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TMI Blog2022 (12) TMI 610X X X X Extracts X X X X X X X X Extracts X X X X ..... l Memorandum , the Appellant , has expressed a desire to make payment, but the same is not accepted by the Respondent , because of the fact that, inspite of ample opportunities and time granted, the Appellant , has not made payment, in respect of Outstanding Principal Amount of Rs.2.05 Crores, barring the Outstanding Interest factor , as opined by this Tribunal . There is no material brought on record on the side of the Appellant , to exhibit, the Existence of a Preexisting Dispute , in regard to the Interest . In fact, the Memorandum of Compromise , dated 30.04.2019 is a document, filed in support of the Section 9 Application , before the Adjudicating Authority , by the 1st Respondent / Operational Creditor , to establish an Acknowledgement of Debt , by the Appellant / Corporate Debtor . The act of Admitting the Section 9 Application , by the Adjudicating Authority , as per Section 9 (5) of the Code, is free from any Legal Infirmities . Resultantly, the instant Appeal fails. - Company Appeal (AT) (CH) (INS.) No. 260 / 2021 - - - Dated:- 12-12-2022 - [ Justice M. Venugopal ] Member ( Judicial ) And [ Kanthi Narahari ] Member ( Technical ) Fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or initiation of CIRP as against the Corporate Debtor. 14. In relation to the Corporate Debtor, it is seen from the record of proceedings that when the matter came up for hearing on numerous occasions, the Corporate Debtor was represented by a an Authorised Representative and time was sought on the pretext that the settlement was about to arrive between the parties. Thereafter, it is seen that there was no representation on behalf of the Corporate Debtor subsequently this Tribunal by its order dated 06.08.2021 has set the Corporate Debtor as ex-parte. Pursuant to that, it is seen that the matter came up for hearing on 03.09.2021 before this Tribunal and this Hon ble Tribunal held as follows: It is seen from the records that the Respondent was set ex- parte on 06.08.2021, however, when the matter is taken up for hearing on 03.09.2021, Mr. Akhil Bhansali appearing on behalf of the Respondent. It is noted that till date no Application has been filed by the Respondent to set aside the ex-parte order passed by the Hon ble Tribunal dated 06.08.2021. The learned Counsel for the Respondent stated that even though the Respondent has been set ex-parte, he may be permitted to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing to the Learned Counsel for the Appellant, the Respondent , based on the Purchase Orders of the Appellant , had raised Invoices , and owing to reasons and factors beyond the control of the Appellant , the Appellant , was precluded from duly honouring its Payment Obligation . 5. It is represented on behalf of the Appellant, that the Appellant had paid a sum of Rs.3,20,00,000/-, as against the Agreed Debt Sum of Rs.5,25,00,000/- and further an Outstanding of Rs.2,05,00,000/-, is yet to be paid by the Appellant . 6. In this connection, the Learned Counsel for the Appellant that the Respondent / Operational Creditor , had relied on the Memorandum of Compromise , for filing a Petition in IBA/751/2020 (under Section 9 of the I B Code, 2016), in accordance with the terms and conditions, as mentioned in the Memorandum of Compromise in question, the Debt , in question, itself is subject to numerous compliances, as mentioned in the Memorandum of Compromise . In fact, the Respondent / Operational Creditor , is barred from claiming future and past interest at 24%, on the Principal Amount , when the Principal Sum claimed itself, was mutually arrived at by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceived and accepted payment of instalments amounting to Rs.2,00,00,000/- till 19.02.2020. In such a situation, the alleged delays, in payment of instalment for the months August 2019 to October 2019, could not be taken as Default , in view of the provision of Section 55 of the Indian Contract Act, 1872. Thereafter, the Respondent , had accepted the payments, without retaining any right, as provided under the Law . Both the Parties , had agreed to substitute a New Contract or Alter it, and as such, there is no question of Default , as per I B, Code, 2016. 14. The Learned Counsel for the Appellant brings it to the notice of this Tribunal , that the Respondent had accepted the payments made in small Tranches , amounting to Rs.3,20,00,000/-, till the date of Admission of Corporate Insolvency Resolution Process . Hence, the Application , under Section 9 of the I B Code, 2016, cannot be triggered and accepting the Delayed Payments , without expressing any demur , the Respondent cannot Claim , breach of Memorandum of Compromise . 15. The Learned Counsel for the Appellant contends that by altering the then existing Operational Debt , and by arriving at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t bring the liability within the ambit of 'financial debt'. The debt, along with interest, if any, should be disbursed against the consideration for the Time Value of Money . Breach of terms of an agreement including a Settlement Agreement whereunder payment may be due would not fall within the ambit of Section 5(8) so as to constitute a 'Financial Debt'. 