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TMI Blog2021 (4) TMI 728X X X X Extracts X X X X X X X X Extracts X X X X ..... delivery of demand notice under section 8(2) of IBC 2016. If the documents available on the record establish the pre-existing dispute, then that shall be taken into consideration and the reply cannot be rejected merely on technical grounds - the Corporate Debtor, by referring to the correspondence made between the parties, have succeeded to establish that there is a pre-existing dispute between the parties prior to the issuance of Demand Notice. In this case, the claim of the applicant is based upon the invoices but it appears from the demand notice that the applicant has not enclosed the invoices rather in column VII of Form 3, the petitioner has mentioned that true copy of dishonoured cheques along with the corresponding bank memos are annexed herewith collectively as Annexure-A and no other document is enclosed. This means that in terms of Section 8(1) of the IBC, the Petitioner has neither enclosed the invoices nor sent the notice in Form-4. Rather it sent the demand notice in Form-3 - the demand notice delivered in the present case is not a valid one in terms of Section 8(1) of IBC,2016 read with Rule 5(1)(b) of the the Insolvency and Bankruptcy (Application to Adjud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l sale value, amount of ₹ 24,50,000/-have been paid to the Operational Creditor at different intervals. iv. After crediting all receipts, an amount of ₹ 41,57,756/-is outstanding, due and payable to the Corporate debtor as on 21.03.2017. v. Against the due and payable amount, the Corporate debtor issued two cheques to the Operational Creditor aggregating to the outstanding and due amount of ₹ 41,57,756/-. However, the said cheques were returned dishonoured by the Operational Creditor's banker. The details of said cheques are as follows: a. Cheques No. 318844 dated 14.08.2017 of ₹ 16,57,756/- drawn on Corporation Bank, Green Field Branch, Faridabad-121010. b. Cheques No. 318843 dated 02.05.2017 of ₹ 25,00,000/- drawn on Corporation Bank, Green Field Branch, Faridabad-121010. vi. Corporate Debtor through one Mr. Mathur, vide email dated 10.06.2017 acknowledged the outstanding debt. The total amount of ₹ 54,93,605/-(₹ 41,57,756/- as outstanding principal amount and ₹ 13,35,849/- as interest @12% accrued as on 20.08.2019) is due and payable to the Operational Creditor as on 20.08.2019. vii. Demand Notice dated 20.0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ices are not signed and not acknowledged, but are only computer-generated invoices. Further, the said invoices also relate to third party consignee other than the corporate debtor, to which the corporate debtor have no connection. Therefore, the computer-generated unsigned and unacknowledged invoice cannot be looked into for the adjudication of the claim of the operational debtor. iii. The Cheques no. 318844 and 318843 of Corporation Bank of corporate debtor were the blank security cheques given by the corporate debtor to operational creditor, as per the practice adopted by the operational creditor. At the time of any work order, operational creditor used to take blank security cheque from the corporate debtor, with the understanding that operational creditor after delivery of the goods, would fill the mutually agreed amount and only after that it would present the said cheques for encashment. It is further stated that the said practice, is adopted by every supplier in the area and the said business model works on trust. Further, if any purchaser, who would not accept the said terms of payment, would not get the goods from the supplier, as the suppliers would not accept the work ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tor. All the invoices filed by the Operational Creditor are computer generated. 11. It is further contended that the Operational Creditor is guilty of playing fraud by placing reliance upon the forged and fabricated document i.e. email from [email protected], which does not belongs to the Corporate Debtor. 12. It is further contended that this fact has been admitted by Sumit Mittal, the brother of Madhur Mittal in Civil Revision No. 960/2017 filed before the Ld. District and Sessions Judge, Lucknow, in which, the submissions of the Sumit Mittal were recorded by the Ld. District and Sessions Judge, Lucknow as follows: - The petitioner has stated that neither he is director of concerned Dayal Industries nor has he any relation or concern with the above said institute. In this regard he has filed an affidavit wherein he has shown as Hari Mohan Gupta and Amit Kumar as directors of the above said company. Hence, the revision petition filed by the applicant petitioner is liable to be accepted and registered . 13. He therefore, submitted, that the correspondence made by Mr. Madhur Mittal is not binding upon the Corporate Debtor because he is not the authorized person ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 20. In the light of these facts, we further notice that it is an admitted fact that the reply to the demand notice was received on 05.09.2019, whereas Ld. Counsel for the Corporate Debtor contended that it was sent on 02.09.2019 after receiving the demand notice on 22.08.2019. 