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TMI Blog2019 (2) TMI 1697X X X X Extracts X X X X X X X X Extracts X X X X ..... that M/S. Priya Trading Company, (X Operational Creditor') and M/S. Veda Biofuel Limited ('Corporate Debtor') entered into Raw Material supply Agreement dated 09-04-2018 for supply of Broken Rice and Coal to the Corporate Debtor. (2) It is the case of Operational Creditor that as per the Raw Material Supply Agreement clause No. 7 (A Joint Account will be opened with an Authorised Signatory and all inward ENA sale revenue should be deposited in this Account. All Raw Material payment for that particular dispatches will be released from the same account immediately, any default in the payments against the material supplies, will terminate the agreement), the Operational Creditor raised invoices upon the Corporate Debtor against supply of said materials. (3) It is the case of Operational Debtor, despite the timely and qualitative supply of Broken Rice and Coal by the Operational Creditor, the Corporate Debtor deducted the shortages and that the Corporate Debtor promised to deposit into Joint Account but the pending invocies amount were never credited. The Corporate Debtor failed and neglected to pay the amount of pending invoices of the Operational Creditor even after s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ited company incorporated under the Companies Act, 1956 on 30.09.2010 bearing Company Identification No. U24100AP2010PLC070652 having its registered office at #H.No.50-50-15/2, Seethammadara behind Gurudwara Visakhapatnam Andhra Pradesh, India - 530 013. It commenced its commercial operations from 09.06.2016. The Corporate Debtor is engaged in the business of the Manufacture of ENA (Extra Neutral Alcohol) & its byproducts, DDGS (Dry cake) and DWGS(Wet cake). (2) It is the case of Corporate Debtor that there is no privity of contract between the Applicant and Respondent and denies all the material allegations and averments. (3) The Corporate Debtor contends that there are disputes existing between the parties to the Raw Material Supply Agreement, i.e., the Corporate Debtor and other party to the contract Shri. Arun Agarwal and Smt. Annapurna Agarwal, basing on which the Operational Creditor, even though having no privity of contract, has issued demand notice under the provisions of the Insolvency and Bankruptcy Code, 2016 to create hardship to the Corporate Debtor,and disrupt the smooth functioning of the business of the Corporate Debtor. (4) It is also the further case of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is no privity of contract between both the parties. Further, it is the case of Corporate Debtor that the invoices raised against the alleged supply of material as per Annexure-B of the Petition clearly shows that they have been raised in the name of "Priya Trading Company" and not by the parties as per the Raw Material Supply Agreement which was executed between Shri. Arun Agarwal and Smt. Annapurna Agarwal and the Corporate Debtor. It is contended that there was neither an offer nor acceptance with regard to the supply of broken rice between the Operational Creditor and. Corporate Debtor and there was never any communication between the Operational Creditor and Corporate Debtor with regard to the same. (9) It is the case of Corporate Debtor that the Operational Creditor issued Demand Notice demanding the alleged payment, ignoring the fact that there already exists a dispute between the parties to the Raw Material Supply Agreement, with regard to the said claim and the Corporate Debtor already replied to the demand notice on 14.07.2018. (10) It is the case of Corporate Debtor that there is no contract that exists between the Operational Creditor and the Corporate Debtor and as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orate Insolvency Resolution Process (CRP) is not maintainable, as the Corporate Debtor Company is a Solvent Company which is capable of paying any outstanding amounts that are due. (16) It is the case of Corporate Debtor, as per the provisions of the Insolvency and Bankruptcy Code, the Petitioner is not an 'Operational Creditor' vis-a-vis the Corporate Debtor so as to initiate the present Petition and that there is no claim or due which is payable by the Corporate Debtor to the Operational Creditor as there is no privity of contract between them. The contention of the Corporate Debtor that there was neither any Raw Material Supply Agreement nor any transaction taken place between the parties and therefore the Petitioner cannot be termed as an "OPERATIONAL CREDITOR". Hence, the present Petition is liable to be dismissed as there is no contract between the parties other than the Raw Material Supply Agreement on which the Operational Creditor is relying upon. (17) The Learned Counsel for Corporate Debtor relied on the following judgements: (i) Hon'ble Supreme Court decision in the matter of Essar Oil Ltd Vs Hindustan Shipyard Limited & Ors cited in (2015) 10 Supreme Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relied on tax invoices for supply of coal along with compilation sheet of all the invoices for the period from 01.04.2017 to 11.07.2017 shown as Annexure B-l (colly). I have seen the compilation of invoices shown at Annexure B-1. The details of invoices from 01.04.2018 to 11.07.2018 are shown at Page Nos 24-26 of Annexure-B-l (Colly). The balance due from the Corporate Debtor is Rs. 1,39,85,095/- towards coal supply. The Operational Creditor relied on demand notice dated 05.07.2018 issued in Form-3 to the Corporate Debtor. It is shown as Annexure-E. I. have gone through the demand notice dated 05.07.2018. The