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TMI Blog2024 (3) TMI 1294X X X X Extracts X X X X X X X X Extracts X X X X ..... that it does not envisage the payment by the Corporate Debtor to the Operational Creditor, would be depending only upon the receipts of amount made from M/s. GVK Coal (M/s. Tokisud Company Pvt. Ltd.). Hence, as far as the purchase order and the contract agreement are concerned, they will have to read only for the contract purposes and not to the liability of payment of the dues to the Operational Creditor. Thus, it could be rightly inferred that prior dues left unpaid by the Corporate Debtor to the Operational Creditor which necessitated invocation of Section 9 of the Insolvency and Bankruptcy Code, 2016, was justified in the eyes of law. Whether there is a prior existence of the dispute between the parties or the pendency of other proceedings filed elsewhere? - whether such will at all have any effect upon the liability of Corporate Debtor in respect of the unpaid operational debt? - HELD THAT:- The said issue has been dealt with by the Hon ble Apex Court in matters of Mobilox Innovations Private Ltd. vs Kirusa Software Pvt. Ltd. [ 2017 (9) TMI 1270 - SUPREME COURT ], wherein it was ultimately held that the Adjudicating Authority at the stage when it is examining an application u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ] Member ( Judicial ) , [ Justice Sharad Kumar Sharma ] Member ( Judicial ) And [ Jatindranath Swain ] Member ( Technical ) For the Appellant : Mr. Y. Suryanarayana , Advocate For the Respondent : Dr. SV. Ramakrishna , Advocate for R1 Mr. Raja Shekar Rao Salvaji , Advocate ( for Impleadment ) ORDER ( Hybrid Mode ) [ Per : Justice Sharad Kumar Sharma; Member ( Judicial ) ] : 1) Briefly, stated facts are that the Appellant herein, in this Company Appeal preferred under Section 61 of the Insolvency and Bankruptcy Code, 2016 (herein after to be called as Code of 2016 ), pleads his grievances as against the Impugned Order dated 19.04.2022 as it has been rendered by the Learned Adjudicating Authority, Hyderabad Bench in CP(IB) No. 493/9/HDB/2018, consequential by virtue of the Impugned Order rendered the Application preferred by the Respondent/Operational Creditor under Section 9 of the Code of 2016 has been admitted, to be proceeded with further as per law. 2) The Appellant who claims himself as to be the Shareholder, Promoter and erstwhile Director of M/s Bevcon Wayors Pvt. Ltd., the Corporate Debtor. He has submitted that initially in the year of 2012, the Corporate Debtor, Operationa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payment from the aforesaid M/s. GVK Coal, against the equipment supplied. It was contended that accordingly based upon the aforesaid arrangement of BACK-TO-BACK payment, the Corporate Debtor used to make the payments to the Operational Creditor, immediately as soon as the payments were received by it from M/s. GVK Coals for the equipment supplied. 5) In order to show his bonafide it is the case of the Appellant that due to the aforesaid BACK-TO-BACK payment arrangement, the Corporate Debtor had made the payments, as detailed in the pleadings raised in the Memorandum of Appeal which he contends were supported by the Ledger entries maintained by the Operational Creditor. 6) In order to carve out an exception for inability to pay, the Appellant contends that the allotment of certain Coal blocks which was given during 1993 to 2010, were cancelled in pursuance to the Hon ble Apex Court Judgment dated 24.09.2014, as it stood rendered in Writ Petition (Criminal) No. 120/2012. Consequent to the aforesaid cancellation of the Coal Block, the Appellant contends that the Coal Blocks allotted to M/s. GVK Coals, (Tokisud) Pvt. Ltd., was also cancelled and thus the aforesaid M/s. GVK Coal, is sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onded to the aforesaid Notices and had not remitted the outstanding amount due to be paid to the Corporate Debtor and therefore the amount due to Operational Creditor could not be paid. 12) For the purposes of redressal of the grievances on account of the failure of M/s. GVK Coals to pay its outstanding amount, the Corporate Debtor had also initiated the proceedings before the Hon ble Telangana State Micro and Small Enterprises Observations Council, Hyderabad on 10.11.2017, which is informed to be presently pending. The Corporate Debtor contends that he also issued Notice of Demand under Section 8 of Insolvency Bankruptcy, Code, 2016 to M/s. GVK (Coals) Ltd., but it yielded no result. To sum up, the Corporate Debtor has stated that he has tried all methods to realise pending payment from M/s. GVK Coals, but since the payments were not released, he was unable to pay the Respondent No. 1/Operational Creditor in full in view of the alleged conditions of the BACK-TO-BACK payment arrangements and that he is not liable to pay the same. 13) The Appellant who was the erstwhile Director of M/s. Bevkon Wayors Pvt. Ltd., states that the Corporate Debtor and the Respondents are Consortium