20. The Learned Counsel for the Appellant , refers to the Order of the Tribunal ( National Company Law Tribunal , New Delhi) dated 03.06.2022 in M/s. Alhuwalia Contracts (India) Ltd. v. M/s. Logix Infratech Pvt. Ltd., reported in 2022 SCC Online, wherein, at Paragraph 15, it is observed as under: 15. As per the definition referred to supra, Operational Debt means a claim in respect of provision of goods or services including employment. Now we consider the case of the Applicant and we observe, the claim of the applicant do not fall either under the category of the supply of the goods or service rendered by the Corporate Debtor. Rather the claim of the Applicant is based on the breach of terms and conditions of the settlement agreement, on the basis of which the Applicant has claimed that there is de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , wherein it is held that the Unpaid Instalments , as per the Settlement Agreement, cannot be treated as an Operational Debt , as per Section 5 (21) of the I B Code, 2016. 1st Respondent s / Petitioner s Submissions: 25. According to the 1st Respondent / Petitioner / Operational Creditor , in spite of adequate number of opportunities and time, being given to the Appellant , the Appellant , had not made the Outstanding Principal Sum of Rs.2.05 Crores, leave alone the Outstanding Interest Component . Further, from the Status Report dated 24.02.2022, filed by the Resolution Professional , there where massive irregularities , in the operations of the Corporate Debtor Company. Moreover, the Resolution Professional , had identified the Preference , Undervalued and Extortionate Transactions , worth more than Rs.563 Crores, by the Corporate Debtor to KKN Holdings Private Limited (a Group Company of the Corporate Debtor ), being managed by the same Managing Director Mr. Keshav Kantemneni , as the Appellant , herein. 26. The Learned Counsel for the 1st Respondent, adverts to the fact that the Forensic Auditors , were appointed, to carry out the Forens ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Through NEFT Rs.25,00,000 Rs.2,00,00,000 29. Moreover, in Page 8 of the Memorandum of Appeal , an Outstanding Sum of Rs.2,05,00,000, is yet to be paid by the Appellant , is tacitly admitted by the Appellant . 1st Respondent s / Petitioner s Citations: 30. The Learned Counsel for the 1st Respondent, refers to the Order of the National Company Law Tribunal (Mumbai Bench) dated 28.10.2021, in Infobay Interactive India Private Limited v. Clear Channel India Private Limited, reported in MANU/NC/2605/2021 (vide CP(IB) 1243(MB)/2019, wherein, at Paragraphs 23 24, it is observed as under: 23. Therefore, even assuming that a part of the amount is disputed, however, since the clear cut admitted debt amount is more than Rs. 1 lakh, the Application u/s. 9 cannot be rejected and is liable to be admitted. In this regard, reliance is placed by the Bench on the Hon ble NCLAT Judgment in Gupshup Technology India Pvt. Ltd. v. Interpid Online Retail Pvt. Ltd. (Company Appeal (AT) (INS) No. 23 of 2019), in which the Hon ble NCLAT observed as follows: 14. From ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e it becomes due and payable, which includes non-payment of even part thereof or an installment amount. For the meaning of debt , we have to go to Section 3(11), which in turn tells us that a debt means a liability of obligation in respect of a claim and for the meaning of claim , we have to go back to Section 3(6) which defines claim to mean a right to payment even if it is disputed. The Code gets triggered the moment default is of rupees one lakh or more (Section 4). The corporate insolvency resolution process may be triggered by the corporate debtor itself or a financial creditor or operational creditor. The moment the adjudicating authority is satisfied that a default has occurred, the application must be admitted unless it is incomplete, in which case it may give notice to the applicant to rectify the defect within 7 days of receipt of a notice from the adjudicating authority. (Emphasis supplied) 33. The Learned Counsel for the 1st Respondent, falls back upon the Order of the National Company Law Tribunal (New Delhi Bench) dated 08.06.2021, in Schneider Electric India Pvt. Ltd. v. Apex Electro Devices Pvt. Ltd., (vide MANU/NC/1466/2021), wherein, it is obse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Adjudicating Authority when notice is issued under Section 9. Further in Reply to Section 9 Corporate Debtor can bring the material to indicate that there are pre-existing disputes in existence prior to issuance of demand notice under Section 8. We thus are of the considered opinion that mere fact that Reply to notice under Section 8 (1) having not been given within 10 days or no reply to demand notice having been filed by the Corporate Debtor does not preclude the Corporate Debtor to bring relevant materials before the Adjudicating Authority to establish that there are pre-existing dispute which may lead to the rejection of Section 9 application. In the above context, we may refer to Judgement of this Tribunal in Neeraj Jain Vs. Cloudwalker Streaming Technologies Private Limited (Company Appeal (AT) Ins. No. 1354 of 2019) decided on 24th February, 2020 in paragraph 50, following observations have been made by this Tribunal: Even otherwise, mere failure to reply to the demand notice does not extinguish the rights of the Operational Creditor to show the existence of a preexisting dispute... We thus set aside the Impugned Order and remit the matter back to the Adjudi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot be excluded to file an Application under the Code. Going by the definition 3(10) of 'Creditor', it includes 'Financial Creditor', 'Operational Creditor'. 