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TMI Blog2021 (8) TMI 427X X X X Extracts X X X X X X X X Extracts X X X X ..... verification of the invoices/bills, if there is any payment pending from their end, they will release the payment. Thereafter, Operational Creditor has sent an email dated 30.07.2019 and 25.09.2019 with a request that after lapse of considerable time no payment has been made to them in regard to the invoices/bills. Even the Corporate Debtor has not disputed the claim. Therefore, the Operational Creditor has filed the Application under Section 9 of the IBC on 04.11.2019. It is to be noted that after sending such reply, the Corporate Debtor has never clarified that which bills are not genuine - The Operational Creditor has filed the true copy of purchase orders along with the tax invoices (A4 at. Pg. 53-124) in reply affidavit filed by the Corporate Debtor before this Tribunal it is not challenged that these documents are not genuine. The Corporate Debtor has failed to prove that there exists any dispute between the parties in regard to the amount claimed by the Operational Creditor. Ld. Adjudicating Authority superficially examined the allegations and held that there is dispute between the parties. Such finding cannot be sustained. Whether the Operational Creditor has attemp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng complete, thus, the Application under Section 9 of the IBC preferred by the Operational Creditor was fit to be admitted. The case remitted to the Adjudicating Authority for admitting the Application under Section 9 of the IBC, after notice to the Corporate Debtor to enable the Corporate Debtor to settle the matter prior to the admission - appeal allowed. - Company Appeal (AT) (Insolvency) No. 869 of 2020 - - - Dated:- 9-8-2021 - [Justice Jarat Kumar Jain] Member (Judicial) And (Dr. Ashok Kumar Mishra) Member(Technical) For the Appellant : Ms. Ramya and Ms. Ishani Banerjee, Advocates For the Respondent : Mr. K.V. Jagdishvaran and Mr. G. Indira, Advocates for Respondent JUDGMENT Jarat Kumar Jain: J. The Appellant Mahesh Hardware Pipes Pvt. Ltd. filed this Appeal against the order dated 19.06.2020 passed by the Adjudicating Authority (National Company Law Tribunal, Bengaluru Bench) in CP(IB) No. 08/BB/2020, whereby rejected the Appellant s Application filed under Section 9 of the Insolvency and Bankruptcy Code, 2016 (IBC). 2. Brief facts of this case are that the Mahesh Hardware Pipes Pvt. Ltd. (Operational Creditor) (Appellant) involved in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4. Ld. Adjudicating Authority after hearing Ld. Counsels for the parties held that the Bank Statement of the Corporate Debtor shows that the payment of ₹ 2,60,594/- have been made which has been suppressed by the Operational Creditor. There is a pre-existing dispute in regard to unpaid invoices and the Application under Section 9 of the IBC is filed to recover the debt amount whereas it is a settled law that the IBC proceedings cannot be used for recovery of debt. The Corporate Debtor is running a business employing several employees cannot be pushed into Insolvency as that will be against the objective of the IBC. It observed that impact of the present financial distress caused by the global novel corona virus pandemic cannot be ignored. Major decisions have been taken to protect the industries from its effects. It is also observed that on 24.03.2020 the Legislature increased the minimum threshold of default from the ₹ 1 Lacs to 1 Cr. so that the IBC is not used merely for recovery of debt. With these observations, Ld. Adjudicating Authority has rejected the Operational Creditor s Application filed under Section 9 of the IBC. 5. Being Aggrieved by this order, the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubmitted that Hon ble Supreme Court in the case of Innovative Industries Vs. ICICI Bank Ltd. (2018) 1 SCC 407 observed that the scheme of the code is to ensure that when a default takes place, in the sense that a debt becomes due and is not paid, the Insolvency Resolution Process begins. The Code get triggered the moment default is of ₹ 1 lacs or more. 10. Ld. Counsel for the Operational Creditor also draw our attention towards the Judgment of this Appellate Tribunal in the case of Monotrone Leasing (P.) Ltd. Vs. PM cold Storage (P.) Ltd. 2020 SCC Online NCLAT 581 in which it is held that a presumption cannot be drawn merely on the basis that a company, being solvent, cannot commit any default. As observed in financial and economic parlance, the inability to pay-off debts and committing default are two different aspects which are required to be adjudged on equally different parameters. Inability to pay debt has no relevance for admitting or rejecting an Application for initiation of CIRP under the IBC. Therefore, it is submitted that the only requirement is to prove that the debt and default over and above ₹ 1 Lacs exists and then the Insolvency process gets trig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a bonafide dispute therefore, Ld. AA has rightly dismissed the Application. There is no merits in this Appeal. Therefore, the Appeal may be dismissed. 