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TMI Blog2017 (10) TMI 916X X X X Extracts X X X X X X X X Extracts X X X X ..... averred by the respondent that due to defective raw material, it affected the business of the respondent. The insolvency resolution process cannot be triggered in case there is dispute of even part of the claim i.e. with regard to the three of the invoices of the year 2013. The present is a case where there was an existing dispute even before the issuance of the demand notice thus disentitling the petitioner to an order of admission. Neither in the petition nor in the rejoinder, the petitioner has indicated about the previous dispute whereunder the petitioner accepted return of the damaged material, though reference is made to various entries from the ledger book of the petitioner showing adjustment in respect of the goods returned. In fact the petitioner even denied the documents from Annexure R-1 to R-9 relied upon by the respondent in the written statement, which are of the year 2014. These facts indicate that the matter needs to be tried in a Civil Suit or by some other appropriate remedy. Thus the instant petition is rejected. - CP. (IB) NO. 52/Chd./Pb/2017 - - - Dated:- 11-10-2017 - MR. R.P. NAGRATH, J. For The Petitioner : Ashwani Talwar and Ms. Kirti, Advocates ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tanding amount at the rate of 24% per annum. 6. It is further stated that there has never been any dispute with regard to the quality and quantity of the goods supplied. The petitioner company is maintaining regular books of accounts in the course of its business, which are audited in accordance with law. Copy of the ledger account of the respondent company maintained by the petitioner is at Annexure A-8 from pages 96 to 110. There was an amount of ₹ 65,67,731/-outstanding as per the books of account as on 31.03.2015. On reconciliation of the account, the respondent issued email dated 01.09.2015 Annexure A-9 at page 111-112 of the paper book confirming the balance of ₹ 63,19,873 instead of the balance shown in the record of the petitioner. The petitioner requested the respondent to release the entire admitted outstanding amount and to leave the balance to be recovered subject to reconciliation. Thereafter the respondent paid an amount of ₹ 5,74,457/- and thus, the admission amount of ₹ 57,45,416/-remains unpaid out of the admitted amount of ₹ 63,19,873/-. 7. The detail of the outstanding amount against the respondent is mentioned below:- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ived by the petitioner by registered post on 21.06.2017 also contained an attachment purportedly the reply dated 10.02.2017 sent to the legal notice at the wrong email address of Mr.Ashwani Talwar, Advocate at [email protected]. Though the correct email Id of the petitioner as per the contention of learned counsel is [email protected] and that of Mr.Ashwani Talwar, Advocate is [email protected]. These emails are said to have been fabricated to show false evidence of the existing dispute. 12. It is further alleged that in fact no dispute was raised by the Respondent-Corporate Debtor prior to the issuance of notice dated 07.06.2017 under Section 7 of the Code. There cannot be any dispute regarding quality and quantity of the supply after issuance of the balance confirmation. 13. The petitioner has calculated the interest over these bills @ 24% per annum, as per the computation chart Annexure A-12 as at page 133 of the paper book. The total amount of interest thus calculated comes to ₹ 42,93,276/-. 14. To show compliance with the requirement of Section 9 (3)(b) and 9 (3)(c) of the Code, the petitioner has relied upon the certificate dated 23.06.2017 Annexure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e present petition by appointing Mr.Ashwani Talwar, Advocate, who was originally engaged by the company. 17. Mr.Khandelwal has also executed a special power of attorney attested on 19.08.2017 in favour of Mr.Satya Parkash through whom the petition under Section 9 of the Code was originally filed by the petitioner company. The special power of attorney is attached with the rejoinder filed by the petitioner to the objections/reply to the main petition. The contents of CA No.129/2017 and the rejoinder are supported by the affidavit of Mr.Khandelwal. 18. Notice of this petition was issued to the respondent and written reply to the petition has been filed. It is stated that the Respondent-Corporate Debtor had raised the dispute with regard to the quality of the material supplied to the respondent much prior to the receipt of the demand notice. It is averred that on 05.07.2014, the respondent lodged a complaint with the petitioner regarding generation of cracks against the material received. Copy of email correspondence dated 05.07.2014 alongwith the Quality Lab Report is at Annexure R-1 (Colly). On 15.07.2014, the officers of the operational creditor visited the site of the respon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... denied that the operational creditor served the demand notice in Form 3 and 4 as