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TMI Blog2022 (9) TMI 221X X X X Extracts X X X X X X X X Extracts X X X X ..... never any point of dispute between OC and CD. The debt existed which were due to be paid and default took place. We also observe that proper demand notice in Form 3 was issued fulfilling the requirement as stipulated in IBC - there are no error in the Impugned Order on this issue. Whether there was a pre-existing dispute between the parties prior to issuance of Demand Notice under Section 8 of the IBC dated 23.08.2021? - HELD THAT:- There are two distinct contracts entered by CD i.e. one with OC, whereby, CD was to receive 66,000 STBs from OC and Second Contract with Akshaya to whom such STBs were to be supplied admittedly at 3% commission. Since, both are separate commercial transactions, the rights and liabilities are distinct of both contract and cannot be intermingled. We observed that at one hand CD has initiated Section 9 Application against Akshaya and later based on compromise memo was filed before the AA and claimed outstanding dues from Akshaya. Admittedly he has received certain consideration for supply of STBs to Akshaya but has raised. There was clear contract between CD and OC as well as CD and Akshaya and it is squarely responsibility of CD towards ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Akshaya on 19.09.2018. The main purpose of this MoU was to precure 66,000 STBs from OC on agreed upon terms and conditions between CD Akshaya . 3. CD placed a purchase order dated 01.10.2018 on OC for supply of 66,000 STBs for USD 6,38,157 and based on RBI Foreign Exchange Rate notified as on 21.08.2021 amount in INR was Rs. 4,74,01,312/- towards STBs supplied by OC. As per payment terms of said Purchase order which was duly signed by Authorised Signatory of CD, 15% of the total purchase order value was to be paid as an advance and the balance 85% payment was to be paid within 180 days from the date of delivery. OC based on the Purchase order had supplied 66,000 STBs in three shipments and the same had been delivered to the CD through various invoices and the details of the same are as follows:- Invoice Number Invoice Date Amount (in USD) Date of Delivery Due Date VO-190204001 18.02.2019 80,500.00 05.03.2019 01.09.2019 VO-190204002 18.02.2019 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ide Impugned Order dated 22.07.2022 admitted Application under Section 9 of the IBC r/w Rule 6 of the Insolvency Bankruptcy (Application to AA Rules, 2016) against CD. Aggrieved by this Impugned Order, Appellant has filed this Instant Appeal. Appellant s Submissions: 9. Learned Counsel for the three Appellants, out of whom two Appellant i.e. Appellant No. 1 Appellant No. 2 were Suspended Director of CD, gave the facts of the case and described relationship between CD OC and also relationship between CD Akshaya. Learned Counsel for Appellants assailed the Impugned Order dated 22.07.2022 and stated that CD was merely acting as an agent for Akshaya and procured the 66,000 STBs on behalf of Akshaya. Learned Counsel took the plea that CD was only acting as a procuring agent for Akshaya, earning a 3% commission on the value of the Purchase Order. This transaction structure was adopted as Akshaya did not enjoy sufficient credit line. An MOU dated 19th September 2018 was entered into between CD and Akshaya. Learned Counsel alleged that OC was in direct contact with Akshaya. Learned Counsel stated that OC was aware that CD was merely an agent for Akshaya and it is a well-e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... OC started asking for payments from the CD, the CD replied OC stating that OC payments need to follow from Akshaya directly. AS per Learned Counsel this clearly establishes that the CD always denied his liability to pay the OC. Learned Counsel brought to the notice that CD had written several emails prior to receipt of Form 3 Notice sent by the OC establishing pre-existing dispute. 13. Learned Counsel cited the case of Mobilox Innovations Pvt. Ltd. v Kirusa Software Pvt. Ltd. wherein the Hon ble Supreme Court of India held that under section 9(5)(ii)(d) it is enough if the OC receives a notice of dispute which predates the Form 3 notice. The Hon ble Supreme Court of India further held that the Court (NCLT) under section 9 could not assess the merits of the dispute raised - as long as the defence was not a patently feeble legal argument or an assertion of facts unsupported by evidence, the NCLT has to dismiss the application under section 9. Learned Counsel brought out that in the present case, the CD has produced adequate evidence in the form of emails showing that there was pre-existing dispute between the parties. 