TMI Blog2024 (3) TMI 646X X X X Extracts X X X X X X X X Extracts X X X X ..... filed. The Corporate Debtor, however, has filed certain other correspondences between the parties prior to demand notice to which reply has also been filed by the Operational Creditor. The correspondence which was brought on the record in the appeal prior to demand notice has not been denied. The demand notice dated 25.08.2021 was sent on the basis of ledger confirmation treating to be principal amount due as Rs.1,79,93,691/-. The demand notice was replied on 20.11.2021 and with regard to faulty cables, the Corporate Debtor has issued a debit note for Rs.67,96,800/- and further stated debit note for amount of Rs.50,00,000/- towards non-supply of G.I. Pipe for Bill number 203. The above reply to demand notice clearly indicate the dispute regarding the claim of the Appellant - there are ample materials on record to indicate that there was pre-existing dispute between the parties and reply dated 20.11.2021 replying the demand notice was not disputed, reply cannot be said to be based on no material or no evidence nor the defence raised by the corporate debtor in the reply to demand notice can be said to moonshine dispute or frivolous dispute as contended by the counsel for the Appella ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - 2.1. The Corporate Debtor- Dhanlaxmi Electricals Private Limited is a license contractor and engineer for carrying out various contract works awarded to the Corporate Debtor. It has issued purchase order to the Operational Creditor for supply of AB Cables for its different projects. The Operational Creditor sold wires and cables of the Corporate Debtor and raised invoices from 29.09.2019 to 06.10.2019. Account Manager of the Corporate Debtor issued an e-mail dated 04.08.2021 forwarding the ledger pointing out certain differences in the ledger in the account of the Operational Creditor and the account of the Corporate Debtor. As per e-mail dated 04.08.2021, ledger from 01.04.2020 to 30.03.2022 reflected as closing balance of Rs.1,79,93,690/-. Operational Creditor issued a demand notice dated 25.08.2021 to the Corporate Debtor claiming an amount of Rs.1,79,93,691/- + interest of Rs.85,27,110/- totalling Rs.2,85,20,800/-. Advance copy of Section 9 application was also forwarded to the Corporate Debtor vide letter dated 09.11.2021. Corporate Debtor after receiving demand notice dated 25.08.2021 as well as letter dated 15.11.2021 regarding the demand notice sent notice of dispute dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to Invoice Nos. 203 and 205, no supply of appropriate material was placed, hence, it is submitted that the debit notes of Rs. 67,96,800/- and Rs.50,00,000/- which was issued by the Corporate Debtor on 20.11.2021 was never responded by the Operational Creditor which clearly indicate that dispute persisted. It is submitted that the Corporate Debtor bonafide after receiving the demand notice has made payment of Rs.61,00,000/- to the Corporate Debtor which according to the Corporate Debtor was the balance due. It is submitted that the Corporate Debtor is using Section 9 Application as recovery mechanism. It is submitted that the relevant e-mails have been brought along with the Appeal to establish pre-existing dispute between the parties. It is submitted that the acknowledgment dated 04.08.2021 cannot be treated to be acknowledgment on behalf of the Corporate Debtor, since the email was sent by account manager and not by the Corporate Debtor. 5. Shri Akshay Sapre, Learned Counsel for the Operational Creditor refuting the submissions of the Counsel for the Appellant contends that there was no pre-existing dispute and the dispute sought to be raised by the Corporate Debtor by its reply t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion (1) bring to the notice of the operational creditor (a) existence of a dispute, [if any, or] record of the pendency of the suit or arbitration proceedings filed before the receipt of such notice or invoice in relation to such dispute; (b) the [payment] of unpaid operational debt- (i) by sending an attested copy of the record of electronic transfer of 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 3 [payment] of the operational debt in respect of which the default has occurred. 8. Section 9(1) empowers the Operational Creditor to file an application before the Adjudicating Authority for initiating a corporate insolvency resolution process after the expiry of the period of ten days from the date of delivery of the notice in event operational creditor does not receive payment from the corporate debtor or notice of the dispute under sub-section (2) of Section 8. Section 9(1) and (2) is as fol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted 25th August, 2021 and the following letter received on 15th November, 2021. Dear Sir, We are writing this to ensure clarity on your letter reference Form No: 3 Dated 25th August, 2021 and letter received on 15th November, 2021 regarding the Demand Notice/Invoice Demanding Payment. We have decided not to move forward your request at this point of time due to the following facts enumerated below. 