stipulated in Rules 5 (1) of the Rules. This objection, however, could not be successfully pressed as it is established that the petitioner had sent the demand notice by speed post vide postal receipt dated 07.06.2017 as at Annexure A-5 and at page 93 (Annexure A-6) is the track report of the post office showing that the postal article was delivered to the respondent on 09.06.2017. The weight of the postal article as mentioned in the postal receipt is 292 gms. Ultimately on close of the arguments, learned senior counsel for the respondent handed over copy of the other email dated 17.06.2017 sent to the petitioner at 2.37 PM, as the earlier email copy of which was sent by registered post was stated to have bounced back. 23. The rejoinder has also been filed by the petitioner with CA 128/2017. It is stated that the petitioner never received any notice of dispute from the Respondent-Corporate Debtor with respect to the unpaid invoices, for which the claim has been made in this case. All the documents filed with the reply at Annexure R-1 (Colly) to R-9 (Colly) are totally wrong, false and the same are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... welve months preceding the date of making of the application; or (c) a corporate debtor or a financial creditor who has violated any of the terms of resolution plan which was approved twelve months before the date of making of an application under this Chapter; or (d) a corporate debtor in respect of whom, a liquidation order has been made. 28. The initiation date for the purpose of Section 11 of the Code is the date on which a financial creditor, corporate applicant or operational creditor, as the case may be, makes an application to the Adjudicating Authority for initiating corporate insolvency resolution process as provided in Section 5 (11) of the Code. The application was filed by the operational creditor on 14.07.2017, which according to the learned petitioner s counsel and rightly so is the initiation date. 29. The learned counsel for the petitioner further contended that the bar created by Section 11 of the Code is restricted only to a petition filed by the Corporate Debtor, but the instant petition has been filed by an operational creditor. This argument has to be rejected out rightly as such an interpretation would make the provisions of Section 11 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resolution professional under sub section (2) of Section 17 of the Code. The interim resolution professional apart from other powers has to act and execute in the name and on behalf of the corporate debtor all deeds, receipts, and other documents, if any. 33. Section 18 of the Code refers to the duties of the interim resolution professional and the specific reference is made to clause (d) whereunder the interim resolution professional can monitor the assets of the corporate debtor and manage its operations until a resolution professional is appointed by the committee of creditors. Under clause 18 (f) (vi) of Section 18 of the Code, the interim resolution professional has to take control and custody of any asset over which the corporate debtor has ownership right, as recorded in the balance sheet of the corporate debtor or with information utility or the depository of securities or any other registry that records the ownership of assets including assets subject to determination by a Court or authority. 34. I am, however, of the view that pendency of the litigation, which is yet to culminate into a final order may not be an asset of the corporate debtor for attracting the afore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e under sub-section (2) is complete; (b) there is no repayment of the unpaid operational debt; (c) the invoice or notice for payment to the corporate debtor has been delivered by the operational creditor; (d) no notice of dispute has been received by the operational creditor or there is no record of dispute in the information utility; and (e) there is no disciplinary proceeding pending against any resolution professional proposed under sub-section (4), if any. (ii) reject the application and communicate such decision to the operational creditor and the corporate debtor, if- (a) the application made under sub-section (2) is incomplete; (b) there has been repayment of the unpaid operational debt; (c) the creditor has not delivered the invoice or notice for payment to the corporate debtor; (d) notice of dispute has been received by the operational creditor or there is a record of dispute in the information utility; or (e) any disciplinary proceeding is pending against any proposed resolution professional: Provided that Adjudicating Authority, shall before rejecting an application under sub-clause (a) of clause (ii) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d counsel for petitioner contended that the respondent was bound to raise the dispute within a period of ten days only and if the same is sent beyond the stipulated period of ten days provided in Section 8 of the Code, these emails cannot be looked into. In support of his contention, the learned counsel relied