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2022 (12) TMI 727 - AT - Insolvency and BankruptcyInitiation of CIRP - whether pre-existing dispute is discernible or not? - whether payment of operational debt the threshold limit to the Operational Creditor/Respondent No.1 had become due and payable? - NCLT admitted the application - HELD THAT - Sub-section (2) of Section 8 obligates the Corporate Debtor who has been delivered a Demand Notice under Section 8(1) by Operational Creditor to bring to the notice of the Operational Creditor the 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 . 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. 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 of coal supplied by Respondent No.1 prior to 12.03.2018 being the date on which Demand Notice was issued - This lends credulity to the stand taken by the Learned Counsel for Respondent No.1 that had genuine disputes been in existence, the Respondent No.2 would have articulated these disputes by responding to the demand notice and not remained silent. We are inclined to agree with the Respondent No.1 that the coal test reports appear to be an after-thought which is validated by the fact that these reports were submitted as additional documents before the Adjudicating Authority by Respondent No.2 only after the Section 9 application had been filed by Respondent No.1. The findings of the Adjudicating Authority that the defence raised by the Respondent No. 2 is an after-thought and a moonshine defence do not appear to be misplaced - the Adjudicating Authority did not commit any error in admitting the Section 9 application filed by Respondent No.1. Appeal dismissed.
Issues Involved:
1. Whether the operational debt above the threshold limit was due and payable. 2. Whether there was a pre-existing dispute discernible at the time of issuing the demand notice. 3. Whether the debt was barred by limitation. 4. Whether the Appellant was denied an opportunity of hearing due to connectivity problems. Detailed Analysis: 1. Operational Debt Due and Payable: The Adjudicating Authority confirmed that the total amount of debt in Part IV of the Section 9 application was Rs. 46,95,033/-, which included Rs. 18,31,644/- towards invoices and Rs. 28,63,389/- towards interest on delayed payments. The Respondent No.2 admitted the debt of Rs. 28,31,644/- in an email dated 05.08.2015, which was not disputed. The Authority found that the interest for delayed payment was part of the contractual debt, thus constituting an operational debt. The last payment of Rs. 10,00,000/- was made on 13.01.2016, and the Section 9 application filed on 09.05.2018 was within the limitation period. 2. Pre-existing Dispute: The Appellant contended that a pre-existing dispute existed regarding the quality of the coal supplied, supported by a debit note dated 16.11.2015. However, the Authority found no evidence of this dispute being communicated to the Operational Creditor before the demand notice was issued on 12.03.2018. The Authority held that the defense of a pre-existing dispute was "moonshine" and an afterthought since no reply was framed in response to the demand notice. The Coal Quality Assessment Reports were submitted only after the Section 9 application was filed, indicating they were an afterthought. 3. Limitation: The Authority determined that the debt was not barred by limitation. The last payment was made on 13.01.2016, and the Section 9 application filed on 09.05.2018 was within the three-year limitation period. The acknowledgment of debt in the email dated 05.08.2015 also provided a fresh period of limitation. 4. Opportunity of Hearing: The Appellant claimed that they were denied an opportunity of hearing due to connectivity problems. However, the Authority noted that the Appellant had ample opportunity to seek a hearing, given the long gap between the last hearing date and the order pronouncement. The plea was deemed superfluous and not given any weight. Conclusion: The Adjudicating Authority did not err in admitting the Section 9 application filed by Respondent No.1. The operational debt was due and payable, no substantial pre-existing dispute was established, the debt was within the limitation period, and the Appellant was not denied a fair hearing. The appeal was dismissed with no order as to costs.
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