TMI Blog2021 (1) TMI 759X X X X Extracts X X X X X X X X Extracts X X X X ..... unpaid Operational Debt . Consequently, the application cannot be rejected under section 9 and is required to be admitted. It is apparent from the records that the Corporate Debtor had not raised any objection pertaining to the work performed by the Operational Creditor prior to the first demand notice dated 2nd December, 2017. It was on 13th December, 2017 when the Corporate Debtor responded for the first time in its reply to the notice issued by the Operational Creditor under Section 8(1) of I B Code - It is noted that a large number of email communications has been made by the Operational Creditor and not even a single response was made by the Corporate Debtor raising such disputes. It is apparent from the records placed before this tribunal that Corporate Debtor have sent a legal notice on 13th March, 2018 setting out several preexisting disputes as to quality of work and delay in completion of work and also raised a counter claim against the Operational Creditor. The Corporate Debtor also sent a notice invoking arbitration on 10th April, 2018. These issues were raised after the issuance of the first demand notice. Thus there were no disputes existing prior to the issua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Adjudicating Authority ) in Company Petition No. CP (IB) 3753/MB/C-IV/2018 under which Corporate Insolvency Resolution Process (CIRP) was initiated against the Corporate Debtor. 2. The brief facts of the case are that the Respondent No. 1 i.e. Malharshanti Enterprises (hereinafter referred to as Operational Creditor ) filed a Company Petition under section 9 before the Adjudicating Authority seeking initiation of Corporate Insolvency Resolution Process (CIRP) against CAN Enterprises Private Limited (hereinafter referred as Corporate Debtor ) on the grounds that the Corporate Debtor failed to make payment of a sum of ₹ 94,64,770 (Rupees ninety-four lakh sixty-four thousand seven hundred and seventy only) as principal and ₹ 68,66,919 (Rupees sixty-eight lakh sixty-six thousand nine hundred nineteen only) as interest as on 22nd August, 2018. 3. Corporate Debtor is a private company limited by shares and incorporated on 11th September, 2009 under the Companies Act, 1956 and the Appellant is the suspended Director cum Promoter shareholder of the Corporate Debtor. The Operational Creditor is engaged in the business of the construction of buildings. The Corporate De ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and raised several pre-existing disputes. On the basis of second demand notice, the Operational Creditor filed CP (IB) 3753/MB/CIV/2018 in which the Impugned Order came to be passed. 6. It is contended by the learned counsel for the Appellant that, prior to the second demand notice, Corporate Debtor already invoked arbitration. Therefore, there was a pre-existing dispute in the form of pending arbitral proceedings and for this reason alone, the impugned order ought to be set aside. Reliance is placed by the learned counsel for Appellant on Pramod Yadav Anr. Vs. Divine Infracon Pvt. Ltd. Company Appeal (AT) (Ins) 251/2017 particularly paragraphs 9 and 10 which we have reproduced herein under: 9. From the aforesaid letter, it is clear that the Corporate Debtor made request under Section 21 of the Arbitration and Conciliation Act, 1996, which reads as follows: 21. Commencement of arbitral proceedings. ─ Unless otherwise agreed by the parties, the arbitral proceedings in respect of a particular disputed commence on the date on which a request for that dispute to be referred to arbitration is received by the respondent. 10. In view of the fact that the arbi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 014 for a full and final settlement amount of ₹ 5 lakhs. Admittedly, Operational Creditor did not complete the work within this time frame and sought waiver of penalty clause by way of his letter dated 12th December, 2015. Thus Operational Creditor guilty of having delayed the project. This is also pre-existing dispute. This aspect has not been adverted to or answered by the Operational Creditor at all even during the oral submissions. The Operational Creditor relies on self-serving emails by conveniently ignores the architect s reports, memorandum dated 25.09.2015 because of the disputes between the parties, his own emails of unilateral extension of the project work and his own email dated 29th June, 2015 itself admitting that maximum trouble is on the first second floor only that too on west side due to heavy rains. Presently our focus is on enhancement of performance of works carried out till date. 10. It is contended by the Learned Counsel for Appellant that the impugned order erroneously made substantial findings on pre-existing disputes in essentially a summary proceeding, thus wishing away the powers of the arbitral tribunal which were specifically invoked by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lus six floors including the additional works. The completed site was thereafter handed over to the Appellant on 16th November, 2015. Demobilization took place on 19th November, 2015. However, it is submitted by the learned counsel that some workforce remained on site till 24th December, 2015, qua additional works. During the progress of the work, the Operational Creditor raised 20 invoices for the contractual civil work and 5 invoices for the additional work. 15. It was further submitted on behalf of Operational Creditor that during the completion of the work, and after completion of work and till January 2017, the Operational Creditor issued various emails and letters to the Appellant, informing the Appellant about raising RA Bills, the overall updates of the projects, delay in project due to factors solely attributable to the appellant, additional works and seeking release of payments from the corporate debtor. Not even a single communication made by the Operational Creditor was responded to by the Corporate Debtor. It is submitted that the Corporate Debtor responded for the first time only in its reply date 13th December, 2017 which was the reply to the notice issued by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. Several emails were referred to by the counsel for the Operational Creditor (dated 12.05.2015, 14.03.2015, 24.06.2015, 29.06.2015, 22.07.2015, 28.08.2015, 05.10.2015, 21.10.2015, 16.11.2015, 03.12.2015, 12.12.2015, 08.01.2016, 01.02.2016) which were sent to the Appellant which highlighted performance of additional works and related aspects including delay and enhancement of performance. In particular reference was made to the email dated 27th October, 2015 wherein it was informed that the work got delayed again due to factors beyond the control of the Operational Creditor. On 22nd November, 2015, an e-mail was sent with the subject successful completion of civil work which informed that the workers were still attending additions and alterations. 