upon the judgment of Hon ble Supreme Court in Mobilox Innovations Private Limited Vs. Kirusa Software Private Limited Civil Appeal No.9405 of 2017, MANU/NL/0027/2017. In para 24 of the judgment, the Hon ble Supreme Court observed that within a period of 10 days of receipt of such demand notice or copy of invoice, the corporate debtor must bring to the notice of the operational creditor, the existence of a dispute and/or the record of pendency of a suit or arbitration proceeding filed before the receipt of such notice or invoice in relation to such dispute. Further in case, the unpaid debt has been repaid, the corporate debtor shall within a period of the self-same 10 days send an attested copy of the record of the electronic transfer of the unpaid amount from the bank account of the corporate debtor or send an attested copy of the record that the operational creditor has en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gnored out of consideration. 46. The Hon ble Supreme Court in M/s Surendra Trading Company v. M/s Juggilal Kamlapat Jute Mills Company Limited and others Civil Appeal No.8400 of 2017, has affirmed the view of the Hon ble National Company Law Appellate Tribunal that the time of 14 days for disposal of the petition under the provisions of the Code, is the directory However, the Hon ble Supreme Court set aside part of the judgment of Hon ble National Company Law Appellate Tribunal, which holds proviso to sub-section (5) of Section 7 or proviso to sub-section (5) of Section 9 or proviso to sub-section (4) of Section 10 of the Code to remove the defects within seven days as mandatory. But it was held that in case the objections are not removed within seven days, necessary application showing sufficient cause for the delay should be filed and only when the Adjudicating Authority is satisfied that such a cause is shown, it should entertain the application on merits, otherwise the Adjudicating Authority will have a right to dismiss the application. 47. It was otherwise quite strange for the respondent to have totally denied the receipt of the demand notice. In the reply, respondent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st proceeded ahead to anneal it in two to three lots with different parameters in house and subsequently also got it annealed from outside party but all the annealed lots did not work on cold heading process for which this material was bought. With this process, they incurred additional process cost which was proved to be a total waste. Finally, the total annealed materials became worthless for cold heading and were forced to be treated as scrap. 50. It was further stated that at last after expiry of substantial amount of time in discussion, Bhushan Steel accepted back the part unprocessed bad quality materials and same was taken back by the company on their own cost and risk. For annealed materials, they out rightly denied to accept and that became sheer scrap for them. Taking back wrongly supplied poor quality materials is itself an expressed acceptance of faults on the part of the company which may be noted. 51. Annexure R-1 is the copy of email sent by the respondent to the petitioner at the email id [email protected] and other persons with regard to discussion of a complaint of cracks against the material received. With this email copy of the invoice dated 19.06.20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No. Invoice Date. Grade Size Invoice Qty. 10181 30.05.2014 EN-8D 38 mm 20,730 10209 30.05.2014 EN-8D 38 mm 20,960 10232 30.05.2014 EN-8D 38 mm 1,482 2621 24.05.2014 EN-8D 38 mm 29,680 2843 29.05.2014 EN-8D 38 mm 11,930 11485 06.06.2014 EN-8D 32 mm 16,050 11486 06.06.2014 EN-8D 32 mm 16,170 11493 07.06.2014 EN-8D 32 mm 16,030 11494 07.06.2014 EN-8D 32 mm 16,110 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with regard to the quality issue at various stages. 57. The learned counsel for the petitioner, however, referred to page 107 of the paper book of the company petition, which is copy of the ledger account to suggest that in respect of 10 rejected invoices, the adjustment has been made towards the outstanding amount of the respondent on 02.01.2015 to 28.01.2015. This contention was raised in response to the document Annexure R-8 attached with the reply regarding recovery towards quality issue of materials grade En8d supplied and accepted by the petitioner. The document is dated 05.08.2017. Out of these 13 bills, the material in respect of invoices taken back by the petitioner is in the tabulated form at page 89 of the reply, the value of which is to the tune of ₹ 45,13,112/-. This tabulated information was not disputed as the credit of the bills, the material of which was rejected is made in the Ledger Books of the petitioner as per entries from 02.01.2015 to 28.10.2015. 58. Learned counsel for the petitioner, however, contended that out of various invoices claimed in this case, the dispute at best can be of only three of the invoices of the year 2013. As per the minutes ..... X X X X Extracts X X X X X X X X Extracts X X X X
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