TMI Blog2021 (2) TMI 724X X X X Extracts X X X X X X X X Extracts X X X X ..... tor vide its letter dated 09.12.2019 has replied and proved beyond doubt that there is an existence of dispute particular the cracks in the projects sites, reduced quality of goods supplied, short supply of concrete multiple snags in windows and doors etc also raising issue to initiate arbitration proceedings for excess sum of over ₹ 9.51 Crore paid to the Appellant etc. This meets the criteria of genuine dispute raised within stipulated period. Accordingly, under Section 9(5)(ii)(d) Application needs to be rejected. The provision of the Code cannot be invoked for recovery of outstanding amount as well as it cannot be misused to drop the curtain on a healthy organization. The Objective of the Code is to consolidate and amend the laws relating to reorganization and Insolvency Resolution of Corporate Persons. Using the platform of the Code, threatening the vendor to release even disputed amount is not fair and equitable. There are no merit in the appeal and the Adjudicating Authority has rightly rejected the Application under Section 9 of the Code. The Appeal deserves to be dismissed and hence dismissed. - Company Appeal (AT) (Insolvency) No. 632 of 2020 - - - Dated:- 15 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rying from over 200 days to approximately 500 days. As per Form 5, filed by the Appellant, before the Adjudicating Authority total amount of Debt is ₹ 8 ,44,49,943/- which includes interest at the rate of 20% amounting to ₹ 1,49,65,555/- as on the date of issue of Demand Notice. These dues are against the supplies made against purchase orders (five numbers) dated 01.07.2017 to 01.03.2018. The Appellant auditor vide their letter dated 22nd March, 2019 asked for confirmation of balance from Respondent that on March 28, 2019 the confirmation of balance as per Books of Corporate Debtor of ₹ 5,86,75,288/- and ₹ 29,34,864/- towards RMC and Tyles respectively were received from the Corporate Debtor. The said balance confirmation was revoked by Corporate Debtor on 03rd May, 2019 due to some accounting issues and the Corporate Debtor assured to provide a new balance confirmation upon reconciliation. The Corporate Debtor assured to pay the outstanding operational dues in tranches vide their letter dated 10th April, 2019 and paid only ₹ 2.10 crore (Approx.) by September, 2019 to the Appellant and again revised balance confirmation was received by the Corporat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roject within time and defects in work done in haste (Paragraph 4 @ page no.1 of respondent s Compilation of judgments) Whereas, the said case in not applicable in the present proceedings since there is no such pre-existing dispute. The Respondent has not produced a single email/ letter relating to existing quality issues. Jaya Patel Vs. Gas Jeans Private Limited and Others, Company Appeal (AT) (Ins) No. 308 of 2018 Facts: the Appellant had filed a petition under section 433 (e)and section 343(1) of companies Act, 1956 which was transferred pursuant to Rule 5 read of companies Act (Transfer of Pending Proceeding) Rules, 2016. The Ld. Adjudicating Authority vide it order admitted the application under Section 9 of IBC, 2016 and appointed interim resolution Professional. Distinguishing Note: Hon ble NCLAT has held that an application under section 9 of IBC, cannot be preferred before the completion of 10 days from sending the demand notice. Since the demand notice and application u/s 9 of the IBC were on the same date, the admitted section 9 application filed by the Operational Creditor was not maintainable (para 1 @ 3 para 4 @ page No.5 of Respondent s Compilation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Limited Vs. Kirusa Software Private Limited in Civil Appeal No. 9405 of 2017. 7. The Respondent is a Real Estate Developer and over a period of time has established a valuable reputation with regard to Real Estate Business activity and has undertaken various commercial / residential and other related activities in and around Bangalore for a value of about ₹ 1200 Crore. The Respondent has also entered into Joint Development Agreement with Land owners for developing projects sites of over 5 million square feet covering commercial and residential space (Annexure R2 of Statement of Objections). The Respondent is duty bound to deliver the property developed with best quality of construction as there is defect liability clause in the respective agreements. The defect liability period is varying up to 5 years. In order to finance the construction projects the Respondent has availed various types of loans for a total sum of ₹ 980.50 Crores. There are multiple clauses in the agreement which provides for liability in respect of defects and delay in delivery in apartments. They are engaging the best architects like Thomas Consultants, VVT Consortium, Gridhar Associates etc. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per the terms of the purchase order. No doubt it is mentioned in the invoice but this is a unilateral Act by the Appellant and not accepted by the Respondent. Similarly, the amount reflected in the invoice is not tallying to the accepted confirmation of balances. They have also raised the issue that certain documents produced in the Appeal, they are not part of the proceedings before Adjudicating Authority and hence the same cannot be considered to improve their case at a later stage and have cited the judgment in MS Gill Vs. Chief Election Commissioner as reported in AIR 1978 SC 851. 