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TMI Blog2022 (8) TMI 1004X X X X Extracts X X X X X X X X Extracts X X X X ..... of Respondents treating this as Financial Arrangements and not procurement of goods and services - It is also noted from Learned Counsel for the Respondent that the said order of insurance company has already been challenged in the State Consumer Forum as such this has not reached the stage of finality. In any case, the outcome of insurance will not impact IBC Proceedings and at the best can only be one of the factors to be considered in final decision as claimed by Appellant. The Adjudicating Authority has correctly treated debt due as operational debt and therefore allowed to petition under Section 9 of IBC. Existence of any pre-existing dispute or not - HELD THAT:- As per section 9(5)(ii)(d) of the IBC, application under Section 8 must be rejected with notice of dispute has been received by the Operational Creditor, however, the existence of dispute and/or a suit of arbitration proceeding must be pre-existing i.e. before receipt of demand notice. It is therefore, important to understand as to whether there were pre-existing dispute prior to issue of demand notice or otherwise. The demand notice was issued on 24.06.2019 in Form 3. Whereas, the arbitration petition was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and thereafter signed. These documents indicated that goods were sold and delivered on behalf of OC to CD. However, during period of agreement due to non-receipts of various payments, OC took recourse to various remedies for recovery including filing of a case under Section 138 of Negotiable Instrument Act, 1881. Apart from this, OC also filed an Arbitration Application as per SDA. Incidentally the Arbitration Award dated 16.04.2021 came in favour of OC. After the award was passed, CD entered into Memorandum of Compromise Settlement dated 30.06.2021. Despite such settlement CD could not make the payment of Rs. 2,11,46,122/- to OC except Rs. 10 Lakhs which was paid to OC. OC also filed Petition bearing CP/IB/12(CHE)/2022 before the Adjudicating Authority under Section 9 of IBC. Adjudicating Authority, vide Impugned Order dated 06.06.2022, accepted that debt existed which was due and not paid resulting into default allowed CIRP and appointed Mr. S. Amarendran as IRP. Aggrieved by this, the Appellant, as Suspended Director of CD, has filed this appeal. Appellant s Submissions: 3. Learned Counsel for Appellant has challenged the Impugned Order dated 06.06.2020 and requested ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /2019. On Application of OC, Hon ble High Court of Madras at Chennai appointed Hon ble Justice K. Kannan retired High Court Judge as sole the arbitrator against the alleged Guarantors. OC also filed an application under Section 9 of IBC against the Corporate Debtor guarantors of CD. In the meantime, CD had also issued notice dated 12.10.2020 invoking arbitration clause 13 of SDA and Hon ble High Court of Madras at Chennai appointed Justice K Kannan as sole arbitrator in dispute of SDA between OC and CD and both arbitration proceedings were taken up by the Sole Arbitrator in Arbitration Case No. 8 10 of 2020. Learned Counsel also admitted the fact that both arbitrations were decided in favour of OC by a common order. 6. Learned Counsel also brought to the notice of Appellate Tribunal that OC has filed the claim with insurance company also which was rejected holding that OC has undertaken financial services and SDA did not fall under scope and perview of scope of sale/service of goods and services. 7. Learned Counsel, however, accepted that after common arbitration award by sole arbitrator on 16.04.2021 against CD, Memorandum of Understanding (MoU) was entered into betwe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... against invoices and therefore, OC was compelled to file the case under Section 138 of Negotiable Instrumental Act in order to realise the due debt. 13. To secure the financial position, OC also started Arbitration Proceedings in terms of SDA. Similarly, CD also filed one arbitration application and both were decided by a common order which came in favour of OC. According to Learned Counsel this itself proves that the claims made by OC were right and CIRP Proceeding was correctly ordered by the Learned Authority. 14. Learned Counsel has brought out that CD had entered into a Memorandum of Compromise settlement on 30.06.2021 for Rs. 2,70,07,459/- along with interest at the rate of 8 per cent from 20.07.2020. According to Learned Counsel the Appellant has paid only Rs. 10 Lakh out of the settlement and the balance amount was not paid which had was agreed upon between OC and CD as per Memorandum of Compromise Settlement . 15. Learned Counsel has further submitted that in terms of the Memorandum of Compromise Settlement , OC withdrew Section 138 cases filed under Negotiable Instrumental Act 1881. 16. Learned Counsel has mentioned that withdrawal of MEIS subsidy had nothi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rvices would be considered as an operational debt. 20. Learned Counsel has reiterated that ten invoices, available on the record along with goods receipt notes, clearly demonstrate that SDA was purely a supply contract. 21. On the issue of non-levy of GST which has been raised by Appellant, Learned Counsel has brought out that GST was exempted for marine products. 22. Learned Counsel has also emphasised that the citations of K. Kishan vs. Vijay Nirman Company Pvt. Ltd. is not relevant for the present case as both the parties acknowledge the debt and dues in the present case. 22. Learned Counsel also refuted any pre-existing disputes prior to issue of demand notice. He assailed the logic of the Appellant that since appeals against arbitration cases are pending the pendency may be treated as pre-existing disputes. This cannot be in any way be treated as acknowledgement of pre-existing dispute by Respondents by any stretch of imagination. 23. Concluding his arguments, the Learned Counsel has again requested for dismissal of the Appeal. Analysis 24. We have heard Learned Counsel for the parties and perused the record made available. We have also gone through th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ebtor, as the case may be; The Financial Creditor and Financial Debtor is also defined under Section 5(7) Section 5(8) of the IBC which as under:- (7) financial creditor means any person to whom a financial debt is owed and includes a person to whom such debt has been legally assigned or transferred to; (8) financial debt means a debt alongwith interest, if any, which is disbursed against the consideration for the time value of money and includes- (a) money borrowed against the payment of interest; (b) any amount raised by acceptance under any acceptance credit facility or its de-materialised equivalent; (c) any amount raised pursuant to any note purchase facility or the issue of bonds, notes, debentures, loan stock or any similar instrument; (d) the amount of any liability in respect of any lease or hire purchase contract which is deemed as a finance or capital lease under the Indian Accounting Standards or such other accounting standards as may be prescribed; (e) receivables sold or discounted other than any receivables sold on nonrecourse basis; (f) any amount raised under any other transaction, including any forward sale or purc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that these transactions were of the nature of trading / procurement and supply of goods and services and not of financing. 26. We have noted the argument of Learned Counsel for the Appellant that insurance company has rejected the claims of Respondents treating this as Financial Arrangements and not procurement of goods and services. We have also noted from Learned Counsel for the Respondent that the said order of insurance company has already been challenged in the State Consumer Forum as such this has not reached the stage of finality. In any case, the outcome of insurance will not impact IBC Proceedings and at the best can only be one of the factors to be considered in final decision as claimed by Appellant. Looking to all above, we are of view that the Adjudicating Authority has correctly treated debt due as operational debt and therefore allowed to petition under Section 9 of IBC. 27. Issue No. (ii) Existence of any pre-existing dispute. Before going into detail, we have perused the definition of dispute as given in IBC 5(6) dispute includes a suit or arbitration proceedings relating to- (a) the existence of the amount of debt; (b) the quality ..... X X X X Extracts X X X X X X X X Extracts X X X X
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