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TMI Blog2024 (5) TMI 1225X X X X Extracts X X X X X X X X Extracts X X X X ..... known email addresses with no delivery failures, the Corporate debtor had failed to respond or dispute the invoices within the legal timeframe. The so called dispute being raised by the Appellant at this stage is based on the remarks of the Adjudicating Authority which are not at all pre-existing dispute - The link between the Corporate Debtor's director's son and Chirag Impex emails further undermines the Corporate Debtor's claims and suggests potential attempts to obfuscate the truth. This linkage cannot be ignored in assessing liability. The Corporate Debtor s claims of a separate company, Chirag Impex, being responsible lack any credible evidence. The Operational creditor's documented trail directly contradicts this assertion. Validity of the debt and who truly owes the money - HELD THAT:- The Operational Creditor presents a compelling case with documented evidence: signed sales contracts, bills of lading listing them as the shipper and the Corporate Debtor as the receiver, confirmation letters from the Corporate Debtor acknowledging receipt and satisfaction with the machines, and a formal demand notice sent but with no response from the Appellant. The creditor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e payment except for some initial advance which was provided to the Operational Creditor. 3. After follow up, the Operational Creditor sent a demand notice to Chirag impex and also to the Corporate Debtor. Since there was no reply to the demand notice by the Corporate Debtor, the Operational Creditor initiated Section 9 proceedings against the Corporate Debtor, which was admitted by the Adjudicating Authority on 10/4/2024. This appeal is against the admission of Section 9 proceedings against the Corporate Debtor. The total debt is about rupees 5.59 crores. 4. Heard the counsel of the Appellant and perused all documents placed on record. Submissions of the Appellant 5. The Appellant is the suspended management of the Corporate Debtor in the matter of C.P.(LB)/153(AHM)2021. It is contended that the original Petitioner i.e. Nanjing Maohj Information Technology Co. Ltd.- NMIT has supplied goods to one M/s. Chirag Impex (HK) Ltd and from M/s. Chirag Impex (HR) Ltd Corporate Debtor imported goods to India. 6. Goods were delivered to M/s Chirag Impex (HK) Ltd, and the demand notice was also issued to M/s. Chirag Impex (HK) Ltd and not to the Corporate Debtor. Corporate Debtor and Chirag I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t if in any matter Adjudicating Authority feels that there are issues like different invoices, different claims and counter claims, malpractices etc. such matter cannot be admitted under IBC. Adjudicating Authority has admittedly stated in the judgement that some malpractices were adopted by the Corporate Debtor and in spite of such observations, admitted the petition contrary to the judgement of Innovative. Adjudicating Authority acknowledges the submissions of malpractices regarding evasion of customs duty, under invoicing etc., which suggests a need for an inquiry rather than admission under the Insolvency and Bankruptcy Code (IBC) contrary to the established law that any such matters require inquiry and investigation and cannot be entertained under IBC. 11. Hon ble Apex court has time and again decided such matters and few of the Land Mark judgments relied by Appellant are in the following paragraphs. 12. Firstly, it relies on Mobilox Innovations Pvt. Ltd Vs. Kirusa Software Pvt. Ltd. (2017) ibclaw.in 01 SC. 45. Going by the aforesaid test of existence of a dispute , it is clear that without going into the merits of the dispute, the Appellant has raised a plausible contention r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ression existence has been understood as follows: Shorter Oxford English Dictionary gives the following meaning of the word existence : (a) Reality, as opp. to appearance. (b) The fact or state of existing; actual possession of being. Continued being as a living creature, life, esp. under adverse conditions. Something that exists; an entity, a being. All that exists. (P. 894, Oxford English Dictionary) XXXXXXXX 51. It is clear, therefore, that once the operational creditor has filed an application, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gh 8 Bill of Lading to the Corporate Debtor and raised 5 invoices totalling to USD 773,696.90. 