2023 (7) TMI 1243 - AT - Insolvency and Bankruptcy

Violation of principles of natural justice - evidence produced by the Corporate Debtor showing that claims by Operational Creditor were bogus on the basis of 12 fake invoices, were not considered suitably by the Adjudicating Authority - existence of operational debt over Rs. 1 Crore existed between the Corporate Debtor and the Respondent No. 1 or not - HELD THAT - It is noted from the averments that there has been no pre-existing dispute between the parties and the Corporate Debtor did not raise any dispute before the demand notice was issued. Even during pleading before this Appellate Tribunal, no pre-existing dispute on any ground has been brought out by the Corporate Debtor. It is the case of the Corporate Debtor that 12 invoices which have been claimed by the Respondent No. 1 are not genuine and have been fabricated by the Respondent No. 1 to get more money out of the Corporate Debtor. From this, only point emerges is regarding existence of 12 invoices and not regarding any other point including supply or quality of the material/ pre-existing disputes. The Corporate Debtor has also taken the plea that the Respondent No. 1 has not furnished documents to prove his claims like weight scale receipt of Dharamkata. On this account the Respondent No. 1 has submitted that he was never required to submit the Dharamkata receipt as it was choice on part of the Corporate Debtor as buyer of the goods to get the products weighted at its end, if so required, and to communicate discrepancy, if any, the Respondent No. 1. The Respondent No. 1 further clarified that even for the invoices admitted by the Corporate Debtor, no Dharamkata receipts have been produced, by the Corporate Debtor as such the plea of the Corporate Debtor about non-submission of documents is prima-facie not convincing. The Corporate Debtor has admitted that there was no formal written contract agreement for supply of material by the Respondent No. 1 and similarly no formal purchase order was issued by him. The Corporate Debtor also admitted that on the representative of the Corporate Debtor used to ask the Respondent No. 1 to supply goods on oral instructions and subsequently payment would be claimed by the Respondent No. 1 based on invoices issued by him to the Corporate Debtor. Hence, there cannot be any dispute regarding payment being made on the basis of invoices issued by the supplier of the material, here in case, by the Respondent No. 1 - On consideration of various invoices which have been relied upon by the Respondent No. 1 had been attached with the application filed before the Adjudicating Authority under Section 7 of the Code. On this account, it may also be pertinent to note that these invoices have stated to been reported in the GST returns and necessary ITC have also been claimed. It is the case of the Corporate Debtor that CGST Department had enquired into alleged fake purchases by the Corporate Debtor based on the alleged fake documents/ invoices issued by alleged non-existent Respondent No. 1. The Corporate Debtor has admitted that he was undergoing financial stress and there have been delays in making payments as well as in default at relevant period. In fact, the Corporate Debtor indeed tried to settle the matter by making payments as already discussed earlier, however, the Corporate Debtor failed to settle the matter - there are not in position to accept the plea of the Corporate Debtor regarding alleged fraudulent invoices claimed by the Respondent No. 1 or over payment made by the Corporate Debtor to the Respondent No. 1. There are no error in the challenged Impugned Order - The Appeal being devoid of any merit(s) is dismissed.

Summary

Issues Involved:

1. Whether the operational debt over Rs. 1 Crore existed between the Corporate Debtor and the Respondent No. 1.
2. Whether any pre-existing dispute existed between the parties.

Summary:

Existence of Operational Debt:
The Appellate Tribunal examined whether an operational debt over Rs. 1 Crore existed between the Corporate Debtor and Respondent No. 1. The Corporate Debtor admitted to receiving materials worth Crores of Rupees from Respondent No. 1 and making payments in a "Running Account Manner." The Corporate Debtor also acknowledged financial distress and delays in payments. Despite claims of overpayment and fraudulent invoices, the Tribunal found no convincing evidence to support these allegations. The Tribunal noted that the Corporate Debtor had made voluntary settlement payments during the petition hearing, which indicated an acknowledgment of the debt.

Pre-existing Dispute:
The Tribunal assessed whether there was a pre-existing dispute between the parties. It was noted that there was no written contract for the supply of materials, and orders were placed through verbal communication or telephonic conversation. The Corporate Debtor did not raise any dispute before the demand notices were issued. The Tribunal found no evidence of a pre-existing dispute, as the Corporate Debtor's claims of fraudulent invoices were not substantiated. The Tribunal also considered the GST records and the Corporate Debtor's claim of Input Tax Credit (ITC) on the disputed invoices, which indicated acknowledgment of the debt.

Conclusion:
The Tribunal concluded that there was no error in the Impugned Order dated 21.02.2022. The appeal was dismissed, and the stay on the constitution of the Committee of Creditors (CoC) was removed. The Interim Resolution Professional (IRP) was directed to proceed immediately in accordance with the law. The Corporate Debtor was entitled to claim back the deposited amount of Rs. 1,06,31,219/- from the Pay and Accounts Officer, Ministry of Corporate Affairs, New Delhi, after following due process.