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TMI Blog2024 (12) TMI 91X X X X Extracts X X X X X X X X Extracts X X X X ..... Adjudicating Authority has admitted the Section 9 application filed by the Operational Creditor and admitted the Corporate Debtor into the rigors of Corporate Insolvency Resolution Process ("CIRP" in short). Aggrieved by the impugned order, the present appeal has been filed by the shareholder of the Corporate Debtor. 2. The brief facts of the case which are necessary to be considered for deciding the matter are as outlined below: The Corporate Debtor- Sahara Q Shop Unique Products Range Limited had entered into Service Agreement with Sigma Supply Chain Solutions Pvt. Ltd.-Operational Creditor for the purpose of handling, storage, maintenance, administration, distribution and arrangement of the goods of the Corporate Debtor kept in the warehouses at various locations within the country. The Operational Creditor provided requisite services in terms of the Service Agreement to the Corporate Debtor and issued invoices from time to time. The Corporate Debtor had also made payments from time to time. The Operational Creditor sent e-mails to the Corporate Debtor regarding outstanding amounts due and payable by the Corporate Debtor. The Operational Creditor claiming that the outsta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... verification of inventory at the Kolkata warehouse even after having assured facilitation of the physical verification. It was further submitted that the Operational Creditor had failed to accede to the request made by the Corporate Debtor on 22.04.2015 to resume operations across all the warehouses. 4. It is also the contention of the Appellant that though the Operational Creditor was holding the stock of the Corporate Debtor in trust and was a handling and distribution agent, it wrongfully sold stocks valued at Rs 2.65 Cr. without the knowledge and consent of the Corporate Debtor. The Corporate Debtor had also notified the Operational Creditor vide their e-mail dated 22.09.2016 that they would debit the amount of Rs 2.65 Cr. in their books of account on account of illegal selling of stocks belonging to the Corporate Debtor by the Operational Creditor. In support of their averment it was pointed out that besides notifying the Operational Creditor on 22.09.2016, the Corporate Debtor had adjusted the amount of Rs 2.65 Cr in its ledger account by a debit entry and that this debit entry was duly verified and confirmed by the statutory auditor. This debit entry of Rs 2.65 Cr clearly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business activity with the Operational Creditor even after making allegations that the Operational Creditor had misappropriated their goods. Further, the Corporate Debtor had made payments to the Operational Creditor till 23.03.2017 which date is after the allegations made by the Corporate Debtor against the Operational Creditor for misappropriation of goods. It is the contention of the Operational Creditor that it remains unexplained as to why the Corporate Debtor had not filed any legal proceeding against the Operational Creditor for the illegal selling of goods. It was also pointed out that the Adjudicating Authority had sought explanation from the Corporate Debtor as to how the alleged misappropriation of goods had been dealt in their books of account. The Appellant had submitted two ledger statements and had changed the entry belatedly in the new detailed ledger which clearly indicates that the Corporate Debtor had manipulated their accounts to match the amount of goods that were allegedly misappropriated. This shows that the financial record produced by the Corporate Debtor are manipulated and entries have been planted in the books of account belatedly. It has also been conte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the threshold level having become due and payable but not yet paid is applicable in the present case. 13. The Operational Creditor has predicated his claim of operational debt as due and payable by placing on record a letter dated 22.04.2015 and an email dated 07.03.2016 to substantiate that the Corporate Debtor had clearly admitted the debt qua the Operational Creditor. It has been asserted by the Operational Creditor that Corporate Debtor had not only clearly acknowledged their debt in their letter dated 22.04.2015 but had requested further time to make payments as they were facing financial difficulty. The Adjudicating Authority has taken cognisance of these correspondences in the impugned order to conclude that there is evidence of admission of liability on the part of the Corporate Debtor which is as reproduced below: "4. This bench has perused the documents and pleadings available on record and considered the arguments of both the sides. 4.1. As per the material on record this Bench finds that, the Operational Creditor has placed on record a letter dated 22.04.2015 and email correspondence dated 07.03.2016 which clearly shows admission of liability on the part of Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ital. Certainly, as concurred by Mr. Romie Dutt (CEO) also, the amount to be so realised will be utilised towards the clearance of the dues of the vendor with you being on the priority." This bench notes that the contents of the emails cited supra are enough to establish admission of liability by the Corporate Debtor. Moreover, the Corporate Debtor has also paid amount of Rs. 15 lakhs in January 2015 and Rs. 11 Lakhs on 23.04.2015 towards outstanding dues. This bench further observes that, the pre-existing dispute raised by the Corporate Debtor is just a way to escape paying of the