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TMI Blog2021 (2) TMI 724X X X X Extracts X X X X X X X X Extracts X X X X ..... y Petition and passed the following orders: "Para -10. In the result, CP(IB) No.34/BB/2020 is hereby disposed of with the following directions: (1) The parties are at liberty to prosecute the Arbitration Application bearing A.A No.25025 of 2019 pending before the XXVIII Additional City Civil Sessions Judge, Mayo Hall Unit (CCH-29), Mayo Hall, Bengaluru. (2) The Petitioner is granted liberty to take appropriate legal course of action, subject to result of the above Arbitration case. (3) No order as to costs." 3. The Adjudicating Authority has decided the case on the reason that the Company Petition has been filed with an intention to recover the disputed outstanding amount in question & Arbitration Application bearing A.A No. 25025 of 2019 is pending before the XXVIII Additional City Civil Sessions Judge, Mayo Hall Unit (CCH-29), Mayo Hall, Bengaluru. 4. The Appellant has submitted that it is the Corporate Debtor which approached the Appellant for supply of Ready-Mix Concrete (RMC), Tyles, UPVS and Blocks (Materials) in 2014 onwards and under the arrangement between the parties the Corporate Debtor (Respondent) i.e. SJR Prime Corporation Private Limited would raise purchas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ook). The Appellant has raised the issue of initiation of unlawful Arbitration including unlawful issuance of notice under Section 21 of the Arbitration and Conciliation Act, 1996. The Appellant has also raised the issue of unrelated FIR filed on 12th September, 2018 as the name of the Appellant is not in the FIR and allegation is of manipulation of accounts department. They have also raised the issue of consideration of economic distress due to pandemic having been considered by the Adjudicating Authority which is against their powers. The Appellant has also clarified the inapplicability of the judgments cited by the Respondent and the same are reproduced below: Yash Technologies Private Limited Vs. Base Corporation Limited, Company Appeal (AT) (Ins) No.01 of 2019. Facts : the Appellant had filed a petition under section 433 (e) and Section 343(1) of Companies Act, 1956 which was transferred pursuant to Rule 5 of Companies Act (Transfer of Pending Proceeding) Rules, 2016. The Ld. Adjudicating Authority vide its order dismissed the application under section 9 of IBC, 2016 on the ground of pre-existing dispute. Distinguishing note: Hon'ble NCLAT has held that in the present the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... djudicating Authority, wherein the ld Adjudicating Authority had admitted the application under section 9 of IBC, 2016. Distinguishing note: Hon'ble NCLAT in the present judgment had set aside the judgment passed by the ld. Adjudicating Authority wherein the CIRP was initiated against the Corporate Debtor. Hon'ble NCLAT held that the operational Creditor failed to submit any documents to prove the existence of the operational debt and the amount in default. Furthermore, the operational creditor had also failed to submit the copes of the invoice, copy of bank statement and relevant documents. (Para 79 @ 34-35 of judgment). The Operational Creditor had issued a notice for payment of due, failing which the dispute shall be referred to arbitration. (Para 79 @ 34 - 35 of judgment) Whereas, the said case in not applicable in the present proceedings since, the debt herein is due, admitted and defaulted: The Respondent provided a Reconciled balance confirmation vide emails dated September 21, 2019 and September 25, 2019 for Rs. 6,80,57,809 (Page No. 68 - 70 of Appeal) Appellant has attached the Invoices for Rs. 7,46,286 raised by the Appellant between the period of September ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss suffered by the purchaser. 9. They have also produced details of payments made to Appellant from September, 2014 to February, 2019 with varying in figures amounting to approx. Rs. 125 crores. The Respondent has also annexed copy of emails at Annexure R-8, 9 &10 at page No.154 to 191 of the Statement of Objections. The copy of email and other debit notes issued for the defects on various dates. All these reflect correspondence of August 2016, February, 2018, September 2018 and then about the incomplete works from email of June, 2019 and Debit note of November 2018. 10. The Respondent has alleged that Appellant have manipulated some of the officers working the Respondent's Account Department and obtained confirmation letter dated 22nd March, 2019 which was withdrawn by the Respondent on 03rd May, 2019 and in the Process the Respondent has also to file FIR against the Deputy General Manager for issuing such balance confirmation certificate. The Respondent has also alleged that vide A.A No. 25025 of 2019 has filed dated 03.12.2019 before the XXVIII Additional City Civil Sessions Judge, Mayo Hall Unit (CCH-29), Mayo Hall, Bengaluru under Section 9 of the Arbitration and Conciliatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Adjudicating Authority and in variation to the notice issued under Section 8. They have also raised the issue that there is a genuine pre-existing dispute which is proved from the records and initiation of Arbitration Proceedings. 13. We have gone through the various submissions made by the parties and carefully gone through the Hon'ble Supreme Court Judgment Mobilox Innovations Private Limited Vs. Kirusa Software Private Limited in Civil Appeal No. 9405 of 2017. For the brevity or clarity, Section 8 &9 of the Code is reproduced below: Section 8 -Insolvency Resolution by Operational Creditor. - (1) An operational creditor may, on the occurrence of a default, deliver a demand notice of unpaid operational debtor copy of an invoice demanding payment of the amount involved in the default to the corporate debtor in such form and manner as may be prescribed. (2) The corporate debtor shall, within a period of ten days of the receipt of the demand notice or copy of the invoice mentioned in sub-section (1) bring to the notice of the operational creditor- (a) existence of a dispute, (if any) or record of the pendency of the suit or arbitration proceedings filed before the receipt o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ays of the receipt of the application under sub-section (2), by an order- (i) admit the application and communicate such decision to the operational creditor and the corporate debtor if,- (a) the application made under sub-section (2) is complete; (b) there is no payment 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 payment 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 pendi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ditor may trigger the insolvency process by filing an application before the adjudicating authority under Sections 9(1) and 9(2). This application is to be filed under Rule 6 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 in Form 5, accompanied with documents and records that are required under the said form. Under Rule 6(2), the applicant is to dispatch by registered post or speed post, a copy of the application to the registered office of the corporate debtor. Under Section 9(3), along with the application, the statutory requirement is to furnish a copy of the invoice or demand notice, an affidavit to the effect that there is no notice given by the corporate debtor relating to a dispute of the unpaid operational debt and a copy of the certificate from the financial institution maintaining accounts of the operational creditor confirming that there is no payment of an unpaid operational debt by the corporate debtor. Apart from this information, the other information required under Form 5 is also to be given. Once this is done, the adjudicating authority may either admit the application or reject it. If the application made under sub-section (2) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er there is existence of a dispute between the parties or the record of the pendency of a suit or arbitration proceeding filed before the receipt of the demand notice of the unpaid operational debt in relation to such dispute? If any one of the aforesaid conditions is lacking, the application would have to be rejected. Apart from the above, the adjudicating authority must follow the mandate of Section 9, as outlined above, and in particular the mandate of Section 9(5) of the Act, and admit or reject the application, as the case may be, depending upon the factors mentioned in Section 9(5) of the Act. 14. On going through the submissions made by the parties and keeping in mind the provisions of law laid down in the Code and the Hon'ble Apex Court Judgment which has made the provisions of applicability of the Code amply clear as far as initiation of proceedings by Operational Creditor against the Corporate Debtor is concerned, we are very much clear that the following facts are proved beyond doubt which has been complied with in accordance with the Hon'ble Apex Court Judgments and provisions of the Code. The debt became "due" from July 2018, the question is whether it became "payab ..... X X X X Extracts X X X X X X X X Extracts X X X X
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