9911796707
TMI Blog2023 (1) TMI 746X X X X Extracts X X X X X X X X Extracts X X X X ..... Book ( APB in short). Moreover, the poor health of the Appellant prevented him from following up the matter in the court and in substantiation thereof medical certificate has been placed at page 321 of APB which we find to be sufficient cause to explain their inability to agitate the matter before the Adjudicating Authority. In the interest of justice, we are of the considered view that the present appeal filed before this Tribunal deserves to be considered on merit. It is well settled that in Section 9 proceeding, there is no need to enter into final adjudication with regard to existence of dispute between the parties regarding operational debt. What has to be looked into is whether the defence raises a dispute which needs further adjudication by a competent court - The present is not a case where there is an undisputed debt for which insolvency can be initiated against the Corporate Debtor. The Adjudicating Authority having heard the matter ex-parte has failed to appreciate the facts of the case in its entirety and therefore committed an error in admitting the Section 9 application and we therefore hold that the impugned order passed is unsustainable. The Adjudicating Auth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 82,22,873/- thus leaving an outstanding amount of Rs.1,34,96,652/-. However, the Corporate Debtor not being in a position to supply more Ethyl Acetate entered into a Memorandum of Understanding ( MoU in short) with the Operational Creditor on 03.01.2020 by which the Corporate Debtor agreed to pay the said outstanding amount within a period of 18 months i.e on or before 03.07.2021. The Corporate Debtor also handed over 18 cheques for the said amount in terms of the MoU. These cheques were deposited with the bank by the Operational Creditor on 06.07.2021 for encashment. No payment was however received as the cheques were returned by the Bank with the remark Payment stopped by drawer on 07.07.2021. The Corporate Debtor having failed to make the outstanding payment, the Operational Creditor sent demand notice under Section 8 of the IBC on 30.07.2021 demanding payment of Rs.1,36,11,373/- as unpaid operational debt including interest. The Corporate Debtor did not furnish any reply to the demand notice. Thereafter, the Operational Creditor filed a Section 9 application before the Adjudicating Authority. The matter was listed for hearing several times before the Adju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch was stipulated in the MoU, it was explained that since the Corporate Debtor had already supplied more than the proportionate quantity of Ethyl Acetate to the Operational Creditor and there were no outstanding payments to be made in terms of the agreement, the cheque encashment were stopped. Thus the Corporate Debtor having fulfilled the obligations under the agreement and there being no dues outstanding when seen together with the fact that there was a pre-existing dispute arising from want of reconciliation of accounts between the two parties, the impugned order passed by the Adjudicating Authority admitting the Section 9 application is illegal and untenable. 5. Refuting the above claims, Learned Counsel for the Respondent No. 1 strenuously contended that the Corporate Debtor was required to supply Ethyl Acetate in proportion to the supply of Special Denatured Spirit (SDS) and Acetic Acid by the Operational Creditor and not at the conversion ratio of 0.65 as per the terms of their business transactions founded on the agreement entered into on 24.06.2019. It was also stated that in terms of the agreement, the Corporate Debtor had agreed to supply the Ethyl Acetate at the tota ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ispute to be a ground to nullify an application under Section 9, the dispute raised must be truly existing at the time of filing a reply to notice of demand as contemplated by Section 8(2) of IBC or at the time of filing the Section 9 application. It will be useful to have a look at the provisions of Section 8 IBC which is as follows :- 8. Insolvency resolution by operational creditor. (1) An operational creditor may, on the occurrence of a default, deliver a demand notice of unpaid operational debtor copy of an invoice demanding payment of the amount involved in the default to the corporate debtor in such form and manner as may be prescribed. (2) The corporate debtor shall, within a period of ten days of the receipt of the demand notice or copy of the invoice mentioned in sub-section (1) bring to the notice of the operational creditor (a) existence of a dispute, if any, or record of the pendency of the suit or arbitration proceedings filed before the receipt of such notice or invoice in relation to such dispute; (b) the payment of unpaid operational debt- (i) by sending an attested copy of the record of electronic transfer of the unpaid amount f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eal Paper Book ( APB in short). Moreover, the poor health of the Appellant prevented him from following up the matter in the court and in substantiation thereof medical certificate has been placed at page 321 of APB which we find to be sufficient cause to explain their inability to agitate the matter before the Adjudicating Authority. In the interest of justice, we are of the considered view that the present appeal filed before this Tribunal deserves to be considered on merit. 