20. It was also submitted that the emails (dated 19.02.2016, 26.02.2016, 04.04.2016, 23.05.2016, 09.07.2016, 15.10.2016 and 02.11.2916) were issued seeking payment of money and confirmation of ledger account and the email dated 30th January, 2017 was sent seeking settlement of dues as it had been more than 15 months since the work was completed. Therefore, it is submitted that right from July 2014 till the end of January 2017, Oper ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n t have obtained Occupation Certificate from municipality. 24. It was further submitted that in the rejoinder additional documents were annexed by the Appellant without permission from this Appellate Tribunal, though the same did not form a part of the record of the Adjudicating Authority. The Operational Creditor denied the authenticity of these documents and stated that there was no opportunity to deal with these documents on affidavit. It is submitted that both the reports of August, 2020 and February, 2018 have been prepared subsequent to the expiration of defect liability period of one year in November, 2016. The project was handed over to the Appellant in November, 2015, but the said reports pertain to period 3-5 years after completion of project and at this juncture, the two reports cannot be relied upon. 25. It was further submitted by the learned counsel for Operational Creditor that qua limitation, the last payment was made by the Corporate Debtor on 29th September, 2015, which is confirmed by Operational Creditor s bank certificate dated 23rd April, 2018. The last invoice was raised by operational Creditor in January, 2016. The second application was filed in S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s disputed the additional documents. It was also submitted that the Appellant did not responded to Operational Creditor s CA s request for confirmation of accounts. 29. We have heard the arguments of the Learned Counsel for the parties and perused the records. The question that arises for consideration is as follows: a) Whether there was a pre-existing dispute between the parties and weather the pre-existence of dispute shall be seen from the date of the first demand notice dated 2nd December 2017 or the second demand notice dated 23rd August, 2018? b) Whether the Adjudicating Authority rightly allow the petition of the Operational Creditor under section 9 of I B Code? 30. In the case of Mobilox Innovations Pvt. Ltd. vs Kirusa Software (P) Ltd. reported at (2017) 1 SCC OnLine SC 353 the Hon ble Supreme Court held as to what are the facts to be examined by the Adjudicating Authority while examining an application under section 9 of I B Code which is reproduced below: 33. The scheme under Sections 8 and 9 of the Code, appears to be that an operational creditor, as defined, may, on the occurrence of a default (i.e., on nonpayment of a debt, any part whereof has be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the pendency of a suit or arbitration proceeding filed before the receipt of the demand notice of the unpaid Operational Debt . Consequently, the application cannot be rejected under section 9 and is required to be admitted. 31. It is apparent from the records that the Corporate Debtor had not raised any objection pertaining to the work performed by the Operational Creditor prior to the first demand notice dated 2nd December, 2017. It was on 13th December, 2017 when the Corporate Debtor responded for the first time in its reply to the notice issued by the Operational Creditor under Section 8(1) of I B Code. We have noted that a large number of email communications has been made by the Operational Creditor and not even a single response was made by the Corporate Debtor raising such disputes. 32. The Contention of the Appellant that the relevant date for determining whether there was a pre-existing dispute was the date of second demand notice, i.e. 23rd August, 2018 and not the first demand notice dated 2nd December, 2017 as the first petition was dismissed by the Adjudicating Authority as the Petitioner Counsel had asked for withdrawal of the first petition due to incorre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... perational Creditor was busy in removing the defects in its first petition. This exhibits that the intention of the Appellant behind this was to misuse the provisions under the Code and to intentionally delaying the process of law. There were no objections raised in relation to quality of work prior to the issuance of first demand notice and the work done by the Operational Creditor was in fact certified by the architect appointed by the Corporate Debtor. Moreover, the Municipal Corporation in September, 2016 issued Occupation Certificate to the Appellant. If there were any discrepancies, the appellant could not have obtained Occupation Certificate from municipality. This also shows that all the defects pointed out by the architect have been timely rectified within the appropriate time, so that the Municipal Corporation found it appropriate to issue the Occupation Certificate. 36. In the light of the above observations and the records placed before us. We are of the view that there was no dispute existing prior to the first demand notice and only disputes raised prior to the first demand notice are relevant to determine its pre-existence and disputes raised thereafter are tota ..... 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