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TMI Blog2023 (9) TMI 1260X X X X Extracts X X X X X X X X Extracts X X X X ..... tter tried out in the present case before the axe falls. The Adjudicating Authority has failed to take cognizance of the fact that there clearly existed dispute between the two parties anterior to the date of demand notice in respect of the terms and conditions of their business transactions as also on the liability to discharge the obligations to pay. Moreover, keeping in mind that IBC bestows only summary jurisdiction upon the Adjudicating Authority and this Tribunal, once plausibility of a pre-existing dispute is shown, it is not required of them to make further detailed investigation. What has to be looked into is whether the defence raises a dispute which needs further adjudication by a competent court. It is well settled that in a Section 9 proceeding, the Adjudicating Authority is not to enter into final adjudication with regard to existence of dispute between the parties regarding the operational debt. There was no reason for the Adjudicating Authority in the present case to go under the skin of dispute to unravel who is the principal debtor. There are force in the contention of the Appellant that since they had never accepted any liability to make payments to the Op ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Limited ( Anwesha in short). As against invoices raised aggregating an amount of Rs. 2,07,09,859/-, the Operational Creditor received payment of only Rs. 70,61,000/-. Since the outstanding debt of Rs.1,37,14,859/- remained unpaid, the Operational Creditor issued a demand notice to the Corporate Debtor under Section 8 of IBC on 22.02.2021. The Corporate Debtor replied to the demand notice on 09.03.2021. The debt having continued to remain unpaid, a Section 9 application was filed by the Operational Creditor before the Adjudicating Authority. The Adjudicating Authority on 12.04.2023 allowed the Section 9 application and admitted the Corporate Debtor into the rigours of CIRP. Aggrieved by the impugned order, this appeal has been preferred by the Appellant. 3. The Learned Counsel for the Appellant submitted that in terms of the business arrangement between them and the Operational Creditor, goods were to be supplied by the Operational Creditor to Anwesha for which the payments were to be made directly by Anwesha to the Operational Creditor. It was further submitted that as per understanding arrived between the Corporate Debtor and Anwesha on 05.11.2019, all payments against invoice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e-existing disputes, travelled beyond the summary jurisdiction of IBC in finding out whether the Corporate Debtor or Anwesha is the principal debtor which issue fell within the realm of a civil dispute. 7. The Learned Counsel for the Respondent refuting the submissions made by the Appellant contended that the business relations between the Operational Creditor and the Corporate Debtor was to be determined in terms of the oral agreement entered between them. According to this arrangement, the purchase order was to be placed by the Corporate Debtor against which goods were to be supplied by the Operational Creditor to Anwesha; payment invoices were to be raised against the Corporate Debtor and payments were to be remitted by the Corporate Debtor. It was also asserted that the purchase order clearly indicated that the buyer of the goods was the Corporate Debtor and hence it was the liability of the Corporate Debtor to clear the payments. 8. It was further added that as regards the agreement between the Corporate Debtor and the Anwesha with regard to payments to be made by Anwesha to the Operational Creditor, this agreement was done unilaterally by them and the Operational Credit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not yet been paid? And (iii) Whether there is existence of a dispute between the parties or the record of the pendency of a suit or arbitration proceeding filed before the receipt of the demand notice of the unpaid operational debt in relation to such dispute? If any of the aforesaid conditions is lacking, the application would have to be rejected. Apart from the above, the adjudicating authority must follow the mandate of Section 9, as outlined above, and in particular the mandate of Section 9(5) of the Act, and admit or reject the application, as the case may be, depending upon the factors mentioned in Section 9(5) of the Act. 12. It is the case of the Appellant that there was no liability on their part to discharge the obligation of making payments to the Operational Creditor for their supply of goods to Anwesha in view of the meeting held on 05.11.2019 by which Anwesha had agreed to make direct payment to the Operational Creditor against supply of materials. While admitting that the purchase order was issued by them, it was claimed that the Operational Creditor was well aware that the payments against the said purchase order was to be made by Anwesha. There was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .2019 between Anwesha and the Operational Creditor, whereby the arrangement worked out on 05.11.2019 was duly communicated to the Operational Creditor, wherein Anwesha undertook to release all the payments directly. The said email is reproduced