2017 (11) TMI 1260 - Tri - Companies Law

Corporate insolvency procedure - proper compliance of Section 9 (3) (c) of the Code by the operational creditor - Held that - Section 9 (3) (c) of the Code says that the operational creditor shall, along with the application furnish a copy of certificate from the financial institutions maintaining account of the operational creditor confirming that there is no payment of an unpaid operational debt by the corporate debtor. In fact the Operational Creditor has filed copy of the statement of its account maintained in the Corporation Bank for the period with effect from 11.05.2016 upto 14.08.2017. This statement of account shows the deposit of an amount of ₹ 10,01,586.04 received from the respondent on 12.05.2016. In view of this, the certificate required under Section 9 (3) (c) was to be for the period 12.05.2016 onwards only and therefore, there is proper compliance of Section 9 (3) (c) of the Code by the operational creditor. Other contention that the claim is barred by time cannot be sustained because part payment was also made on 12.05.2016 as depicted in the bank statement filed by the petitioner to start a fresh period of limitation. Dispute raised by the respondent disentitling the petitioner to an order of admission - As referred to email dated 06.01.2016 at the bottom of page 626 of Annexure VI sent by the respondent, wherein it was admitted that an amount of ₹ 70,53,180/- was still to be paid to the petitioner and invoices worth ₹ 34.68 lacs were adjusted against the advance payment. It was further stated that invoices worth ₹ 22.32 lacs were rejected and invoices for ₹ 1.05 lacs were not submitted. The petitioner responded to this email and after more than 1 years, vide email dated 11.08.2017 as at page 626 claiming outstanding amount of ₹ 2,18,19,462/-. In view of the facts discussed above, there is clearly an existing dispute between the parties disentitling the petitioner to an order of admission. Whether the demand notice sent by the petitioner is valid in the eyes of law? - It is well settled principle of law that entries in the ledger account of the petitioner cannot fasten liability on the respondent. The basic documents were only the invoices for establishing the claim of debt and to support the contention that there was no scope of a possible dispute. At serial No.7 of Form No.3, Operational Creditor is required to attach the list of documents in order to prove the existence of operational debt and the amount in default. For these reasons, I would hold that the demand notice was not valid. The instant petition deserves to be rejected.

Summary

Issues Involved:
1. Compliance with Section 9 (3) (c) of the Insolvency & Bankruptcy Code.
2. Timeliness of the claim.
3. Existence of a dispute between the parties.
4. Validity of the demand notice.

Issue-wise Detailed Analysis:

1. Compliance with Section 9 (3) (c) of the Insolvency & Bankruptcy Code:
The respondent contended that the certificate from the Financial Institution was not in conformity with Section 9 (3) (c) of the Code. The petitioner provided a certificate from Corporation Bank dated 12.07.2017, stating no payment from the respondent since 12.05.2016, except ?6969/- on 18.05.2017. The Tribunal held that the certificate was sufficient, as Section 9 (3) (c) requires confirmation of no payment of an unpaid operational debt by the corporate debtor, and the petitioner's bank statement from 11.05.2016 to 14.08.2017 showed proper compliance.

2. Timeliness of the Claim:
The respondent argued that the claim was time-barred. However, the Tribunal noted that part payment was made on 12.05.2016, starting a fresh period of limitation. Therefore, the claim was within the permissible time frame.

3. Existence of a Dispute Between the Parties:
The Tribunal examined whether a dispute existed that would disqualify the petitioner's claim. The respondent cited various discrepancies in the invoices, such as multiple invoices dated 01.03.2017 for services allegedly provided in 2014 and 2015, and inconsistencies in work completion certificates. The Tribunal referred to the Supreme Court's ruling in "Mobilox Innovations (P.) Ltd. v. Kirusa Software Private Limited," which mandates rejection of the application if there is a plausible contention requiring further investigation. The Tribunal found that the discrepancies and the respondent’s consistent disputes over invoices indicated a genuine dispute, disqualifying the petitioner from an order of admission.

4. Validity of the Demand Notice:
The Tribunal scrutinized the validity of the demand notice sent by the petitioner. The petitioner sent 47 invoices dated 06.03.2017, but only 16 were annexed with the demand notice. The Tribunal emphasized that the basis of the claim was the invoices, not the ledger account entries. The Tribunal ruled that the demand notice was invalid as it did not include all relevant invoices, failing to establish the operational debt and the amount in default.

Conclusion:
The petition was rejected due to the existence of a genuine dispute between the parties and the invalidity of the demand notice. The Tribunal concluded that the petition did not meet the necessary legal requirements for admission under Section 9 of the Insolvency & Bankruptcy Code. The decision was communicated to both parties.