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TMI Blog2024 (5) TMI 526X X X X Extracts X X X X X X X X Extracts X X X X ..... m from 11.04.2022 for 145 days amounting Rs.13,14,431/- only. In the Section 9 application, in Part IV also, the total amount of debt has been similarly shown as Rs.1,96,96,325/- only and interest has been calculated with effect from 11.04.2020 to 02.09.2022. It is therefore an undisputed fact that the crystallised amount of operational debt is Rs 1.96 cr only including interest and we do not find any other sum included in Form 3 or Form 5 submitted by the RCL. It is an undisputed fact that RCL had never sought any GST amount in the Section 8 demand notice or Section 9 application or at any time when the matter was pending adjudication before the Adjudicating Authority. The scheme of the IBC is to ensure that when a default takes place, in the sense that the debt becomes due and is not paid, the insolvency resolution process begins. Default is defined in Section 3(12) in very wide terms as meaning non-payment of a debt, once it becomes due and payable, which includes non-payment of even part thereof or an instalment amount. On looking into the facts of the present case, there are no hesitation to opine that BGCL had already made payment of the entire operational debt as claimed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paid amount of Rs.1.96 cr comprising of Rs.1.83 cr as principal amount and Rs.13 lakhs as interest amount @ 18% p.a. as on 11.04.2022. A Demand Notice under Section 8 of IBC was sent by RCL to BJCL on 15.09.2022. As the outstanding amount was not received, RCL proceeded ahead by filing a Section 9 application. The Adjudicating Authority on hearing the matter reserved the order on 07.08.2023 which was pronounced on 05.09.2023 by which order BJCL was admitted into CIRP. Aggrieved by this impugned order, the present appeal has been preferred by the Appellant. 3. Shri Abhijeet Sinha, Learned Senior Counsel appeared for the Appellant while Shri Rishabh Singh, Learned Counsel appeared on behalf of the Respondent No. 1. The Learned Counsel for the IRP was also heard. 4. Making his submissions, the Learned Senior Counsel for the Appellant submitted that the entire outstanding amount of Rs.1.96 cr as claimed in the Section 9 application was paid by BJCL into the bank account of RCL on 10.08.2023 by RTGS. It was further pointed out that BJCL had filed two I.A.s before the Adjudicating Authority on 11.08.2023 to place on record all subsequent developments post reserving of orders by the Adjud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on-payment of the returns on GST and that they had agreed to pay Rs.65.72 lakhs for this purpose. These material facts were suppressed from this Tribunal and the Appellant having therefore come with unclean hands, their appeal deserves to be dismissed. It has also been contended that the Appellants do not have locus standi to institute the present appeal as they have failed to place on record any document which substantiates or establishes proof regarding their shareholding in the Corporate Debtor. 7. We have duly considered the arguments advanced by the Learned Counsels for both the parties and perused the records carefully. 8. Before dwelling on the facts of the present case, a quick glance at the relevant statutory construct of IBC would be useful. It is pertinent to note that in terms of Section 6 of IBC, CIRP under the IBC can be initiated against a Corporate Debtor only when the Corporate Debtor commits a default. This sine qua non to establish that the Corporate Debtor has committed default rests both on the Financial Creditor and the Operational Creditor, as the case maybe, while seeking to initiate CIRP proceedings against the Corporate Debtor. In other words, unless a deb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent from the Corporate Debtor or notice of the dispute under Sub-section (2) of Section 8, he may file an Application under Section 9(1) of the Code. It is an undisputed fact in the present matter that RCL did not receive any payment from the Corporate Debtor after service of Section 8 Demand Notice and therefore proceeded to file an application under Section 9 of IBC. 11. For convenience, we reproduce Section 9 of IBC which is to the following effect: 9. Application for initiation of corporate insolvency resolution process by operational creditor.