1- The submitted Invoice No: 203 dated 29th September, 2021 in tune of Rs. 33,42,527/- and Invoice no: 205, in tune of Rs. 23,81,417/- Dated and 6th October, 2021 towards the supply of G.I. cannot be forwarded for payment due to non-receive of your material Inline to your bill claimed. There is lack of supporting documents related to supply of materials such as LR Copy, Test Certificate of class B.G.I. Pipe as per the approved GA/ GTP of MPKVVCL, Materials Delivery Receipt certified from site etc., in this regards multiple correspondence was issued to your good self-office. Neither there is any proof or supporting documents of supplied materials nor any evidence or records of delivery at our store or execution sites. We have transferred amount of Rs. 50,00,000/ (Rupees Fifty Lakhs) towar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le supplied by you. Hence, we hereby debit the extra charges paid for the rectification and reinstallation of the faulty cable. 6- Kindly note that our client M/s MSEDCL has examined and evaluated at site on your materials supplied and given us the remark of substandard quality. A proposal has been in process for black listing your organization from supplier and manufacturer list for all their projects across Maharashtra. In view to the above substantiation we look forward to your understanding of holding back your invoice without forwarding it at our end and hence, you are requested to accept the following Debit charges in order to process the payment further, failing which may lead the legal process to recover losses followed by propelling blacklisting process based on evidence as per MSEDCL record. a- Amount of Rs. 67,96,800/- For 80 K.M. Faulty Cable supplied for our Nagpur IPDS Project b- Amount of Rs. 50,00,000/- towards the non-supply of G.I. Pipe for Bill number 203 dated 29th September, 2021. 11. As per the statutory scheme under Sections 8 and 9, we need to notice whether reply dated 20.11.2021 is a notice of dispute given by the Corporate Debtor or not. It is further rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6. The allegations raised in the above letter are false, fabricated, baseless and contrary to the fact that the Corporate Debtor vide its email dated 4th August 2021 (attaching a copy of the acknowledged Statement of Account) duly acknowledged a principal amount of Rs. 1,79,93,690.80 as due and payable to the Operational Creditor. The aforesaid email while highlighting certain differences in relation to the balance as per the books of accounts of the Corporate Debtor raised no concerns/ outstanding concerns in relation: a. The alleged non receipt of the goods billed vide invoice no. 29th September 2019 and 6th October 2019 (both erroneously mentioned as 2021 invoice in the letter dated 20th November 2021; b. Any outstanding quality/ quantity or other issues in relation to the material supplied to the Corporate Debtor; c. Any reference to its email dated 24th December 2018 or any pending issues in relation to the same; d. Any allegation of any loss incurred by the Corporate Debtor on account of any alleged fault supplied by the Operation Creditor. 7. The above allegation clearly are baseless and with an intent to create 'false dispute' in relation to the goods supplied by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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)]. It may also reject the application where there has been repayment of the operational debt [Section 9(5)(ii)(b)], or the creditor has not delivered the invoice or notice for payment to the corporate debtor [Section 9(5)(ii)(c)]. It may also reject the application if the notice of dispute has been received by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , all that the adjudicating authority is to see at this stage is whether there is a plausible contention which requires further investigation and that the dispute is not a patently feeble legal argument or an assertion of fact unsupported by 9 evidence. It is important to separate the grain from the chaff and to reject a spurious defence which is mere bluster. However, in doing so, the Court does not need to be satisfied that the defence is likely to succeed. The Court does not at this stage examine the merits of the dispute except to the extent indicated above. So long as a dispute truly exists in fact and is not spurious, hypothetical or illusory, the adjudicating authority has to reject the application. 16. The law with regard to consideration of Section 9 application being well settled and contours of examination by the Adjudicating Authority having laid down by applying the ratio in the above judgment, we have to look into whether in the present case dispute raised by the Corporate Debtor is patently feeble legal argument or an assertion of fact unsupported by any evidence as noted above. Present is a case where notice of dispute was clearly issued by the Corporate Debtor whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e hereby debit the extra charges paid for the rectification and reinstallation of the faulty cable. 