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TMI Blog2019 (10) TMI 1242X X X X Extracts X X X X X X X X Extracts X X X X ..... ion filed by the Operational Creditor before MSMEFC was assigned temporary number and no notice was ordered by MSMEFC to the Corporate Debtor and 25. before taking further proceedings, the Application was withdrawn. For the said reason, the Corporate Debtor did not take this objection either in the reply or the counter because no notice was served by the MSMEFC on the Corporate Debtor. So, proceedings never stared against the Corporate Debtor before the MSMEFC. Corporate Debtor cannot take any advantage to contend dispute pending on the ground that application was filed before the MSMEFC under Section 18(1) of the MSME Act. So this objection cannot be a ground for rejecting the Petition. The objection cannot be sustained under the law. Therefore, the Operational Creditor is able to establish that Corporate Debtor committed default of operational debt and Petition is liable to be admitted. Application admitted - moratorium declared. X X X X Extracts X X X X X X X X Extracts X X X X ..... demand notice dated 02.02.2018 within the time stipulated therein and also failed to establish existence of any dispute over the debt claimed in the demand notice. It is the case of Operational Creditor that the Corporate Debtor admitted having placed purchase orders and invoices raised thereby and admitted this liability of payment in respect of material supplied thereby defaulted to a tune of ₹ 1,84,84,210/- and hence prayed this Tribunal to admit the Petition. Counter by Corporate Debtor (3) Counter is filed by Corporate Debtor. The averments in the counter in brief are:- (a) It is the case of Corporate Debtor that Purchase orders were placed with Operational Creditor for supply of materials for its clients who placed purchase orders on Corporate Debtor. But the materials supplied by Operational Creditor was of very poor quality and the materials were returned by the Clients to the Corporate Debtor. (b) It is the further case of Corporate Debtor that in the reply notice dated 27.02.2018, it raised estimated loss at ₹ 1,38,17,420/- on account of supply of defective goods. The defects noticed by the Corporate Debtor were communicated to the Operational Credit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Further contended though demand notice was issued on 02.02.2018, the Corporate Debtor did not raise any dispute within the statutory period of 10 days. However, in reply notice dated 27.02.2018 it stated that the material supplied under PO Nos. 151040034 dtd 15.10.2015 and 151040382 dtd 21.01.2016 were defective and it sustained loss of ₹ 1,38,17,420/- whereas the said POs are not part of the demand notice dated 02.02.2018 and no amount is claimed in respect of these POs. The POs mentioned in the reply filed by Corporate Debtor are not part of debt claimed in demand notice as such the loss if any sustained by Corporate Debtor, it should seek remedies as per law. Further it is the case of Operational Creditor that no claim is made in demand notice with respect to debit notes. Hence, the debit notes are not part of the debt claimed by the Operational Creditor and deny the contentions of Corporate Debtor that the Operational Creditor has accepted the same. Further it is averred that the contentions raised by the Corporate Debtor are nothing but internal matters between the Corporate Debtor and its clients. (3) The Operational Creditor denies the contentions raised by Corpora ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 1,84,84,210/-. They are shown as Account No. 1 and Account No.2 at page Nos. 40-46 and 47-49 respectively of the paper book-let filed along with Form-5. (9) The Learned Counsel strongly contended that Corporate Debtor through its email dated 13.03.2018 addressed to the Operational Creditor had confirmed about placing of Purchase Orders and raising of invoices which is shown at page No. 50- 56 of the main petition book-let. Learned Counsel also relied on delivery challans shown at page No. 57-165 of Annexure-I of main petition. Thus, Learned Counsel for Operational Creditor would contend that documentary evidence has been placed including confirmation by Corporate Debtor about placing of Purchase Orders and supply of materials in terms of Purchase Orders from time to time and also the amount due. Counsel contended there is absolutely no dispute raised with regard to the quality of the goods supplied till date of issuing Demand Notice dated 02.02.2018. The Counsel contended there is also no dispute with regard to supply of material to the Corporate Debtor from time to time. The Learned Counsel contended, the Operational Creditor issued Demand Notice in Form 3 & 4 dated 02.0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore, those debit notes are not connected to the purchase orders referred to in Demand Notice over which default occurred and Petition is filed under Section 9 of IBC. 12. The other contention raised that the dispute to be referred to the Arbitrator is also not tenable. Thus, Learned Counsel contended, the Operational Creditor is able to establish the debt due by the Corporate Debtor in respect of material supplied and also the default. Therefore, petition is liable to be admitted. 