48. Be that as it may, in the light of detailed qualitative and quantitative discussions and also this Tribunal keeping in mind the entire conspectus of the attendant facts and circumstances of the instant case in a holistic fashion comes to a resultant conclusion that the impugned order passed by the National Company Law Tribunal, New Delhi Bench dated 8.6.2020 as an incorrect and invalid one in the eye of law. Viewed in that perspective, this Tribunal to prevent aberrational justice and to promote substantial cause of justice set aside the impugned order in IB 1895 dated 8.6.2020 passed by the National Company Law Tribunal, New Delhi Bench. Resultantly the Appeal succeeds. 37. The Learned Counsel for the 1st Respondent, cites the Judgment of the Hon ble Supreme Court of India dated 04.02.2022, in the matter of Consolidated Construction Consortium Limited v. Hitro Energy Solutions Private Limited (vide Civil Appeal No. 2839 of 2020), reported in MANU/SC/0152/2022, wherein, at Paragraphs 60 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at, the Outstanding Sum(s) , are also duly reflected in the Ledger Account (for the period from 01.04.2015 to 31.03.2016, onwards), maintained in the name of the Appellant / Company , by the 1st Respondent and the relevant Ledger Entry , is in Pages 205 206 of the Appeal Paper Book ( Ledger Account for the period from 01.04.2019 to 31.03.2020). Dispute : 39. It is pointed out that a Dispute , does not mean a mere denial, namely no payment is due , because there is a Dispute . To decide whether, there exists a Dispute , whether there is plausible contention, which requires further investigation and ensure that the Dispute , is not based on Feeble Arguments or Assertion of Facts , which are Unsupported by Evidence . 40. The Dispute of Privity of Contract , has no relevance , if the Debt payable , is more than Rs. One Lakh. Even if the Sum , is Disputed , if the Claim , is more than Rs. One Lakh (now Rs. One Crore), the Corporate Insolvency Resolution Process , can be Initiated . 41. A Corporate Debtor , must exhibit , a Preexisting Dispute . Further, the disputed questions , pertaining to Claims and Counter Claims , cann ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in AIR 1955, Patna at Page 320. Discussions : 48. Before the Adjudicating Authority , ( National Company Law Tribunal , Division Bench I, Chennai), the 1st Respondent / Petitioner / Operational Creditor , in Form No.5 (filed under Section 9 of the Code read with Rule 6 of the Insolvency and Bankruptcy (Application to Adjudicating Authority Rules, 2016), under Part IV Particulars of Operational Debt , had averred that the Principal Sum of Rs.3,25,00,000/- was due and the interest till 30.06.2020 was calculated at 24% per annum and the Total Amount Due , was mentioned as Rs.3,99,55,123.29. 49. Further, as per Clause 5 of the Memorandum of Compromise , the Debtors , undertook to pay a sum of Rs.5,25,00,000/-, to the Operational Creditor , in accordance with the Schedule of Payment , specified in the said Clause. Also that, the Corporate Debtor , had issued six Post Dated Cheques from its Account in favour of the Operational Creditor , for a total Sum of Rs.5,25,00,000/-, which was the agreed payable Sum , as per the said Memorandum of Compromise . The six cheques , issued by the Corporate Debtor , along with their respective cheques were dishonoured o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paid Dues , under a Settlement Agreement , is not an Operational Debt , and also that, a Violation of the Memorandum of Compromise dated 30.04.2019, cannot be a basis to initiate Corporate Insolvency Resolution Process , against the Corporate Debtor , it is evident from the Memorandum of Compromise dated 30.04.2019, and other materials available on record that the Outstanding Principal Amount , remains Unpaid and on this ground alone, the instant Appeal , deserves to be dismissed, in the considered opinion of this Tribunal . 55. In the present case, the Defaults , took place in the year 2018 and later in the year 2019, with a promise to effect payments, by October 2019, prior to the Covid-19 Pandemic , in March 2020. 56. Apart from that, the Appellant , in the instant Appeal Memorandum , had tacitly admitted that, till date, a payment of Rs.2,00,00,000/-, was made in favour of the Respondent by the Appellant and UDL as against the Outstanding Sum of Rs.5,25,00,000/-, which was admitted by the Respondent. Therefore, the Balance Outstanding Sum , payable was Rs.3,25,00,000/-. 57. Continuing further, the Appellant , in the Appeal , vide Page 11 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oices and the Ledger Account , were the cementing platform, for the 1st Respondent / Petitioner / Operational Creditor , to prefer an Application in IBA/751/2020, before the Adjudicating Authority , ( National Company Law Tribunal , Division Bench I, Chennai). 65. In the instant case, the Appellant , had not produced any Document , to the subjective satisfaction of this Tribunal , evidencing the prevalent of Preexisting Dispute , either prior to the issuance of Notice , under Section 8 of the I B Code, 2016, or in Reply , to the Notice , issued under Section 8 of the Code, by the 1st Respondent / Petitioner / Operational Creditor . Also, the Appellant , had failed to exhibit any interest / controversy / dispute , when the Section 9 Application , was pending before the Adjudicating Authority . 66. In view of the detailed upshot, on a careful consideration of the respective contentions advanced on either side, this Tribunal , keeping in mind the facts and circumstances of the instant case, in a conspectus manner , comes to a consequent conclusion that the Appellant , has not repudiated that the Sum is Due and Payable to the 1st Respondent / ..... X X X X Extracts X X X X X X X X Extracts X X X X
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