TMI Blog2022 (12) TMI 727X X X X Extracts X X X X X X X X Extracts X X X X ..... tence of dispute is made by the Corporate Debtor, the Operational Creditor can go ahead and file an application under Section 9(1). In the present case the demand notice has been served on Respondent No.2 on 12.03.2018 to which no reply has been furnished by Respondent No.2 and therefore the Respondent No.1 was well within its rights to file the Section 9 application. It is a well settled proposition that for a pre-existing dispute to be a ground to thwart an application under Section 9, the dispute raised must be truly existing at the time of filing a reply to notice of demand as contemplated by Section 8(2) or at the time of filing the Section 9 application. In the present case, we notice that no reply was framed in response to the demand notice at all. In such circumstances the Adjudicating Authority is only required to look into the substance of the pleadings to find out whether a real dispute is discernible from the stated facts. It is an undisputed fact that the notice of demand was issued on 12.03.2018. Hence, we proceed to examine from the material on the record to find out was to whether there was any dispute raised by the Corporate Debtor regarding inferior quality ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al Corporation, Operational Creditor/Respondent No.1 for supply of 500 MT of Steam Coal. The material was delivered from time to time by the Operational Creditor /Respondent No.1 with corresponding invoices. The purchase orders contained certain terms and conditions including quality parameters. For reasons of not having received payment for the materials supplied, Respondent No.2 was served a demand notice by Operational Creditor/Respondent No.1 on 12.03.2018 for Rs.46,95,033/- including interest amount of Rs 28,63,389/-. The demand notice was followed by filing of a Section 9 application before the Adjudicating Authority in May 2018. The matter was first heard by a two member Bench of the National Company Law Tribunal, Ahmedabad Bench-I. As the two members on the Bench gave two separate dissenting final orders, the matter was assigned to a third Member for disposal. The Adjudicating Authority on 25.08.2022 held that debt is established, having been acknowledged by the Corporate Debtor, and default having occurred, it admitted the Section 9 application after holding that that defence of pre-existing dispute raised by the Corporate Debtor is moonshine defence. Aggrie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re-existing dispute with respect to inferior quality of steam coal supplied by the Operational Creditor under Purchase Orders in question which had led to issue of debit note. It is also submitted that the Adjudicating Authority failed to appreciate that Respondent No.2 had justifiably raised the defence of pre-existing dispute but by ignoring the Coal Standards Laboratory Test Reports the defence has been erroneously viewed as moonshine defence . It has also been submitted that the Adjudicating Authority should have appreciated that these disputed questions of facts between the parties can only be adjudicated through trial in terms of the judgement of the Hon ble Supreme Court in Mobilox Innovations Pvt. Ltd. Vs. Kirusa Software Private Limited (2018) 1 SCC 353 (hereinafter referred to as Mobilox ). 7. It was also added that the Adjudicating Authority had failed to appreciate the binding precedent of this Tribunal s decision dated 26.10.2021 upholding the order of the National Company Law Tribunal, Ahmedabad Bench in an identical matter where the issue of debit note and lab reports was held as constituting pre-existing disputes. It has been further stated that the Adjudicatin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he coal test reports are concocted and were manufactured later on and were submitted for the first time only as additional documents before the Adjudicating Authority and not when the demand notice was issued in March 2018. The Learned Counsel for the Respondent No.1 placed reliance on the judgment of Hon ble Supreme Court in Mobilox supra to assert that dispute, if any, has to be in existence prior to the demand notice and should have been brought to the notice of the Operational Creditor which has not happened in the instant case. The Learned Counsel for the Respondent No. 1 has also mentioned that if the alleged issue of debit note and the story of defect in goods was genuine, it is in-explicable as to why payments were made even after January 2014 without first resolving the alleged dispute. The fact that payment continued to be made shows that the story of defect in goods was concocted and improbable. 10. On the issue of debt due and outstanding, it has been submitted by Learned Counsel for Respondent No. 1 that Respondent No.2 by their own admission in the objections filed have admitted the principal outstanding amount for the financial year 2013-14 and 2014-15. Moreover, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the receipt of the same not been denied or challenged by Respondent No. 2. Respondent No.2 has also not denied that no reply was sent to the said demand notice. Section 9 application was filed by Respondent No.1 before the Adjudicating Authority in May 2018. However, during hearings, the Respondent No.2 chose to remain absent on three consecutive days i.e. 13.05.2018, 09.07.2018, 01.08.2018 and finally filed its objection only in October 2018. Moreover, the reasons for their absence on 3 consecutive dates of hearing before the Adjudicating Authority has also not been explained. Yet again, when the matter came up for hearing before the third member, after a detailed hearing on 28.04.2022, the Respondent No.2 again did not appear on 01.06.2022 and 27.06.2022 on the grounds that there were technical glitches and could not join the hearing. This was merely an excuse manufactured to drag and delay the proceedings as others did not find any connectivity impediments during the date of hearing. 14. We have duly considered the detailed arguments and submissions advanced by the Learned Counsel for both the parties and perused the records carefully. 