legitimate dues owed to the Operational Creditor. Various payments were received by the Corporate Debtor which are reflected in the ledger account maintained by the Operational Creditor even after alleging that goods worth Rs. 2.65 Crores were misappropriated by the Operational Creditor. Further the Corporate Debtor has placed no evidence on record to support his defence. In that view of the matter, this bench is of the considered view that plea raised by the Corporate Debtor has no substance. ( Emphasis supplied ) 14. We notice that the Adjudicating Authority after noting the above admissions ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d wrongfully sold stocks valued at Rs 2.65 Cr. without the knowledge and consent of the Corporate Debtor and therefore the Corporate Debtor had notified the Operational Creditor vide their e-mail dated 22.09.2016 that they would debit the amount of Rs 2.65 Cr. in their books of account. In support of their averment, it was pointed out that besides notifying the Operational Creditor on 22.09.2016, the Corporate Debtor had adjusted the amount of Rs 2.65 Cr in its ledger account by a debit entry and that this debit entry was duly verified and confirmed by the statutory auditor. It was admitted by the Ld. Counsel for the Appellant that the Adjudicating Authority had sought clarifications regarding the ledger filed earlier following which a corrected detailed ledger was placed before the Adjudicating Authority on 05.07.2023. It was submitted that the corrected ledger had to be issued since errors had crept into their ledger owing to migration of data from SAP-ERP software to Tally. This fact of error caused by data migration has also been clarified in the statutory auditor's certificate dated 05.08.2023. This debit entry of Rs 2.65 Cr clearly evidenced pre-existing dispute which the Adj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns of the Appellant, it was submitted by the Operational Creditor that the Corporate Debtor had raised these allegations against them of having misappropriated goods and illegally sale of stocks subsequent to having addressed several e-mails calling upon the Corporate Debtor to pay the outstanding amount of service charges. It was stoutly contended that the allegation of illegal sale of stocks is unfounded which explains why the Corporate Debtor had not initiated any action or filed any criminal complaint against the Operational Creditor. Further the very fact that the Corporate Debtor had continued their business transactions with the Operational Creditor even after making allegations of misappropriation of goods shows that the allegations were bogus and has been raised to merely escape the liability of making payment. Furthermore, the Corporate Debtor had continued to make payments to the Operational Creditor till 23.03.2017 well after making allegations against the Operational Creditor for misappropriation of goods which shows that the allegations are false and imaginary and not genuine. It was vehemently argued that the defence raised by the Corporate Debtor is a bogey which ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rdered on 27.03.2023 to explain how the misappropriation of disputes was handled by the Corporate Debtor in their books of accounts following which the Corporate Debtor had submitted a single page screen shot of a ledger reflecting a ledger entry dated 30.06.2016, the amount of which roughly resembled the alleged misappropriated amount as is placed at page 388 of Appeal Paper Book ('APB' in short). Moreover, while this entry was dated June 2016 in the ledger, the Corporate Debtor had claimed the alleged misappropriation to have happened in September 2016 and thus the ledger entry and misappropriation of goods are not directly attributable to each other. Besides the fact that the date in the ledger entry happened to be a date which preceded the allegation of misappropriation of goods, we notice that the Adjudicating Authority upon noticing the vulnerability of relying on the one-page screen shot of the ledger produced by the Corporate Debtor, the Corporate Debtor was directed on 23.06.2023 to produce a detailed ledger account. In their detailed ledger as placed at pages 402-437 of APB, no entry contained in the earlier screen shot can be seen. Further while the account reflected in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dues claimed by the Operational Creditor prior to issue of demand notice. When the operational debt had already arisen and become due and invoices raised were not specifically disputed, there is nothing on record which detracts from the operational debt having become due and payable. For reasons already elucidated in the immediately preceding paragraph, the grounds on which alleged disputes have been claimed by the Corporate Debtor are feeble and not supported by credible evidence. This puts a serious question mark on the bona-fide of the bogey of pre-existing disputes raised by the Corporate Debtor. The Adjudicating Authority therefore does not appear to have committed any error in holding that all requisite conditions necessary to trigger CIRP under Section 9 stands fulfilled and that the grounds of pre-existing disputes do not rest on genuine foundations. Thus, even on the third test laid down by Mobilox judgment supra, the contention of the Appellant fails. 23. In result , we find that no error has been committed by the Adjudicating Authority in admitting the application under Section 9 of IBC. We find no merit in this Appeal. Appeal is dismissed. CIRP proceedings against the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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