12. The Appellant has also produced the ICICI Bank Letter but the same is unable to confirm how much money is received from the Corporate Debtor. They have also alleged that the Appellant claim that they sent a notice as well as an email dated 18/11/2019. The said email was not produced along with the Petition before the Adjudicating Authority. The only notice which was produced before the Adjudicating Authority is the Form-3 and Form-4 notice dated 18/11/2019. The email dated 18/11/2019 refers to an attachment. However, no attachment is produced alongwith the said notice. The Demand notice was re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om the bank account of the corporate debtor; or (ii) by sending an attested copy of record that the operational creditor has encashed a cheque issued by the corporate debtor. Explanation.-For the purposes of this section, a demand notice means a notice served by an operational creditor to the corporate debtor demanding payment of the operational debt in respect of which the default has occurred. Section 9. Application for initiation of corporate insolvency resolution process by operational creditor (1) After the expiry of the period of ten days from the date of delivery of the notice or invoice demanding payment under sub-section (1) of section 8, if the operational creditor does not receive payment from the corporate debtor or notice of the dispute under sub-section (2) of section 8, the operational creditor may file an application before the Adjudicating Authority for initiating a corporate insolvency resolution process. (2) The application under sub-section (1) shall be filed in such form and manner and accompanied with such fee as may be prescribed. (3) The operational creditor shall, along with the application furnish- (a) a copy of the invoice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ication under subclause (a) of clause (ii) give a notice to the applicant to rectify the defect in his application within seven days of the date of receipt of such notice from the adjudicating Authority. (6) The corporate insolvency resolution process shall commence from the date of admission of the application under sub-section (5) of this section. In Mobilox Innovations Private Limited Vs. Kirusa Software Private Limited in Civil Appeal No. 9405 of 2017 Para 24 25 of Hon ble Supreme Court Judgment reflects as below: Para 24 - 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 non-payment of a debt, any part whereof has become due and payable and has not been repaid), deliver a demand notice of such unpaid operational debt or deliver the copy of an invoice demanding payment of such amount to the corporate debtor in the form set out in Rule 5 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 read with Form 3 or 4, as the case may be (Section 8(1)). Within a period of 10 days of the receipt of such demand notice or copy of invoice, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cant to rectify defects within 7 days of the receipt of the notice from the adjudicating authority to make the application complete. Once this is done, and the adjudicating authority finds that either there is no repayment of the unpaid operational debt after the invoice (Section 9(5)(i)(b)) or the invoice or notice of payment to the corporate debtor has been delivered by the operational creditor (Section 9(5)(i)(c)), or that no notice of dispute has been received by the operational creditor from the corporate debtor or that there is no record of such dispute in the information 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. On the other hand, the adjudicating authority shall, within 14 days of the receipt of an application by the operational creditor, reject such application if the application is incomplete and has not been completed within the period of 7 days granted by the proviso (Section 9(5)(ii)(a) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e quality other issues raised by the Corporate Debtor. The Operational Creditor has issued a Demand Notice dated 18.11.2019 received on 06.12.2019 by the Corporate Debtor and within the stipulated period, the Corporate Debtor vide its letter dated 09.12.2019 has replied and proved beyond doubt that there is an existence of dispute particular the cracks in the projects sites, reduced quality of goods supplied, short supply of concrete multiple snags in windows and doors etc also raising issue to initiate arbitration proceedings for excess sum of over ₹ 9.51 Crore paid to the Appellant etc. This meets the criteria of genuine dispute raised within stipulated period. Accordingly, under Section 9(5)(ii)(d) Application needs to be rejected. The provision of the Code cannot be invoked for recovery of outstanding amount as well as it cannot be misused to drop the curtain on a healthy organization. The Objective of the Code is to consolidate and amend the laws relating to reorganization and Insolvency Resolution of Corporate Persons. Using the platform of the Code, threatening the vendor to release even disputed amount is not fair and equitable. 15. Hence in the facts and circu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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