied by the operational creditor and, therefore, the instant petition is not maintainable. 12. In view of what is stated herein above, the Adjudicating Authority is of the considered view that the instant application devoid of merit and as such is not maintainable on the very reason that there is/are pre-existing disputes with regard to the quality ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were no emails exchanged between the parties from January 2018 to January 2019 regarding any Dispute ; that the issue was resolved way back in May 2018 and that the Corporate Debtor with the sole intention of avoiding making payment for the goods supplied against invoice dated 04.09.2018 raised the issue of poor quality goods after a belated period of one year. 4. The Learned Counsel appearing for the Appellant placed reliance on the emails dated 09.01.2019 and 10.01.2019 to substantiate his argument that the issue of quality of goods was resolved in May 2018. He also drew our attention to the ledger accounts for the period 01.04.2017 to 30.04.2019 and relied on the amounts credited on 01.02.2018, 02.02.2018 and on 05.02.2018 amounting to ₹ 87,78,462/-, in support of his contention that the balance amounts with respect to the goods delivered to the Corporate Debtor against the November 2017 invoice were paid subsequently and therefore the Dispute was settled between the parties. Learned Counsel for the Appellant argued that it was only after a substantial period of one year i.e. January 2019, that the Corporate Debtor raised a Dispute regarding supplies made a year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... due and payable ; the question of payment of interest does not arise. 6. Heard both sides at length. 7. The point that arises for rumination in this Appeal is whether the Learned Adjudicating Authority was right in dismissing the Section 9 Application filed under I B Code, 2016 based on the ground that there was a Pre-Existing Dispute between the Operational Creditor and the Corporate Debtor . 8. The Operational Creditor in Form V of the Section 9 Application of the code has made a claim in respect of the undermentioned amounts; 1. Invoice No. 35125011900810 dated 4.9.2018 amounting to ₹ 38,83,169/- out of which ₹ 11,83,255/- remains outstanding and payable. 2. Debit Note No. 70625011900070 dated 28.2.2019 amounting to ₹ 5,96,234/- which remains outstanding and payable. 3. Debit Note No. 70625012000002 dated 8.4.2019 amounting to ₹ 1,28,071/- which remains outstanding and payable. Total outstanding amount = ₹ 19,07,560/- 9. The Hon ble Supreme Court in a catena of Judgements has laid down the Principle that in an Application under Section 9, the Corporate Debtor can point out any Pre-Existing Dispute raised ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns is lacking, the application would have to be rejected. Apart from the above, the adjudicating authority must follow the mandate of Section 9, as outlined above, and in particular the mandate of Section 9(5) of the Act, and admit or reject the application, as the case may be, depending upon the factors mentioned in Section 9(5) of the Act. 12. From the aforesaid decision, it is clear that the existence of Dispute must be pre-existing i.e. it must exist before the receipt of the demand notice or invoice. If it comes to the notice of the Adjudicating Authority that the operational debt is exceeding ₹ 1 lakh and the Application shows that the aforesaid debt is due and payable and has not been paid, in such case, in absence of any 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. 13. In the present case, the first point which arises for consideration is whether the Dispute pertaining to the invoice of November 2017 was settled between the pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u that as long as the unconverted film that we supplied to you, though there are no technical defects but we have still taken it back considering that you are one of our prime and prestigious customer. However, the claim being imposed by you after converting and using the film is not at all in order and justifiable as we are not liable to bear any such cost which is definitely not because of our film quality. In view of these facts, we request you to kindly release our payment and we look forward to have a continued business with your esteemed organization. Thanks and regards, Amit Singh Manager (Marketing) (Emphasis Supplied) Email dated January 4, 2019 addressed by the Corporate Debtor to the Operational Creditor. Dear Mr. Amit, Up till now we had waited for the technical person to visit and clarified the problem. Now our account department has asked to clear the account so kindly find the below final deduction and explanation from our end. Finally all efforts gone for toss and we lost our esteemed customer on account of the same. The total laminate supplied by us cost to the tune of more than 40 Lakh. But due to l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as settled and the balance amounts were also paid for, by the Operational Creditor, shows that a total amount of ₹ 87,78,462/- was paid by the Operational Creditor to the Corporate Debtor between 01.02.2018 and 05.02.2018. On a pointed query from the Bench to the Learned Counsel for the Appellant with respect to the quantum of the balance amount due and payable by the Corporate Debtor and if the amounts reflected in the ledger from 01.02.2018 to 05.02.2018 commemorates the complete balance amount, the Learned Counsel submitted that though the quantum of amount is not mentioned in any of the emails or in the correspondence, these amounts paid subsequent to the Disputed transaction evidence that the Dispute was settled. Be that as it may, it is seen from the ledger that there are payments being made intermittently by the Operational Creditor to the Corporate Debtor from 01.04.2017 onwards and the ledger does not evidence anywhere that these amounts were explicitly paid towards the balance due and payable against the invoice raised in November 2017. Even subsequent to 05.02.2018, there were amounts credited to the account of the Operational Creditor, paid by the Corpor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of working with converter always be ready for after effect only, as this effects or failurity can be observed only after processing and we as a converter will never be able to digest losses. Hope now it is very clear and in a simple language which can be understood by everybody. So kindly release the credit note and be forward in business, or in next one week you will receive debit note from our accounts. Ravindra: If credit note not received then kindly send the debit note to them and clear the accounts. Regards Pragnesh (Emphasis Supplied) Email dated Feb 8, 2019 addressed by the Corporate Debtor to the Operational Creditor. Subject: Re: Found Blocking and Metal Transfer Issues in Sumilon CC Pet and CC Met Pet Dear Mr. Jilal, The issue was never settled and we were just trying to push the customer to consume maximum material so that the losses should be minimised, this we have done in good spirit, but it looks like that the same is taken in different perspective @ M/s Sumilon. On the contrary because of this episode we had lost the Business of said category of shampoo from M/s Dabur till time. From our side nobo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . For the meaning of debt , we have to go to Section 3(11), which in turn tells us that a debt means a liability of obligation in respect of a claim and for the meaning of claim , we have to go back to Section 3(6) which defines claim to mean a right to payment even if it is disputed. The Code gets triggered the moment default is of rupees one lakh or more (Section 4). The corporate insolvency resolution process may be triggered by the corporate debtor itself or a financial creditor or operational creditor. A distinction is made by the Code between debts owed to financial creditors and operational creditors. A financial creditor has been defined under Section 5(7) as a person to whom a financial debt is owed and a financial debt is defined in Section 5(8) to mean a debt which is disbursed against consideration for the time value of money. 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. xxx xxx xxx 29. The scheme of Section 7 stands in contrast with the scheme under Section 8 where an operational creditor is, on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... peated in the emails exchanged on 09th and 10th January and 3rd and 4th February 2019. 20. These emails clearly show that there is an ongoing Dispute which is not specific to only November 2017 transaction. The email dated 08.02.2019 sent by the Operational Creditor to the Corporate Debtor categorically states that the issue was never settled, that nobody on behalf of the Operational Creditor had confirmed the closure of the matters; that the problem in the material supplied was on account of process malfunction at the end of the Corporate Debtor and that the Operational Creditor suffered huge losses and had instructed their office to stop future business with the Operational Creditor. The material on record, specifically the email dated 08.02.2019 evidences that the Dispute is not transaction centric but is an ongoing Dispute . Additionally, there is no documentary evidence to substantiate the contention of the Learned Counsel for the Appellant that November 2017 Dispute was settled. The correspondence between the parties establishes that the Dispute is with respect to substandard material supplied for both the consignments and explicitly refers to problem of ad ..... 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