14. Learned Counsel emphasis that as per settled law, IBC c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons as proof of pre-existing dispute between the parties including allegation that despite instructions through email dated 07.05.2019 of the CD not to ship the second shipment, the OC had shipped the same. Learned Counsel stated that CD in its reply to the demand notice had admitted that the entire shipment was delivered to the CD and subsequently sold the same to Akshaya and received money. Therefore, it is very clear that subsequent to the aforesaid mail, the CD had taken delivery and possession of the STBs and also has resold the same to Akshaya and hence the mail which was being projected as pre-existing dispute had no relevance. Beyond any doubt the STBs supplied by the OC were accepted by the CD and allegations made by the Appellants that CD had merely acted as an agent of principal i.e. Akshaya and therefore it is not liable to make payment towards the outstanding dues to the OC are far from truth. 23. Learned Counsel also mentioned that OC is not a party to the MoU executed between CD and Akshaya and also in addition, the OC vide its mail dated 08.10.2020 had clearly intimated CD that the payment dues were to be settled by the CD only and it did not want to get involv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds to be decided:- (i) Whether there was a debt due of which default was committed by the Corporate Debtor entitling the Operational Creditor to file an Application under Section 9 of the IBC? (ii) Whether there was a pre-existing dispute between the parties prior to issuance of Demand Notice under Section 8 of the IBC dated 23.08.2021. 29. It will be necessary for us to take issue by issue discussion and we shall proceed accordingly in subsequent discussion Issue No. (i) Whether there was a debt due of which default was committed by the Corporate Debtor entitling the Operational Creditor to file an Application under Section 9 of the IBC? 29(a). To understand whether in the present appeal any debt existed at all and if default took place w.r.t. said debt, we need to see the exact definitions of these in the IBC. The debt has been defined in Section 3 (11) of IBC which is as under:- 3(11). debt means a liability or obligation in respect of a claim which is due from any person and includes a financial debt and operational debt; Since, the term claim is mentioned in above definition of debt, we need to refer to definition of claim under Section 3(6) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and was entitled for 3% commission. CD taken the plea that as an agent he has no responsibility to pay to OC and it is responsibility of Akshaya, on whose behalf 66,000 STBs were procured from OC, to make payment to OC. CD alleged that since Akshaya did not make payment of CD he in turn could not make payments to OC. 29(d). From the various records made available as well as based on averments made by Counsel for the Parties, it is clear that the contact was entered directly between OC CD and it was responsibility of CD to make payment to OC. At this stage, CD cannot take shelter of MoU entered into between CD Akshaya, which in any case, was an independent MoU or agreement. Admittedly, OC was not a direct party to said MoU. Merely fact that CD in turn had supplied 66,000 STBs to Akshaya as an agent, does not absolve him of his liability to make the payments as per contract in form of purchase order. The receipt of quantity i.e 66,000 STBs, quality or agreed upon rates were never any point of dispute between OC and CD. 29(e). We, therefore, are in agreement with Hon ble AA in holding that debt existed which were due to be paid and default took place. We also observe that p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... STBs from OC and Second Contract with Akshaya to whom such STBs were to be supplied admittedly at 3% commission. Since, both are separate commercial transactions, the rights and liabilities are distinct of both contract and cannot be intermingled. We observed that at one hand CD has initiated Section 9 Application against Akshaya and later based on compromise memo was filed before the AA and claimed outstanding dues from Akshaya. Admittedly he has received certain consideration for supply of STBs to Akshaya but has raised 31. We also observe that AA has correctly pointed out clause 9 of compromise memo between CD Akshaya dated 24.03.2022 to allay any doubt about alleged pre-existing dispute. The clause 9 is as herein under:- The Creditor (Corporate Debtor herein), Corporate Debtor (Akashaya), Confirming Party 1 and Confirming Party 2 expressly agree that the Creditor shall take it upon itself to settle within 3 months of signing this Joint memorandum of Compromise, the claim of Jiangsu Yinhe Electronics Co. Ltd., (Chinese Supplier) in respect of the aforesaid 66,160 HD digital Set Top Boxes ultimately purchased by the Corporate Debtor from the Creditor which forms b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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