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TMI Blog2023 (2) TMI 951X X X X Extracts X X X X X X X X Extracts X X X X ..... y deviation whatsoever, as opined by this Tribunal. Likewise, the observations of the Adjudicating Authority (Tribunal), in the impugned order dated 30.06.2022, at Paragraph 10, Hence the earlier proceedings, before the Hon ble High Court, may not be of much significance in the matter before this Tribunal. In any case, even if the matter were considered as transferred from the Hon ble High Court, it would stand abated, etc., are an incorrect, invalid, and legally untenable one. It is to be remembered that the proceedings to be transferred in Law, are required to be dealt with an Application / Petition, for the Corporate Insolvency Resolution Process, under the I B Code, 2016, with a mandate that the Adjudicating Authority (NCLT), will provide from the stage, at which, the Proceedings are transferred, as it is from the Hon ble High Court. Viewed in that perspective, this Tribunal, is of the cocksure opinion that the Adjudicating Authority (Tribunal), has misdirected itself by making observations at Paragraph 9, while passing the impugned order dated 30.06.2022, which are clearly unsustainable, in the eye of Law. Appeal disposed off. - Company Appeal (AT) (CH) (INS.) No. 36 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 23.03.2016, under Section 434(1)(a) of the Companies Act, 1956, demanding that the Corporate Debtor pay an amount of Rs.2,40,69,233.30/-, along with interest of 18% per annum. The Corporate Debtor replied vide letter dated 12.04.2016, listing the issues that arose with respect to the pumps that were supplied. It was stated that the Operational Creditor had failed to rectify defects that were complained of, by the farmers and further, failed to take back about 700 pump sets that were lying with the Corporate Debtor, for want of replacement. Yet another issued that was flagged was the use of inferior quality parts in the assembling of the pumps, that led to the failure of the pumps. The said correspondence may be adverted to, in order to ascertain pre-existing disputes between the parties. 19. The term dispute has been inclusively defined in the Code in S.5(6) as under: (6) dispute includes a suit or arbitration proceedings relating to- (a) the existence or the amount of debt; (b) the quality of goods or service; or (c) the breach of a representation or warranty; 20. It has been judicially held that for the purposes of deciding maintainability of an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al argument, the Adjudicating Authority is required to reject the application filed under Section 9 of the Code, 2016: Therefore, all that the adjudicating authority is to see at this stage is whether there is a plausible contention which required 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 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 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. 23. When the facts of the instant case, as discussed above, are considered against the above background, it is observed that there has been no admission of operational debt by the Corporate Debtor. Moreover, the exchange of correspondence between parties indicates the following: (a) Various letters and representations, sent by the farmers to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Appellant) before any other Forum, shall not prejudiced, on account of dismissal of the instant Application . Appellant s Submissions: 4. Assailing the Correctness , Validity , Propriety and the Legality of the impugned order dated 30.06.2022 in CP (IB) No. 210/9/HDB/2020, the Learned Counsel for the Appellant submits that the Adjudicating Authority , ( National Company Law Tribunal , Hyderabad Bench, Hyderabad), had erroneously, on the basis of Non-Service of Notice , under Section 8 of the I B Code, 2016, dismissed , the Main Petition . In fact, the Service of Notice , was not at all a requirement in Law , as per Section 434 of the Companies Act, 2013, and the Adjudicating Authority , has committed a serious error , in rendering a finding that the absence of Notice , as per Section 8 of the I B Code, 2106, is a ground for dismissing the Transferred Proceedings . 5. Advancing his argument, the Learned Counsel for the Appellant / Operational Creditor / Petitioner contends that Rule 5 of the Companies (Transfer of Pending Proceedings) Rules, 2016, is applicable only in a case where Notice , was not Served , upon the Respondent . However ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ediately before such date shall stand transferred to the Tribunal and the Tribunal shall dispose of such matters, proceedings or cases in accordance with the provisions of this Act; (b) any person aggrieved by any decision or order of the Company Law Board made before such date may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may if it is satisfied that the appellant was prevented by sufficient cause from filing an appeal within the said period, allow it to be filed within a further period not exceeding sixty days; and (c) all proceedings under the Companies Act, 1956, including proceedings relating to arbitration, compromise, arrangements and reconstruction and winding up of companies, pending immediately before such date before any District Court or High Court, shall stand transferred to the Tribunal and the Tribunal may proceed to deal with such proceedings from the stage before their transfer: Provided that only such proceedings