12. We now come down to examine whether there was any pre-existing dispute raised by the Corporate Debtor prior to the date of filing the application under Section 9 of the IBC by the Operational Creditor in light of the guiding principles laid down by the Hon ble Supreme Court in Mobilox Innovations (P) Ltd. v. Kirusa Software (P) Ltd. (2018) 1 SCC 353 ( Mobilox in short). It is relevant to refer to paras 33, 51 and 56 of the said Judgment which is extracted as hereunder: 33 What is important is that the existence 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 maybe. In case the unpa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inly frivolous or vexatious. A dispute does truly exist in fact between the parties, which may or may not ultimately succeed, and the Appellate Tribunal was wholly incorrect in characterizing the defense as vague, got-up and motivated to evade liability. 13. Further, the Hon ble Supreme Court in (2021) 10 SCC 483, Kay Bouvet Engineering Ltd. vs. Overseas Infrastructure Alliance (India) (P) Ltd. in para 21 has reiterated the same proposition in the following words :- 21. ..All that the adjudicating authority is required to see at this stage is, whether there is a plausible contention which requires further investigation and that the dispute is not a patently feeble legal argument or an assertion of fact unsupported by evidence. It is important to separate the grain from the chaff and to reject a spurious defence which is a mere bluster. It has been held that however, at this stage, the Court is not required to be satisfied as to whether the defence is likely to succeed or not. The Court also cannot go into the merits of the dispute except to the extent indicated hereinabove. It has been held that so long as a dispute truly exists in fact and is not spurious, hypothetical ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in detail by the Corporate Debtor on 19.07.2021 which finds place at page 72-73 of APB and is as reproduced below:- BOCPL BHANGE ORGANIC CHEMICALS PVT LTD BOCPL/KDCPL/155/2021-155 Dated 19.07.2021 To, Khushbu Dye Chem Pvt. Ltd. Gala No.99, New Unique Ind. Estate, Dr. R.P. Road, Opp. Jawahar Talkies, Mulund (W), Mumbai 400 080. Subject - Reply for your letter dtd. 15.06.21 request for to submit us our business ledger account statement regarding. Dear Sir, We are in receipt of your above referred letter by post. In this regards we are giving herewith stepwise reply for the same. Step 1. As per our mutual commitment we were engaged for doing the business for conversion basis of raw material to finished good @ Rs.5/- per kg for total quantity of supplying raw material Denatured Ethyl Alcohol 12,65,920.B.L. Acetic Acid also 12,65,920.0 kg. having committed ratio 0.65% . As per the ratio for the total quantity of manufacturing Ethyl Acetate should be 1649.315 M.T. As per the committed ratio we had supplied totol quantity 1649.315 M.T. to you within the time frame period as per your submitted purchase order. Where ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the above letter dated 19.07.2021 it is clear that before the issue of demand notice on 30.07.2021 the Corporate Debtor had clearly articulated an array of disputes arising from the fact that their business model was based on conversion cost; that the operational creditor had not released balance conversion payment due to them; that the bills submitted by them were not faulty or fabricated and that the operational creditor has not submitted ledger account statement to settle the accounts. 18. It is however the case of Respondent No.1 that the MoU signed between the two parties is a document which clearly establishes admission of debt on the part of Corporate Debtor and failure to honour the cheques on or before 03.07.2021 reinforces debt and default. It has also been contended that the claim that the MoU was signed under duress is false and is belied by the fact that no steps were taken by the Corporate Debtor to seek cancellation of the MoU or dispute the MoU. Be that as it may, we find that the Corporate Debtor has contended that it is the agreement of 24.06.2019 which constitute the underpinning of their business engagement with the Operational Creditor and as per that a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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