20. Pursuant to the sales contracts, the Operational Creditor made available the said Goods that were duly inspected by the Corporate Debtor and the Corporate Debtor issued Confirmation letters of quality and payment vide letters dated 04.06.2019, 20.06.2019, 08.07.2019, 17.08.2019 and 26.08.2019 in favour of Operational Creditor against corresponding sales contract. By way of said Confirmation letter of quality and payment the Corporate Debtor, inter-alia, acknowledged the quality of the said Goods being in line with agreed standards, issued no-objection in respect with quality of said Goods to be supplied by Operational Creditor and guaranteed to make full payment on or before the due date to the Operational Creditors designated bank account. Upon such acknowledgement and guarantee by way of Confirmation letter of quality and payment by Corporate Debtor raised following invoices for supply of the said Goods: Sl. No. Invoice No. Date Amount 1. MHJ2019000376E 19.06.2019 165,345.60 2. MHJ201900416E 21.06.2019 145,191.30 3. MHJ2019000440E 01.07.2019 135,760.00 4. MHJ2019000498E 09.08.2019 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntention nor has the ability to repay the outstanding operational debt of the Operational Creditor and are malafidely avoiding to make payment of the legitimate dues of the Operational Creditor. 28. The Corporate Debtor has asserted without any material evidence on record that the Operational Creditor routed different machineries, other than the ones ordered under sales contracts with the Operational Creditor, through one M/s Chirag Impex HK Ltd. and Corporate Debtor purchased such machines from the said M/s Chirag Impex HK Ltd. instead of through the Operational Creditor. In order to support its false assertions, the Corporate Debtor has even placed on record some bill of ladings, invoices and bill of entries proclaiming that the machines imported by the Corporate Debtor were imported through M/s Chirag Impex HK Ltd. and not through the Operational Creditor . 29. The fictitious story which has been concocted by the Corporate Debtor in its reply is belied by the fact that the bill of lading relied by the Corporate Debtor in its said reply clearly reads Operational Creditor as Shipper and Corporate Debtor as Consignee, inferring that the goods/machines supplied under the admitted bi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... none of such machines can be purchased at price as low as to be made out from the invoices placed on record by the Corporate Debtor and is a clear cut case of under-pricing and it appears that it may have been done with an intention to evade customs duty. 32. The demand notice issued by the lawyer of the Operational Creditor is under instructions of the Operational Creditor and delivered by email dated 31st March, 2020 to the then known and published email addresses of the Corporate Debtor. The said Demand Notice was delivered to the email addresses operated by the Corporate Debtor as there was no delivery failure receipt received by the lawyer of the Operational Creditor. It is pertinent to note that the email addressed used by the lawyer of the Operational Creditor being: [email protected]; [email protected]; [email protected], where [email protected] was the email address then listed with the MCA at the point of time. 33. And the email address [email protected], as noted in the preceding paragraph, is the email address of the shell/related company of the Corporate Debtor and is operated by the Corporate Debtor and son of one of the Directors ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l/related company of the Corporate Debtor and the alleged transaction vide the invoices placed on record by the Corporate Debtor are nothing but fabricated invoices, where the value of the machines are highly undervalued and seems to have been prepared in order to evade liability of customs duty by the Corporate Debtor. It is pertinent to note that the bill of ladings placed on record by the Corporate Debtor along with its reply clearly note Operational Creditor as consignor of the goods and the Corporate Debtor as consignee under all the bill of ladings and there is no mention of M/s Chirag Impex HK Ltd. in any of the bill of ladings where it can be made out that the machines were exported by M/s Chirag Impex HK Ltd. from Hong Kong as being alleged by the Corporate Debtor. But the documents submitted by the Corporate Debtor do not prove that the Corporate Debtor purchased goods from its own shell company M/s Chirag Impex HK Ltd. from Hong Kong as being alleged by the Corporate Debtor. To the contrary the invoices are fabricated as the description on the packaging list and the invoice do not match. Further the value of the machines as invoiced is highly under-priced and above all t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tation and now is using such made up documents to support its moonshine defense in these proceedings 40. The Corporate Debtor vide letter dated 1/5/2018 had announced to the Corporate Debtor that Chirag Impex Limited is to act as a third party payer which clearly reveals that the Corporate Debtor is the buyer and just to facilitate the payment, the corporate debtor had asked Chirag Impex Limited to make the payment. 