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TMI Blog2023 (1) TMI 194X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the Adjudicating Authority has correctly recorded the finding that there exist disputes between the two parties even prior to the date of demand notice both in respect of the terms and conditions of their business transactions and outstanding dues payable to the operational creditor. It is clear that the defence was raised by the Corporate Debtor both in their reply to demand notice as well as in their detailed reply filed in Section 9 application and the nature of dispute raised was such that it required adjudication by competent court. The Adjudicating Authority has therefore correctly applied the ratio of the Mobilox judgement and rejected the Section 9 application on the ground of pre-existing disputes between the parties and that the matter requires thorough investigation. The Adjudicating Authority has rightly rejected the application of the Appellant filed under Section 9 of IBC - appeal dismissed. - Company Appeal (AT) (Ins.) No. 617 of 2022 - - - Dated:- 5-1-2023 - [ Justice Ashok Bhushan ] Chairperson And [ Mr. Barun Mitra ] Member ( Technical ) For the Appellant : Mr. Shravan Chandrashekhar , Advocate For the Respondent : Mr. Rajivee Waghley , Ms. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of liability made in the said acknowledgement. Furthermore, there being no dispute in existence before the issue of the demand notice, the Adjudicating Authority by rejecting the Section 9 petition failed to appreciate the facts in the correct perspective that the defence raised by the Corporate Debtor is a sham based on concocted documents. 4. The Learned Counsel for the Respondent while making his submissions admitted that they received the demand notice dated 09.05.2019 and that reply to the said notice was sent on 20.05.2019. Going into the background of their relationship with the Operational Creditor, it is submitted that as the loan account of Parimal Vakharia Couture, the Operational Creditor was to be declared Non-Performing Asset, it sought help from the Corporate Debtor through a property broker, one Naveen Dalal. The said broker arranged a deal between the Operational Creditor and the Corporate Debtor. The terms and conditions of this business arrangement in the form of a draft Memorandum of Understanding ( MoU in short) was exchanged with the Operational Creditor vide email dated 18.10.2018 with the intervention of the said Naveen Dalal. While admitting that the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt. It has also been contended by the Corporate Debtor that frivolous and wrongful claims were made in the demand notice by the Operational Creditor with a view to harass and extort money from the Corporate Debtor. It was submitted that the Corporate Debtor denied any liability or dues payable to the Operational Creditor in their reply to the demand notice and in their written statement before the Adjudicating Authority. 7. We have duly considered the detailed arguments and submissions advanced by the Learned Counsel for both the parties and perused the records carefully. 8. We find that the Appellant has denied that any understanding was entered into between the Operational Creditor and Corporate Debtor by which garments were to be supplied on Sale or Return Basis by the Operational Creditor. It has been contended that no agreement or MoU with such terms and conditions were executed in this regard with the Corporate Debtor. Further the purported exchange of emails in respect of any such MoU with the Corporate Debtor has been denied and it was strenuously contended that the Appellant was not a party to the said email correspondence. It has also been stated that the alleged Mo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10. Coming to the impugned order we find that the Adjudicating Authority has not made any observations on the above email dated 18.12.2018 relating to the draft MoU except noting that the Corporate Debtor has relied on this email in support of their contention that goods were purchased on Sale or Return basis. At the same time, we find that the Adjudicating Authority has also noted the contention of the Operational Creditor that the alleged emails with Naveen Dalal which have been relied upon by the Corporate Debtor to establish that goods were supplied on Sale or Return basis has nothing to do with the Operational Creditor and therefore not binding on them. In all fairness, the Adjudicating Authority beyond taking cognizance of the contentions of the two sides on the emails in question has not made any further observations on the emails. 11. We now come to the first issue raised by the Operational Creditor that the Corporate Debtor having signed the copy of the ledger account in the books of accounts of the Operational Creditor showing an outstanding balance is estopped from raising any defence. It was also submitted that copy of the ledger showing a closing balance of Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s cogently explained that since the goods were purchased from the Operational Creditor on Sale or Return basis, liability had to be created in the book. For every entry there has to be a corresponding entry. Thus goods purchased but not sold were included in the opening stock on 01.04.2019 amounting Rs.7,33,59,575/- as also shown in the closing stock of Rs. 9,19,09,309/- as on 31.03.2020 as at page 101 of APB. 15. We now come to the next issue raised by the Appellant that the alleged settlement dated 01.05.2019 based on an unsigned calculation sheet should not have been accepted by the Adjudicating Authority to be a ground of dispute existing between the two parties. It has been emphatically argued that the Adjudicating Authority should not have relied on unsigned documents as settlement documents. The Learned Counsel for the Appellant strongly resisted the defence put forth by the Corporate Debtor that a settlement was arrived at in the presence of police personnel. It was argued that the alleged settlement paper executed between the Operational Creditor and the Corporate Debtor was not signed by the Operational Creditor and therefore not binding on them. Even the calculation s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he petitioner is a mere name lender. It is appropriate to mention here that the alleged settlement took place on 01.05.2019 and the demand notice was issued on 09.05.2019 and the above Company was filed on 20.08.2019. Therefore, from the perusal of the above referred documents relied upon by both parties and from the above developments, this Bench is of the considered opinion that there exists some disputes between the parties, even prior to the date of demand notice with regard to their business dealings more so with regard to amounts payable to the Operational Creditor and the basis on which the material is supplied. The contention of the Operational Creditor is that the alleged settlement entered into between the husband of the Operational Creditor with the Corporate Debtor is a forcible settlement and the goods were not supplied on sale or return basis is a matter to be thoroughly investigated and is beyond the scope. As per the law laid down by the Hon ble Apex Court in Civil Appeal No. 9405 of 2017, Mobilox Innovations Private Limited Vs. Kirusa Software Private Limited it is not incumbent upon this Bench to decide whether the Corporate Debtor would succeed on the defence rai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sertion of fact unsupported by evidence. It is important to separate the grain from the chaff and to reject a spurious defence which is mere bluster. However, in doing so, the Court does not need to be satisfied that the defence is likely to succeed. The Court does not at this stage examine the merits of the dispute except to the extent indicated above. So long as a dispute truly exists in fact and is not spurious, hypothetical or illusory, the adjudicating authority has to reject the application. 20. If we apply the above cited test laid down by the Hon ble Supreme Court to the facts of the present case, it is clear that the defence was raised by the Corporate Debtor both in their reply to demand notice as well as in their detailed reply filed in Section 9 application and the nature of dispute raised was such that it required adjudication by competent court. The Adjudicating Authority has therefore correctly applied the ratio of the Mobilox judgement and rejected the Section 9 application on the ground of pre-existing disputes between the parties and that the matter requires thorough investigation. 21. For the foregoing reasons, we are of the view that the Adjudicating Aut ..... X X X X Extracts X X X X X X X X Extracts X X X X
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