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TMI Blog2021 (12) TMI 485X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Appellant' Jai International Pvt Ltd. , under Section 61 of the Insolvency and Bankruptcy Code, 2016 (in short Code ) against the impugned order dated 15.07.2021 passed by the Adjudicating Authority (National Company Law Tribunal), Mumbai Bench in Company Petition (IB) No. 4605 of 2019. 2. The Appellant is engaged in the business of supplying, trading and exporting agricultural commodity and extraction products. The Respondent too is also engaged in similar business apart from providing consultancy services to the Appellant. The Appellant has asked for refund of outstanding amount of ₹ 30,75,408/-. The Respondent neglected to refund the said amount inspite of demand notice served on them and hence filed Insolvency Petition under Section 9 of the Code before the Adjudicating Authority. On its petition being dismissed by the Adjudicating Authority, it has appealed to set aside the impugned order dated 15.07.2021 and initiate Corporate Insolvency Resolution Process (CIRP). 3. The Adjudicating Authority has dismissed the petition on the ground of limitation, dispute between the parties, the amount being loan, the Petition filed under Section 9 is not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hraseology. In some cases, the so-called premium is in fact for advance rent and in others rent is deferred price. It is not the form but the substance of the transaction that matters. The nomenclature used may not be decisive or conclusive but it helps the court, having regard to the other circumstances, to ascertain the intention of parties In the case of Commissioner of Income Tax West Bengal III, Vs. Provincial Farms Pvt. Ltd., reported at 1976 SCC Online Cal 342, the Hon ble High Court of Calcutta had observed that:- 14. It is also elementary that the entries in the books of account cannot alter or affect the nature, quantity and character of any transaction and that for the purposes of taxation the substance of the transaction in question has to be looked at. The substance of the matter, in the instant case before us, must be viewed in the light of the said litigation including the decree and the said order passed therein. Further, the conveyance in that case should also be read and understand in the context of the said decree and the order including the facts and the circumstances of the case as found by the Tribunal. The Adjudicating Authority has, there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... td. Vs. Bishal Jaiswal, reported at 2021 SCC Online SC 321, the Hon ble Apex Court was of the view that: 32. A perusal of the aforesaid Sections would show that there is no doubt that the filing of a balance sheet in accordance with the provisions of the Companies Act is mandatory, any transgression of the same being punishable by law. However, what is of importance is that notes that are annexed to or forming part of such financial statements are expressly recognised by Section 134(7). Equally, the auditor s report may also enter caveats with regard to acknowledgements made in the books of accounts including the balance sheet. A perusal of the aforesaid would show that the statement of law contained in Bengal Silk Mills (supra), that there is a compulsion in law to prepare a balance sheet but no compulsion to make any particular admission, is correct in law as it would depend on the facts of each case as to whether an entry made in a balance sheet qua any particular creditor is unequivocal or has been entered into with caveats, which then has to be examined on a case by case basis to establish whether an acknowledgement of liability has, in fact, been made, thereby extending ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... concerned is not disputed by the Respondent only the dispute is there that the payment is a loan . Hence, application filed by the Appellant under operational creditor category under section 9 of the Code is not maintainable. Ongoing through page 163 of the Appeal paper book, the Corporate Debtor ledger reflects for the period 1st April 2014 to 31st March, 2019 closing balance of ₹ 30 lakhs in the books of corporate debtor. While audited Balance Sheet of the operational creditor for the Financial Year 2016-17 reflects and outstanding amount of ₹ 30,71,903/- under the heading advances to be recovered in cash or kind from the Corporate Debtor . Hence, it is very much clear that an amount of ₹ 30 lakhs are recoverable from the Corporate Debtor and it is also very much clear that that amount is advanced towards commission/brokerage payable to the other party at a future date as and when such commission becomes due. Hence, it is an amount towards utilization of provisions of services provided by the other parties and is covered under Section 5(21) the Code. For clarity brevity, Section 5(21) of the Code, is reproduced below for convenience: Section 5(21) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xistence of the dispute and/or the 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. ........ 25. Therefore, the adjudicating authority, when examining an application under Section 9 of the Act will have to determine: (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 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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