15. The short point for our consider ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at page 90 of reply affidavit of Respondent No. 1. This email has not been disputed by Respondent No.2 either before the Adjudicating Authority or before this Tribunal. The Adjudicating Authority in the impugned order has therefore committed no error in holding that an amount of Rs.28,31,644/- as debt stands acknowledged by the Corporate Debtor in their email dated 05.08.2015. That no payments have been received from Respondent No.2 pursuant to demand notice issued on 12.03.2018 is also not disputed. On the issue whether the debt is time-barred, the Adjudicating Authority has duly considered the matter and held that since the Corporate Debtor made the last payment of Rs.10 lakhs on 13.01.2016 and Section 9 application was filed on 09.05.2018, the application was within limitation and not barred by law. As it is well settled that any part payment shall trigger fresh period of limitation from such date, we do not find any error in the findings of the Adjudicating Authority in this regard and agree that the debt was not barred by limitation. 18. The Appellant s case on the other hand is that against the total balance of outstanding payments of Rs.28,31,644/- on 14.11.2015, adjustm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pt of such notice or invoice in relation to such dispute . There is a statutory purpose for requiring a Corporate Debtor for bringing into notice of the Operational Creditor about the existence of a dispute in its reply to Section 8(1) notice. The purpose is that if there is a dispute in existence, the same be immediately communicated to the Operational Creditor so that he charts out his next actionable step. If no mention of existence of dispute is made by the Corporate Debtor, the Operational Creditor can go ahead and file an application under Section 9(1). In the present case the demand notice has been served on Respondent No.2 on 12.03.2018 to which no reply has been furnished by Respondent No.2 and therefore the Respondent No.1 was well within its rights to file the Section 9 application. 21. It is well settled that existence of dispute when the Demand Notice was issued is a mandatory condition for exercising jurisdiction to reject the application by the Adjudicating Authority as is envisaged in Section 9(5) of IBC which reads as follows:- 9. Application for initiation of corporate insolvency resolution process by operational creditor. ******* ****** ****** ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the electronic transfer of the unpaid amount from the bank account of the corporate debtor or send an attested copy of the record that an operational creditor has encashed a cheque or otherwise received payment from the corporate debt [Section 8(2) (b)]. It is only if, after the expiry of the period of the said 10 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) ****** ***** ***** 51. It is clear, therefore, that once the operational creditor has filed an application, which is otherwise complete, the adjudicating authority must reject the application under Section 9(5)(2)(d) if notice of dispute has been received by the operational creditor or there is a record of dispute in the information utility. It is clear that such notice must bring to the notice of the operational creditor the existence of a dispute or the fact that a suit or arbitration proceeding relating to a dispute is pending between the parties. Therefore, all that the adjudicating authori ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pre-existing dispute to be a ground to thwart an application under Section 9, the dispute raised must be truly existing at the time of filing a reply to notice of demand as contemplated by Section 8(2) or at the time of filing the Section 9 application. In the present case, we notice that no reply was framed in response to the demand notice at all. In such circumstances the Adjudicating Authority is only required to look into the substance of the pleadings to find out whether a real dispute is discernible from the stated facts. 25. The Adjudicating Authority in its findings has noted that there was a provision in the Purchase order which stipulated compensation against the supply of inferior quality of goods. It also took note of the fact that the Corporate Debtor had raised a debit note dated 16.11.2015 for an amount of Rs.17,59,286/- towards inferior quality of coal supplied. However, whether this dispute was in the nature of pre-existing dispute, it has held: The Corporate Debtor has not brought on record any communication/evidence establishing pre-existing dispute prior to issuance of the demand notice on 13.03.2018. There is no acknowledgement of debit note by Operati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... credibility to the contention that debit note dated 16.11.2015 was never issued to Respondent No.1 on that date. The explanation of the Appellant that since the Respondent No. 2 had sold its business hence postal receipts of debit notice delivery are not available is not a cogent or persuasive explanation. We also note that Respondent No.2 has not indicated in the objections filed before the Adjudicating Authority as to how and by which mode the debit note was actually serviced upon Respondent No.1. No proof has either been given while filing their objections before the Adjudicating Authority to establish that the debit note was received by Respondent No.1. It has been stated in the rejoinder filed by the Appellant that the issue of supply of sub-standard coal was raised during personal meetings but fails to explain why such a serious matter was never followed-up in writing even once. It has also been pointed out that the alleged debit note suffers from the discrepancy that it does not specifically refer to those invoices under which coal supplied was found to be of inferior quality. Moreover, the debit note suffers from a gross infirmity that it mentions supply of inferior coal du ..... X X X X Extracts X X X X X X X X Extracts X X X X
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