21. At this juncture, when we refer to the tracking report filed by the applicant (page 82 of the application), we notice that the demand notice was delivered on 22.08.2019 and that has also been corroborated by the Corporate Debtor in the course of hearing. The Corporate Debtor has also admitted that they have sent the reply to the demand notice on 02.09.2019 and the contention of the Corporate Debtor is that since 31.08.2019 and 01.09.2019 were Saturday and Sunday, it was not sent on those dates. The respondent has also enclosed the tracking report ( page 15 of the paper book), which shows that reply to the demand notice was delivered on 05.09.2019. 22. At this juncture, we would like to refer to the decision of the Hon'ble NCLAT in Company Appeal (AT) (Insolvency) 548/2020 on the similar issues and the same is quoted below:- 18. We are of the view that the learned Adjudicating Authority ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice or copy of the invoice mentioned in subsection (1), bring to the notice of the operational creditor the existence of a dispute or the record of the pendency of a suit or arbitration proceedings, which 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. 21. Further, this Bench in the matter of Vinod Mittal Vs. Rays Power Exports Anr. in Company Appeal(AT) (Insolvency) No. 851 of 2019 dated 18.11.2019 held in paragraph-11 as under: .. 11. Having gone through the matter and on considering record, there remains hardly any doubt that the earlier correspondence shows that between the parties there were disputes regarding installation of the project as well as functioning of the same. Although the project had been commissioned for which Completion Certificate had been issued, still if disputes had arisen between the parties regarding the installation and functioning of the project, the Operational Creditor merely pointed out Certificate of Appreciation dated 19th April, 2015 issued and claims that once Completion C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Appellant/Corporate Debtor. 24. Therefore, it is quite clear that there is pre-existing of dispute regarding completion of the work and the learned Adjudicating Authority ought not to have admitted the Application under Section 9 of IBC filed by the Respondent/ Operational Creditor. Even in the Reply filed by the Appellant/Corporate Debtor before the learned Adjudicating Authority pursuant to Section 9 Application, it is quite clear that there was sufficient material produced before the learned Adjudicating Authority and the learned Adjudicating Authority ought to have considered the materials placed before it. 25. We are of the considered view that the learned Adjudicating Authority should have considered the substantial material placed before it in its correct perspective and law laid down by the Hon'ble Supreme Court in this regard, before passing the Impugned Order dated 04.06.2020 thus committed error. 26. It is re-iterated that the Code is a beneficial legislation intended to put the Corporate Debtor on its feet and it is not a mere money recovery legislation for the Creditors. 27. For the above reasons, we set aside the Impugned Order dated 04.06. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the parties, have succeeded to establish that there is a pre-existing dispute between the parties prior to the issuance of Demand Notice. 28. At this juncture, we also notice that the Operational Creditor at page 69 of the petition has enclosed the demand notice and on perusal of that, we find that the said demand notice was sent in Form-3. Therefore, at this juncture, we would like to examine the provision of law, under which the Operational Creditor is required to deliver the demand notice. The Rule 5 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 prescribes the procedure for sending the demand notice and the same is quoted below:- Rule 5. Demand notice by operational creditor. - (1) An operational creditor shall deliver to the corporate debtor, the following documents, namely, - (a) a demand notice in Form 3; or (b) a copy of an invoice attached with a notice in Form 4. (2) The demand notice or the copy of the invoice demanding payment referred to in sub-section (2) of section 8 of the Code, may be delivered to the corporate debtor, (a) at the registered office by hand, registered post or speed post wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f which such debt fell due and the date from which such debt fell due, and as per Column 7 of the said Form 3, applicant has to attach the documents to prove the existence of operational debt and the amount in default. Likewise, where the operational debt involves the generation of the invoice, then in that case, invoice raising the demand may be sent to the Corporate Debtor demanding the invoice amount. In such a situation, the Operational Creditor has to issue the demand notice in Form 4 along with the invoice. 47. Thus, it is clear that the choice of issuance of demand notice u/s 8(1) of the Insolvency and Bankruptcy Code 2016, either in Form 3 or Form 4, under the Insolvency and Bankruptcy Code Application to Adjudicating Authority Rules 2016, depends on the nature of Operational Debt. Section 8(1) does not provide the Operational Creditor, with the discretion to send the demand notice either Form 3 or Form 4, as per its convenience. The applicability of Form 3 or Form 4 depends on whether the invoices were generated during the course of transaction or not. It is also made clear that the copy of the invoice is not mandatory if the demand notice is issued in Form 3 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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