Part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er the prior Notice to the Appellant and finally as CIRP failed, the Liquidation was Ordered by an order on 22.05.2023. in IA No. 695/2023. The Respondent has further elaborated that the stand taken by the Corporate Debtor is not correct as it has received full amount based on various invoices submitted by the Operational Creditor and that he has not wilfully paid the same in full to the Operational Creditor. In this regard the contents of Para-5 of the Counter Affidavit filed by the Respondent No. 1 before the Appellate Tribunal which is extracted hereunder: That the impugned orders axe well reasoned order passed by the Hon'ble Adjudicating Authority, NCLT, Hyderabad Bench after thorough examination of the facts and gave number of opportunities to settle the matter (as craved by the Counsel of Corporate Debtor in various hearings) and decided the matter, on merits, as per law and initiated Corporate Insolvency Resolution Process (CIRP) vide impugned orders. That, the Hon'ble Adjudicating Authority, NCLT, Hyderabad Bench decision in its impugned orders under appeal is correct and the alleged back-to-back payment of invoiced amounts is twisted and misrepresented by the Appel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeal against the Impugned Order cannot be sustained owing to the fact that the Liquidation Order has been passed on 22.05.2023 in IA No. 695/2023. 19) Apart from it, in the Rejoinder Affidavit filed by the Operational Creditor before the National Company Law Tribunal, it took a defence that under the contract / purchase order in 17th September 2012, there existed clause 20, which provided for an Arbitration clause for settlement of disputes between the two parties referred to in the purchase order and the same has not been invoked by the Corporate Debtor thus the bonafide are not clear. Further that the alleged payment which the Corporate Debtor contends to have been made was not admitted by the Operational Creditor and has contended that the payment were made towards the admitted debt of Rs.1,26,70,782/-, not otherwise as claimed by Corporate Debtor. 20) The point to determine is as to whether based on the documentary evidence which were furnished by the Corporate Debtor whether any debt was payable at all and what is the basis on which it has been claimed to have been paid. So far as it relates to the Corporate Debtor, he has not denied the factum of placement of the Purchase Or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssue has been dealt with by the Hon ble Apex Court in matters of Mobilox Innovations Private Ltd. vs Kirusa Software Pvt. Ltd. as decided on 21.09.2017, wherein it was ultimately held that the Adjudicating Authority at the stage when it is examining an application under Section 9, will only have confine itself to determine whether there happens to be an operational debt, exceeding amount prescribed under the Code and further the only precaution which is required to be taken is that based on documents on rigour as furnished, the aspects of liability of dues stand established and that if any of the ingredients as aforesaid exists, the application under Section 9 would be sustainable. Relevant observation is extracted hereunder : - Therefore, the adjudicating authority, when examining an application under Section 9 of the Act will have to determine: (i) Whether there is an Operational Debt as defined exceeding Rs.1 lakh? (See Section 4 of the Act) (ii) Whether the documentary evidence furnished with the application shows that the aforesaid debt is due and payable and has not yet been paid? and (iii) Whether there is existence of a dispute between the parties or the record of the pende ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rather it chooses a payment on a running basis. Hence, the contention raised by the Appellant on a scrutiny of the document does not support the contention of the Appellant on perusal of the records placed before us. 24) We are of the view that in terms of law of contract, any document determining a liability or creating of any right will only inter se bind the signatories to the Purchase Order or the Contract as herein and even if there is any stipulation as argued by the Appellant the same will not be having any bearing over the controversy with regard to the so-called philosophy of back-to-back payment arrangement. Thus, the arguments as extended by the Appellant is not accepted. 25) The act of the Adjudicating Authority in declaring the moratorium for the purpose of Section 14 of the Code, in the light of provisions contained under Section 9 dealing with the aspect of remittance of the dues claimed, does not appear to suffer from any apparent error of law or a fact on record which could call for acceptance of the defence taken by the Corporate Debtor or questioning the existence of the dues to be paid and/or admitting the existence of any prior dispute regarding the amount due ..... X X X X Extracts X X X X X X X X Extracts X X X X
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