below: - Akshay Mhatre From: Dipak Sarkar [email protected] Sent: Monday, September 9, 2019 2:32 PM To: Jayesh Steel Cc: Amit Dalal; Asitava Roy, [email protected]; [email protected] Subject: RE: PAYMENT EXTREMELY OVERDUE Dear Jayesh Bhai, It is true that we have made delay in releasing the payment. We will complete Anwesha account within this week. We will release payment against InnSteel account from next week. Time again, I have informed you that we have received the request letter from InnSteel for releasing payment directly to you, so you need not to follow with InnSteel. Regards, Dipak Kumar Sarkar | Jt. Managing Director Anwesha Engineering Projects Limited. The above correspondence which outlines the new mechanism/arrangement of payment was not challenged or questioned by the Operational Creditor as there are no supporting documents to that effe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom Anwesha are found to be endorsed to the Corporate Debtor validates that for purposes of payment, the Operational Creditor had by their conduct been adhering to an arrangement of dealing only with Anwesha for receiving payments. 18. We further notice that the Operational Creditor has admitted to have collected three post-dated cheques from Anwesha for the entire payments which were later replaced with new post-dated cheques. The issue of post-dated cheques by Anwesha to secure the entire outstanding payment which had been willingly collected by the Operational Creditor also shows that the understanding arrived at the meeting of 05.11.2019 between the Corporate Debtor and Anwesha had been implicitly and explicitly accepted by the Operational Creditor. 19. More significantly, the Operational Creditor has failed to produce any document on record to establish that the Corporate Debtor had admitted the alleged debt due. No averments were made or any proof provided by the Operational Creditor to show that any request was placed by them with Corporate Debtor for reconciliation of accounts or with regard to outstanding payments which is sufficient basis to believe that Operational ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion, which is otherwise complete, the adjudicating authority must reject the application under Section 9(5)(2)(d) if notice of dispute has been received by the operational creditor or there is a record of dispute in the information utility. It is clear that such notice must bring to the notice of the operational creditor the existence of a dispute or the fact that a suit or arbitration proceeding relating to a dispute is pending between the parties. Therefore, all that the adjudicating authority is 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 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. 23. We notice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scussed and agreed between Anwesha and you, without our any involvement from Insteel Engineers. Thereafter, Insteel Engineers has categorically informed you that it is not liable to make any payments to you considering that the same shall be released by Anwesha. Please also note that vide letter dated February 9, 2021 by Insteel Engineers, it clarified and reiterated the aforesaid position that Insteel Engineers does not any liability towards Jayesh Steel and the same shall be released by Anwesha. The copy of this email communication is marked hereto as Exhibit 1. 4. You agreed to the revised understanding and payment terms; and towards this, also collected post-dated cheques and subsequent payments from Anwesha, including the payments on February 20, 2020 and May 27, 2020. This was confirmed by the Joint Managing Director of Anwesha, through email communication dated September 9, 2019 to you. The copy of this email communication is marked hereto as Exhibit 2. 5. The above position is confirmed through your ledger confirmation, which clearly provides details of the payments received directly from Anwesha. The copy of ledger confirmation is marked hereto as Exhibit 3. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of entering the realm of tautology or in initiating any proceedings against us. However, should you choose to proceed with such false and illusory correspondence, make no mistake, the same shall be taken up vociferously by us . Yours faithfully, For Insteel Engineers Private Limited Authorized Signatory (Emphasis supplied) 24. From the reply notice as reproduced in the foregoing paragraph, other available material on record in the APB and after hearing the rival contentions of both the parties, we are of the view that the Adjudicating Authority has failed to take cognizance of the fact that there clearly existed dispute between the two parties anterior to the date of demand notice in respect of the terms and conditions of their business transactions as also on the liability to discharge the obligations to pay. Moreover, keeping in mind that IBC bestows only summary jurisdiction upon the Adjudicating Authority and this Tribunal, once plausibility of a pre-existing dispute is shown, it is not required of them to make further detailed investigation. What has to be looked into is whether the defence raises a dispute which needs further adjudication by a com ..... X X X X Extracts X X X X X X X X Extracts X X X X
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