6- Kindly note that our client M/s MSEDCL has examined and evaluated at site on your materials supplied and given us the remark of substandard quality. A proposal has been in process for black listing your organization from supplier and manufacturer list for all their projects across Maharashtra. In view to the above substantiation we look forward to your understanding of holding back your invoice without forwarding it at our end and hence, you are requested to accept the following Debit charges in order to process the payment further, failing which may lead the legal process to recover losses followed by propelling blacklisting process based on evidence as per MSEDCL record. a- Amount of Rs. 67,96,800/- For 80 K.M. Faulty Cable supplied for our Nagpur IPDS Project b- Amount of Rs. 50,00,000/- towards the non-supply of G.I. Pipe for Bill number 203 dated 29th September, 2021. 19. Thus, the reply dated 20.11.2021 was not confined only to Invoice Nos. 203 and 205 as was observed by the Adjudicating Authority rather said reply refer to issues regarding faulty cables and two debit notes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 000 mtrs. Hence it is requested to you please look into the matter and do the needful. Thanks and Regards, Pankaj Palaskar Assistant Manager Kamptee Thanks and regards DHANLAXMI ELECTRICALS PVT. LTD Site-Nagpur 21. The above email clearly pointed out deficiency in the quality of the material supplied. We may also notice that after receiving of the complaints regarding cables, a letter dated 05.12.2019 was sent by the Operational Creditor to the Corporate Debtor which is filed as Annexure A-9 to the Appeal, which is as follows:- Date: 05/12/2019 To Dhanlaxmi Electricals Pvt. Ltd. Kamptee Kind Attn: Mr. Abhishek, Mr. * Bhai Mr. Sohail Singh Dear Sir, With reference to your complain regarding the failure of 2cx4 Sqmm Copper Arm Service cable, we will attend without testing team to resolve the issue at your site on Dated 8th December 2019. We assure you that we have supplied the cable as per MSEDCL-IPDS specifications and the cables were dispatched after inspection done by Department. However, if any problem found we will provide replacement of the supplied cables. Hence we request you to kindly co-operate with us by explaining the issue you have been facing during the visit at your si ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the operational creditor. 25. We have noted that the demand notice dated 25.08.2021 was sent on the basis of ledger confirmation treating to be principal amount due as Rs.1,79,93,691/-. The demand notice was replied on 20.11.2021 and with regard to faulty cables, the Corporate Debtor has issued a debit note for Rs.67,96,800/- and further stated debit note for amount of Rs.50,00,000/- towards non-supply of G.I. Pipe for Bill number 203. The above reply to demand notice clearly indicate the dispute regarding the claim of the Appellant. There is no response given to the debit note issued by the said letter for a period of one year and eight months and it was only on 25.08.2021 that demand notice was issued after receiving a ledger confirmation of account manager of the corporate Debtor. As noted above, after receipt of the said reply to demand notice dated 20.11.2021, operational creditor did not proceed to file its application for which notice under Section 8 was issued and application came to be filed only on 18.02.2023 i.e. after more than 1 year. This sequence of events clearly indicate that the dispute persisted between the parties regarding the claim, as noted above, after recei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IBC, is not a debt collection forum. The IBC tackles and/or deals with insolvency and bankruptcy. It is the object of the IBC that CIRP should be initiated to penalize solvent companies for non-payment of disputed dues claimed by an operational creditor. 32. There are noticeable differences in the IBC between the procedure of initiation CIRP by a financial creditor and initiation of CIRP by an operational creditor. On a reading of Sections 8 and 9 of the IBC, it is patently clear that an Operational Creditor can only trigger the CIRP process, when there is an undisputed debt and a default in payment thereof. If the claim of an operational creditor is undisputed and the operational debt remains unpaid, CIRP must commence, for IBC does not countenance dishonesty or deliberate failure to repay the dues of an Operational Creditor. However, the debt is disputed, the application of the Operational Creditor for initiation of CIRP must be dismissed. 27. The Hon ble Supreme Court clearly held that the operational creditor can only trigger the CIRP process, when there is an undisputed debt and a default in payment thereof. If the claim of an operational creditor is undisputed and the operat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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