relating to the winding up of companies shall be transferred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thority in the Code would stultify the objective sought to be achieved by the Code, which is to resuscitate the corporate debtors who are in the red. In accordance with this objective, the Rules kept being amended, until finally Section 434 was itself substituted in 2018, in which a proviso was added by which even in winding up petitions where notice has been served and which are pending in the High Courts, any person could apply for transfer of such petitions to the NCLT under the Code, which would then have to be transferred by the High Court to the adjudicating authority and treated as an insolvency petition under the Code. This statutory scheme has been referred to, albeit in the context of Section 20 of the SICA, in our judgment which is contained in Jaipur Metals Electricals Employees Organization Through General Secretary Mr. Tej Ram Meena vs. Jaipur Metals Electricals Ltd. Through its Managing Director Ors., being a judgment by a Division Bench of this Court dated 12.12.2018. 23. Though, we are not interfering with the Appellate Tribunal s order dismissing the appeal, we grant liberty to the appellant before us to apply under the proviso to Section 434 of the Com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the same. 15. The clear cut stand of the Appellant / Operational Creditor / Petitioner is that, the Dispute , raised by the Respondent , after the Service of Statutory Notice dated 23.03.2016, is a mere bluster , and an averment / allegation , unsupported by evidence, which is to be Rejected , in limine, based on the ratio , laid down by the Hon ble Supreme Court of India in Mobilox Innovations (P) Ltd. v. Kirusa Software (P) Ltd., reported in (2018) 1 SCC 353. 16. The other contention advanced on behalf of the Appellant is that, in as much as the allegation of defects, in Pump Sets, is an afterthought, the instant case on hand, is covered by the decision of the Hon ble Supreme Court in the matter of Shital Fibers Ltd. v. Indian Acrylics Ltd. (2021) SCC Online SC 281, wherein, it is observed and held that a Dispute, which is not a Bona fide and Substantial , is liable to be Rejected , in a Winding up Petition . Appellant s Decision: 17. The Learned Counsel for the Appellant, seeks in aid of the Judgment of the Hon ble Supreme Court in Mobilox Innovations (P) Ltd. v. Kirusa Software Private Ltd. (vide Civil Appeal No. 9405 of 2017 dated 21.09.2017 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ace in the Act either upon an application filed by either of the parties to the proceedings or suo motu. (4) A fresh petition or an application may also be filed in Form NCLT 1 corresponding to those provisions of the Act, if both the parties thereto so consent with the approval of the Tribunal while withdrawing the proceedings as already continued before the Company Law Board and serve a copy of the petition on the parties thereto including the Central Government, Regional Director, Registrar of Companies, Official Liquidator or Serious Fraud Investigation Office, as the case may be, as provided in the Act, in the manner as provided under Part III. Insertion by the I B Code (Amendment Act, 2018): 20. A new proviso, was inserted to Sub-section (1) of Section 434, by way of Amendment Act 26 of 2018 (with effect from 06-06-2018), which enjoins: Provided further, that any Party or Parties to any Proceedings, relating to Winding up of Companies , pending before any Court, immediately, before the commencement of I B Code, may file an Application , for transfer of such Proceedings and the Court may Order by Transfer , such Proceedings to Tribunal , and that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... INS) No. 523 of 2019). 28. In an Application , under Section 9 of the Code , the aspect of merit of Dispute , cannot be determined by an Adjudicating Authority . Also that an Adjudicating Authority , is not to conduct an Indepth Enquiry , in respect of the Allegations , at the time of determining an Application / Petition , filed under the Code . 29. It must be borne in mind that an Adjudicating Authority , is required to examine before Admitting or Rejecting an Application , under Section 9 of the I B Code, 2016, whether the Dispute , raised by the Corporate Debtor , qualify as a Dispute , as defined under Sub-section (6) of Section 5 of the Code. 30. Also that, it is to be seen that the Notice of Dispute , given by an Operational Creditor , fulfils the conditions, specified in Sub-section (2) of Section 8 of the Code. 31. As long as the Dispute , truly exists in fact, and it is not spurious , illusory or hypothetical one, an Adjudicating Authority , has to reject the Petition / Application . Summary Proceedings: 32. An Adjudicating Authority , is not a Court of Law , and it does not decide a Money Claim or Suit , in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ibunal , for adjudication of the matter, under I B Code, 2016. Further, the Default , took place on numerous occasions, particularly 30 days from the date of each Invoice and the interest was enclosed with the Notice annexed. 