total amount due with interest is shown at Rs. 4,80,65,149/-. It is not in dispute demand notice was issued by Operational creditor to the Corporate Debtor. The Corporate Debtor issued reply dated 14.07.2018. It is shown as Annexure-F. I have gone through the reply. The reply is addressed to one Shri. Shyam Sundar Agarwal who is partner of Operational Creditor, which is a firm. In the reply Corporate Debtor stated that a legal notice was issued on behalf of Operational Creditor on 15.06.2018 and Corporate Debtor gave reply to the said notice on 02.07.2018. The Corporate Debto ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of Corporate Debtor that somebody other than Operational Creditor supplied the raw material. The Agreement was entered into with Shri Arun Agarwal and Smt Annapurna Agarwal but raw material was supplied to the Corporate Debtor through Operational Creditor. It goes to establish that raw material was supplied to the Corporate Debtor though the firm. Shri Arun Agarwal and Smt Annapurna Agarwal might have entered into contract with Corporate Debtor for supply of raw material but they supplied the raw material through their firm which is the Operational Creditor. Husband of Smt Annapurna Agarwal is a partner in the firm / Operational Creditor. Similarly Smt Annapurna Agarwal is a partner. Even in the absence of Agreement for supply of raw material, the Corporate Debtor admtitedly received raw material from Operational Creditor. The invoices were raised. The Corporate Debtor is accepting the consignment delivered by the Operational Creditor. Thus, even in the absence of an Agreement, the Operational creditor is entitled for the money for supply of raw material. The Corporate Debtor cannot say that it is not liable to pay to the Operational Creditor on the ground that it entered into ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter-alia supply of raw materials i.e. broken rice, coal and husk. Therefore, it goes to show that Corporate Debtor is aware Shri Arun Agarwal and Smt Annapurna Agarwal are running the business in the name of Operational Creditor and supplying raw material. Thus, it is clear the two persons who entered into contract with Corporate Debtor dated 09.04.2018 supplied raw material through their firm. It is interesting to note Operational Creditor filed copy of partnership deed of Operational Creditor firm shown as Annexure-N (Colly). The Partnership Deed is executed between Shri Shyam Sundar Agarwal and Smt Annapurna Agarwal. Shri Shyam Sundar Agarwal is the husband of Smt Annapurna Agarwal. Thus, there is clear admission by Corporate Debtor in the notice dated 16.06.2018 that Shri Arun Agarwal and Smt Annapurna Agarwal are running business through Priya Trading Company. The raw material was supplied to the Corporate Debtor through Priya Trading Company. Then it is not open to the Corporate Debtor to contend Operational Creditor has no locus standi to file Petition under Section 9 of IBC against it. It can be safely concluded that the parties to the Agreement supplied raw material throug ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efault in paying the amount covered by invoices. Now the contention of Corporate debtor after Opertional Creditor issued notice on 15.06.2018 demanding payment, the Corporate Debtor started contending that Operational Creditor/Supplier failed to supply raw material as per terms of contract. Even assuming that required quantity of raw material was not supplied. The supplier will supply raw material if buyer pays the value of goods supplied. In the case on hand, the Corporate Debtor was not honouring the invoices and amounts covered by the invoices was mounting up. In a situation like this, there is no other go for the supplier except to stop supplying goods to the Corporate Debtor: Without paying to the supplier, the Corporate debtor cannot blame the supplier as if supplier has not supplied the required quantity. 16. It is interesting to note, Corporate Debtor claimed had the supplier supplied the required quantity of raw materials it would have earned profit of IRs. 3.15 lakhs per day. Thus, the Corporate Debtor claimed that it had sufferred loss as if on account failure to supply required quantity by supplier and as such there exist a dispute. 17. The Counsel for Corporate Debto ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch is pre-existing - i.e. before such notice or invoice was received by the Corporate Debtor. The moment there is existence of such a dispute, the Operational creditor gets out of the clutches of the Code. It is true, if there is pre-existing dispute then Petition by Operational Creditor cannot be admitted. Pre-existing dispute must note be spurious, hypothetical or illusory. The Corporate Debtor issued a reply as if it sufferred loss alleging Operational Creditor had not supplied required quantity of raw material and further claimed damages. I already discussed at length that Corporate Debtor failed to pay the money covered by invoices and terms of Raw Material Agreeement provides for termination in case of non-payment. The alleged dispute cannot be recognised in the light of default committed by Corporate Debtor. 20. It is interesting to note Corporate Debtor till date had not initiated any action against the supplier / Operational Creditor for recovery of alleged loss. The alleged dispute has no merit at all. The alleged dispute cannot be recognised. The Corporate debtor has committed default in paying the amounts covered by the invoices. Having committed default, the Corpora ..... X X X X Extracts X X X X X X X X Extracts X X X X
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