14. After hearing Ld. Counsels for the parties, we have gone through record. 15. The following issues arose in this Appeal for our consideration: - (i) Whether the Operational Creditor has not adjusted the amount of ₹ 2,60,594 remitted by the Corporate Debtor? (ii) Whether there is a pre-existing dispute? (iii) Whether the Operational Creditor has attempted to use the provisions of IBC as a recovery forum? Issue No. (i) Whether the Operational Creditor has not adjusted the amount of ₹ 2,60,594 remitted by the Corporate Debtor? 16. The Operational Creditor has filed the ledger account maintained for Corporate Debtor since 01.04.2018 to 31.03.2020 Annexure A-7 Pg. 131 of Appeal Paper Book and in this ledger account it is shown that on 02.06.2018 City Bank Account BL No. 267034 Cheque No. 000956 dated 02.06.2018 amount a sum of ₹ 1,37,296/- is credited. Thereafter, on 13.08.2018 City Bank Accounts Cheque No. 001085 dated 03.08.2018 a sum of ₹ 1,23,298/- has been credited in the accou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of considerable time no payment has been made to them in regard to the invoices/bills. Even the Corporate Debtor has not disputed the claim. Therefore, the Operational Creditor has filed the Application under Section 9 of the IBC on 04.11.2019. It is to be noted that after sending such reply, the Corporate Debtor has never clarified that which bills are not genuine. Even in the objections filed before the Adjudicating Authority, the Corporate Debtor has not pointed out that which invoices/bills are not genuine. The Operational Creditor has filed the true copy of purchase orders along with the tax invoices (A4 at. Pg. 53-124) in reply affidavit filed by the Corporate Debtor before this Tribunal it is not challenged that these documents are not genuine. 19. Hon'ble Supreme Court, in the case of Mobilox Innovations Pvt. Ltd. (Supra) held that what is the scope of ascertaining the existence of a dispute at the time of admitting the Application, which is as follows: - it is clear, therefore, that once the operational creditor has filed an application, which is otherwise complete, the adjudicating authority must reject the application under Section 9(5)(2)(d) if notice of d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cy resolution process prematurely or initiate the process for extraneous considerations. 9) This Court also noticed that the original Bill which ultimately became the Code had the expression bona fide dispute contained in an inclusive definition. It is significant to note that by the time the Code was enacted the expression bona fide was dropped. (See para 32 of the judgment) 10) After referring to Section 8, the judgment went on to hold that what is important is that the existence of the dispute and/or a suit or arbitration proceeding must be pre-existing i.e. it must exist before the receipt of the demand notice or invoice, as the case may be. 11) The Adjudicating Authority, therefore, when examining an application under Section 9 of the Act, will have to determine the following: - (i) Whether there is an operational debt as defined exceeding ₹ 1 lakh? (See Section 4 of the Act) (ii) Whether the documentary evidence furnished with the application shows that the aforesaid debt is due and payable and has not yet been paid? and (iii) Whether there is existence of a dispute between the parties or the record of the pendency of a suit or arbit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot use the Insolvency Code either prematurely or for extraneous considerations or as a substitute for debt enforcement procedures. The alarming result of an operational debt contained in an arbitral award for a small amount of say, two lakhs of rupees, cannot possibly jeopardize an otherwise solvent company worth several crores of rupees. Such a company would be well within its rights to state that it is challenging the Arbitral Award passed against it, and the mere factum of challenge would be sufficient to state that it disputes the Award. Such a case would clearly come within para 38 of Mobilox Innovations (supra), being a case of a pre-existing ongoing dispute between the parties. The Code cannot be used in terrorem to extract this sum of money of Rs. two lakhs even though it may not be finally payable as adjudication proceedings in respect thereto are still pending. We repeat that the object of the Code, at least insofar as operational creditors are concerned, is to put the insolvency process against a corporate debtor only in clear cases where a real dispute between the parties as to the debt owed does not exist. 22. With the aforesaid Judgment it is clear that once the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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