13. On the other hand, the Learned Counsel for Corporate Debtor would contend that goods supplied in respect of purchase orders No. 1510400324 dated 15.10.2015, 151040382 dated 21.10.2016 were defective which were supplied to customers of Corporate Debtor namely ITC, EYRA and Krishnapatnam Port Company Ltd. The debit notes were raised by the Corporate Debtor which were accepted by Operational Creditor, however to the extent of Rs. out of ₹ 71,60,284.16/- out of ₹ 1,38,17,420. The Counsel contended the Corporate Debtor has given credit to the debit notes which are as follows: Sl.N0. Debit Note date Amount debited 01. 31.10.2016 14,62,505.16 02. 31.10.2016 5,68,290.00 03. 24.02 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The contention of the Corporate Debtor, the material supplied by Operational Creditor to the customers of Corporate Debtor were found defective, and they returned the material. Therefore debit notes were raised in respect of the value of goods which were found defective. Here, the Corporate Debtor is raising some dispute, that too only after the Demand Notice was issued on 02.02.2018, as if some goods delivered by the Operational Creditor were defective, particularly with reference to the purchase orders, the detail of which are given in the reply. Interestingly, the Corporate Debtor is not raising any dispute with regard to the goods supplied to it by the Operational Creditor with reference to the purchase order referred to in the Demand Notice. In other words, the specific case of Operational Creditor that that Corporate Debtor fell due in respect of invoices referred to in the Demand Notice. Default occurred in respect of invoices / purchase orders referred to in the Demand Notice. The Corporate Debtor on the other hand is contending that goods supplied against certain purchase orders were found defective and debit notes were raised. These invoices are covered in the debit not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1964) 34 Comp Cas 963 held as follows:- Para 2 : It is well settled that in order to raise the presumption under Section 434 (I) as a Company's inability to pay its debts, it is not suffcient to show merely that the Company has omitted to pay the debt due to the Petitioner despite service of the Statutory notice: it must be shown that the Company has omitted to pay without reasonable excuse. The existence of valid counter claims would clearly constitute reasonable excuse for non-payment. What has to be seen in the present case therefore, is whether the counterclaims set up by the Company are prima facie valid and bonafide. Similarly, Hon'ble High Court of Madhya Pradesh has held in the decision cited supra that when matters of dispute raised, the proper course for the parties is to approach competent Civil Court for recovery of their claims or counter claims. 19. The Learned Counsel for Corporate Debtor also relied on the decision of Hon'ble Apex Court in the matter of Mobilox Innovations Private Limited Vs Kirusa Software Private Limited that to constitute a dispute, the pendency of suit or arbitration proceedings not necessary for constituting dispute as an ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te dispute, as such the Operational Creditor cannot maintain the present petition. On the other hand, the Learned Counsel for Operational Creditor would contend that the Operational Creditor had withdrawn the Application filed before MSMEFC even before any action is initiated. The Counsel contended, in fact the Corporate Debtor did not raise this point in the reply. 23. The Company Petition was filed on 14.03.2018 and the Corporate Debtor filed reply on 14.08.2019. In the counter, the Corporate Debtor did not raise any dispute with regard to the matter filed before MSMEFC. Counsel contended that the Operational Creditor uploaded the Application under Section 18(1) of MSME Act 2006 on 02.02.2018 and no notice was served on the Corporate Debtor and it was withdrawn. Therefore, it doesn't amount to pending proceedings. 24. It is true the Operational Creditor informed the Tribunal by filing a memo about withdrawal of application filed under Section 18 (I) of MSME Act and no proceedings were continued under the said Act. It cannot be said that there was a dispute pending. The Application filed by the Operational Creditor before MSMEFC was assigned temporary number and no notice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r in any court of law, Tribunal, arbitration panel or other authority; Transferring , encumbering, alienating or disposing of by the Corporate Debtor any of its assets or any legal right or beneficial interest therein; any action to foreclose, recover or enforce any security interest created by the Corporate Debtor in respect of its property including any action under Securitization and Reconstruction of Financial Assets and Enforcement of Security interest Act, 2002 (54 of 2002); the recovery of any property by an owner or lessor where such property is occupied by or in possession of the corporate Debtor; (b) That the supply of essential goods or services to the Corporate Debtor, if continuing, shall not be terminated or suspended or interrupted during moratorium period. (c) That the provisions of sub-section (1) of Section 14 shall not apply to such transactions as may be notified by the Central Government in consultation with any financial sector regulator. (d) That the order of moratorium shall have effect from 18.10.2019 till the completion of the Corporate Insolvency Resolution Process or until this Bench approves the Resolution Plan under Sub-Section (I) of Section ..... X X X X Extracts X X X X X X X X Extracts X X X X
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