41. As per the submission of the Corporate Debtor, the machines were supplied to it by Chirag Impex. If that be so, then Chirag Impex would have issued Bill of Lading. In that case, the Corporate Debtor would not be in possession of the Bill of Lading with the Operational Creditor as Shipper/Consignor of the goods. 42. Assuming that Chirag Impex has purchased the goods from the Petitioner and supplied the goods to the Corporate Debtor, then the Respondent should have placed on record the purchase orders, invoices, sales contract, letter of confirmation entered between the Operational Creditor and Chirag Impex. It is submitted that the Operational Creditor has not entered into any Agreement or Contracts with Chirag Impex which is a related entity of the Corporate Debtor. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts issued by a neutral third party, show the Operational creditor- NMIT as the shipper and the Corporate Debtor as the recipient of the machines. This independent verification directly contradicts the Corporate debtor's claims of a different supplier. 46.3. Corporate Debtor's Acknowledgement: The Corporate debtor's signed Confirmation Letters of Quality and Payment demonstrate their satisfaction with the received machines, further solidifying the legitimacy of the transaction and delivery of goods to it. 46.4. Bills of Entry and Proof of Delivery: The Corporate Debtor s reliance on the absence of specific Bills of Entry from the Operational Creditor is insufficient to dismiss the claim. The provided Bills of Entry indicate that the Corporate Debtor was the recipient of the goods, thereby establishing a connection to the transaction. Moreover, other documents like sales contract, bill of lading, invoices and Confirmation Letters of Quality and Payment are more than sufficient to prove the claims of the Operational Creditor. 46.5. Existence of a Business Relationship: It is evident that the Corporate Debtor had a business relationship with M/s. Chirag Impex (HK) Ltd., an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... HK Ltd. Both Corporate Debtor and Chirag Impex HK Ltd. have common directors and shareholders. The link between the Corporate Debtor's director's son and Chirag Impex emails further undermines the Corporate Debtor's claims and suggests potential attempts to obfuscate the truth. This linkage cannot be ignored in assessing liability. The Corporate Debtor s claims of a separate company, Chirag Impex, being responsible lack any credible evidence. The Operational creditor's documented trail directly contradicts this assertion. 46.9. Disputed Claims and Investigation: The alleged malpractices concerning customs duty and under-invoicing, while serious, do not negate the Operational Creditor s claim. These issues are not being addressed by us and need be looked into separately through appropriate investigative channels. 46.10. Landmark Judgements and Legal Precedents: The Appellant cites landmark Supreme Court judgements to support their arguments. Appellant claims that the evidence clearly demonstrates a disputed debt with another company, and the CIRP petition should be dismissed. The reliance on the so called dispute is being quoted from the orders of the Adjudicating Au ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e crux of the dispute lies in the validity of the debt and who truly owes the money. As noted above the Operational Creditor presents a compelling case with documented evidence: signed sales contracts, bills of lading listing them as the shipper and the Corporate Debtor as the receiver, confirmation letters from the Corporate Debtor acknowledging receipt and satisfaction with the machines, and a formal demand notice sent but with no response from the Appellant. The creditor's documented trail, particularly the bills of lading and confirmation letters, appears strong. However, the Corporate Debtor s allegations of Chirag Impex involvement and undervalued invoices tries to raise suspicion but are not convincing at all to treat them as a case of dispute. 48. The documents on record which has clinched the matter in favour of the Appellant are summarized hereunder : Sr. No. Letter of Confirmation of Quality and Payment issued by Corporate Debtor Invoices issued by Operational Creditor Bill of Lading Amount (USD) 1. Letter dated 04.06.2019 issued under contract No. MC20190604 Alliance confirming supply of 1 quantity of machine Invoice No. MHJ201900 0376E dated 19.06.2019 HDMUNX AY500 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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