36. The Respondent / Corporate Debtor in its Reply , to the main CP (IB) No. 210 / 9 / HDB / 2020, had averred that it time and again sent emails / letters, requesting the Appellant / Petitioner , to rectify the defects and replace the damaged pump sets as agreed as per Clause 7 and 8 of the Memorandum of Understanding . Furthermore, the Appellant / Petitioner , had supplied all substandard quality goods, which were of cheap quality, made with China parts that fail to start and a premature problem at first case, almost more than 700 pumps were sent back and were lying in Respondent s go-down without being replaced, in spite of they were being under warranty, in view of the same, most of the pumps which were installed had functional defects and beneficiaries who bought them faced lot of problems and affected their irrigation. 37. Moreover, the Appellant / Petitioner, had failed to send a Technical Support Team , to rectify the same, even after v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mp sets, out of which, 400 were supplied to the Respondent / Company in its earlier name Viz. Haritha Irrigation Pvt. Ltd. and 3501 Pump sets were supplied to the Respondent , in its present name. In respect of these supplies, the Respondent / Company , had issued Purchase Orders , E-way Bill and C-Forms from time to time. There was due of Rs.7,17,081/- from Haritha Irrigation Pvt. Limited against the supply of 400 Pump sets and the same outstanding was shown in the Account of the Respondent / Company . 45. Also that, in respect of the total outstanding of Rs.5,56,71,661, in respect of the supply of 3501 Pump sets and 35 extra pumps, the Appellant / Petitioner , had received a payment of Rs.3,10,00,000 (Rs.2,70,00,000 plus Rs.40,000/-). 46. Besides this, the Appellant , had issued Credit Notes , towards free spares amounting to Rs.5,98,603/-. Resultantly, a Balance of Rs.2,40,73,058/- towards the supply of 1495 Pump sets remain outstanding and due, which is proved through their own Statement of Accounts . 47. According to the Appellant, in respect of the supply of Pump sets, payments made by the Respondent, the following Table will indicate the same : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 434 (as amended) and Rule 5 of the 2016 Transfer Rules, all proceedings under Section 20 of the SIC Act pending before the High Court are to continue as such until a party files an application before the High Court for transfer of such proceedings post 17.08.2018. Once this is done, the High Court must transfer such proceedings to NCLT which will then deal with such proceedings as an application for initiation of the corporate insolvency resolution process under the Code. In the light of the above, the application is allowed with a direction to the Registry to make over the file to NCLT, Hyderabad Bench, for conducting further proceedings by following due process. 50. By virtue of the aforesaid Order of the Hon ble High Court for the State of Telangana in IA No. 1 of 2019 in CP No. 311 of 2016 dated 29.11.2019, the CP No. 311 of 2016, on the file of Hon ble High Court, was directed to be made over to the file of National Company Law Tribunal , Hyderabad Bench, for conducting further proceedings, by following due process. 51. From the above, it is crystalline clear that the Adjudicating Authority ( National Company Law Tribunal , Hyderabad Bench), ought to have t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r , praying for transfer of the Winding up Petition No. 311 of 2016 , to the Adjudicating Authority ( National Company Law Tribunal , Hyderabad Bench). 54. It is to be remembered that the proceedings to be transferred in Law , are required to be dealt with an Application / Petition , for the Corporate Insolvency Resolution Process , under the I B Code, 2016, with a mandate that the Adjudicating Authority ( NCLT ), will provide from the stage, at which, the Proceedings are transferred, as it is from the Hon ble High Court . Viewed in that perspective, this Tribunal , is of the cocksure opinion that the Adjudicating Authority ( Tribunal ), has misdirected itself by making observations at Paragraph 9, while passing the impugned order dated 30.06.2022, which are clearly unsustainable , in the eye of Law . Judicial Discipline : 55. An Order of the Hon ble High Court , passed in a given case, shall be binding on the Adjudicating Authority ( Tribunal ), established under Section 419 (4) of the Companies Act, 2013, exercising Territorial Jurisdiction . To put it differently, the Propriety , Sobriety and the Comity of Judicial Discipline , r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed further, by following the Due Process , and to take it to its logical end, in passing a reasoned order in speaking terms (ofcourse in a qualitative and quantitative manner), by adhering to the Principles of Natural Justice , and permitting the Parties , to raise all Factual and Legal Pleas , and meeting out the same, in a Fair , Just and in a Dispassionate manner, Untrammelled and Uninfluenced , with any of the Observations , made by this Tribunal , in this Appeal . 60. Resting upon the numbering / re-numbering of CP No. 311 of 2016, from the File of the Hon ble High Court to the File of the Adjudicating Authority / Tribunal , for proceeding further, in accordance with Law (keeping in tune with the Order of the Hon ble High Court for the State of Telangana, Hyderabad, dated 29.11.2019 in IA No. 1 of 2019 in CP No. 311 of 2016, the Tribunal is to pass consequent orders in CP (IB) No. 210 / 9 / HDB / 2020 (Fresh Petition filed by the Appellant / Petitioner / Operational Creditor ), by dismissing , the same. Disposition : With the aforesaid observations and directions, the instant Comp. App (AT) (CH) (INS) No. 367 of 2022, s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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