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TMI Blog2023 (4) TMI 775X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of Corporate Insolvency Resolution Process ('CIRP' in short) against Corporate Debtor-Bhavika Apparels Private Limited (the present Respondent). Aggrieved by the impugned order, the present appeal has been preferred by the Operational Creditor. 2. Making his submissions on the factual background of the case, the Learned Counsel for the Appellant pointed out that the Appellant was approached by the Respondent/Corporate Debtor for job work printing and finishing of woven fabrics. The Corporate Debtor had issued a work order dated 13.12.2018 for which the Operational Creditor had raised invoices from 04.01.2019 to 05.02.2019 and raised GST bills for the same. It has been further submitted that the Corporate Debtor on receipt of the printed fabrics used to check the goods and clear the bills for the invoices submitted after making TDS deductions and that payments were cleared on running account basis instead of bill wise payments. Moreover, Form 26A shows acknowledgment of invoices by the Corporate Debtor. 3. It was stated that only when the Operational Creditor took up the matter in January 2019 with the Corporate Debtor for release of payment that the Corporate Debtor for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e because a suit had been filed in the District Court vide suit No. 517/2019 which shows pre-existence of dispute. The Learned Counsel for the Appellant submitted that the civil suit being not filed by the Corporate Debtor but by one of the Directors of the Corporate Debtor in his personal capacity was, therefore, not competent. Moreover, the very fact that this suit was filed after the letter of 19.08.2019 shows that it was an afterthought. Moreover, the Corporate Debtor had never disputed quality issues of printing job prior to the intimation notice of 19.08.2019 and this bogey has been raised to avoid liability to pay outstanding dues. Furthermore, had the goods not been of acceptable quality, the same should logically have been returned by the Corporate Debtor, but the goods were never returned which shows that the dispute raised is moonshine and an afterthought. 6. Submitting further that several reminder emails were sent for release of outstanding payment from 30.12.2018 onwards and the total outstanding amount as on 04.01.2019 stood at Rs.35,33,737/- and the payment not having been cleared even after the receipt of the demand notice, the Appellant had filed Section 9 applic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the unpaid amount from 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." 10. This now brings us to the statutory construct of IBC post issue of demand notice by the Operational Creditor as laid down in Section 9 of IBC. Under Section 9(1), if the Operational Creditor does not receive payment from the Corporate Debtor or notice of the dispute under Sub-section (2) of Section 8, he may file an Application under Section 9(1) of the Code. It is also an undisputed fact in the present matter that the Operational Creditor did not receive any payment from the Corporate Debtor and therefore proceeded to file an application under Section 9 of IBC. 11. For convenience, we reproduce Section 9(1) of IBC which is to the following effect: "9. Application for initiation of corporate insolvency resolution process by operational creditor.- (1) Aft ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x months after raising of invoices, no grounds were ever raised with regard to supply of defective and substandard goods and therefore the debit notes issued by the Corporate Debtor were not accepted. However, since payments were not forthcoming, Section 8 demand notice issued on 16.09.2019 was followed by Section 9 application before the Adjudicating Authority. While admitting that the Corporate Debtor had raised disputes in their communication dated 23.08.2019, it was pointed out that the Adjudicating Authority failed to appreciate the fact that this communication had been triggered by the fact that the Corporate Debtor had been informed on 19.08.2019 that action would be initiated against them before the NCLT in case of non-payment. It is also the Appellant's contention that the very fact that they were called for negotiations by the Corporate Debtor in their communication dated 23.08.2019, this was an implied admission on the part of the Corporate Debtor that they had acknowledged their liability. 14. When the matter came up before the Adjudicating Authority, it was observed by the Adjudicating Authority that even prior to issue of demand notice by the Operational Creditor, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Learned Counsel for the Respondent that the Corporate Debtor in their reply to the demand notice dated 16.09.2019, as placed at page 132-134 of the APB, had sent a reply on 27.09.2019 stating that the notice of demand was unwarranted, untenable and frivolous. It has been clearly mentioned that there is a pre-existing dispute and that inspite of having pointed out these discrepancies, the operational creditor had continued to ignore the same and rejected the debit notes which has led to filing of a civil suit No.517/2019. It has been pressed in the said reply that the Civil Suit was filed before the receipt of the demand notice of the Operational Creditor and hence the demand notice is illusory and unwarranted having no legs to stand. Paras 8 and 9 of the Reply Notice is relevant and is to the following effect: - "8. That the dispute as regards the amount claimed by you from our client is a pre-existing dispute, that is, this dispute is prior to the receipt of the demand notice under reply if and therefore on this ground alone the demand notice under reply must fail in light of the provisions of the Insolvency and Bankruptcy Code, 2016. 9. In view of the above stated facts a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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