- (1) After the expiry of the period of ten days from the date of delivery of the notice or invoice demanding payment under subsection (1) of section 8, if the operational creditor does not receive payment from the corporate debtor or notice of the dispute under sub-section (2) of section 8, the operational creditor may file an application before the Adjudicating Authority for initiating a corporate insolvency resolution process. (2) The application under sub-section (1) shall be filed in such form and manner and accompanied with such fee as may be prescribed. (3) The operational creditor shall, along with the application furnish- (a) a c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rectify the defect in his application within seven days of the date of receipt of such notice from the Adjudicating Authority. (6) The corporate insolvency resolution process shall commence from the date of admission of the application under sub-section (5) of this section. 12. Before we proceed further, we would like to keep in mind the well settled proposition of law as laid down by the Hon ble Supreme Court in Mobilox Innovations Pvt. Ltd. Vs. Kirusa Software (P) Limited 2017 1 SCC OnLine SC 353 on the tests to be employed by the Adjudicating Authority while examining an application under Section 9 which is as follows: 34. 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 pendency of a suit or arbitration Proceeding filed before the receipt of the demand notice of the unpaid oper ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in tabular from can be referred to in Annexure C . 14. It is the case of the Learned Senior Counsel of the Appellant that when BGCL had already made payment of the complete outstanding amount as claimed by RCL in Form 3 accompanying the demand notice under Section 8 and Form 5 of Section 9 application, no claim of the RCL was outstanding and this should have rendered the Section 9 application infructuous. The said payment, which the Appellant had endeavoured to bring to the knowledge of the Adjudicating Authority by way of filing I.A.s, should have led to the closure of Section 9 application had they been considered prior to the passing of the impugned order. Assailing the impugned order, it is the contention of Appellant that there is no subsisting default as the alleged operational debt stands satisfied. It has also been contended by the Appellant that though Mr. R.B. Singh had ceased to be Director of the Corporate Debtor, as he continues to be shareholder of the Corporate Debtor, he is fully entitled to file this appeal as he continues to be affected by the impugned order being a shareholder of BJCL. 15. The short point for our consideration is whether the operational debt cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ffect, the two I.A.s filed by BJCL remained pending before the Adjudicating Authority since 11.08.2023 and one of them was filed for the purpose of seeking urgent listing and disposal of the I.A.s. Finally, when the matter came to be listed on 05.09.2023, though the legal counsel representing BJCL had mentioned before the Adjudicating Authority about the pending I.A.s., the Bench after deferring the matter to verify with the Registry regarding the pending I.A.s, nevertheless proceeded to pronounce the impugned order without disposing of the I.A.s. Non-consideration of the I.A., especially when it dealt with the subsequent developments in respect of repayment of the entire operational debt is a pointer to a grave infirmity in the impugned order. 18. This brings us to the contention of RCL that in response to the email dated 09.08.2023 in which BJCL had proposed to make certain payments for seeking withdrawal of the Section 9 application, it was clearly pointed out by return email dated 10.8.2023 that they had suffered loss in the availment of Input Tax Credit ( ITC in short) amounting Rs.65.72 lakhs. It was contended that BJCL had belatedly filed the GST return for the month of Marc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red view that in the factual matrix of the case at hand, when the dues in terms of Form 3 and Form 5 have been cleared by BJCL, endeavours on the part of RCL to seek initiation of CIRP by raising claims which do not find place in Form 3 and Form 5 filed by them, clearly manifests the intention of the RCL to invoke the provision of IBC to enforce recovery of debts against the Corporate Debtor. Allowing such claims which never formed part of the claim of operational debt before the Adjudicating Authority to be considered at the appeal stage is not tenable. This cannot be commended as it militates against the spirit and essence of IBC. 21. The Preamble of IBC is carefully worded and depicts the point and purpose of the IBC to be Reorganisation and Insolvency Resolution , specifically omitting the word Recovery . As stated in its Object and Reasons, the objective of the IBC is to consolidate and amend the laws relating to reorganisation and insolvency resolution of corporate persons, partnership firms and individuals in a time bound manner, for maximization of the value of the assets of such persons, to promote entrepreneurship, availability of credit and to balance the interest of all ..... X X X X Extracts X X X X X X X X Extracts X X X X
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