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TMI Blog2024 (7) TMI 1004X X X X Extracts X X X X X X X X Extracts X X X X ..... djudicating Authority has dismissed Section 9 Application filed by the Appellant - Operational Creditor and imposed a penalty of Rs. One Lakh only. Aggrieved by the impugned order, the present appeal has been preferred by the Operational Creditor. 2. Making his submissions, the Learned Counsel for the Appellant submitted that the Operational Creditor - Manishaas Infratecho Solutions Pvt Ltd received a development-cum- maintenance work order from the Corporate Debtor - Bhonu Hulshi Real Estate for civil construction and miscellaneous work for a real estate project, namely, Bhonu Hulshi Nilaay Project. It is further stated that in pursuance of the work order, the Operational Creditor undertook various civil-cum-electrical works which were completed and invoices were raised aggregating an amount of Rs.4.26 cr for payment. It was further submitted that the Corporate Debtor had made part payment of Rs.2.05 cr and there was an outstanding payment of Rs.2.83 cr including interest. The Appellant submitted that it had sent reminders to the Corporate Debtor for making payment but due to nonreceipt of any response from the Corporate Debtor, the Appellant had issued Section 8 demand notice on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate Debtor company being a distinct and independent juristic entity, it was legally obliged to discharge its admitted legal debts and could not claim immunity from the discharge of debt liability merely on the ground that its erstwhile Managing Director was now the Director of the Operational Creditor. 6. It was also contended that the Adjudicating Authority wrongly took the view that the Section 9 application could not have been filed by the Appellant since the default in respect of the third invoice raised by the Appellant amounting Rs.2.47 cr arose after 24.03.2020 and hence attracted Section 10A of the IBC. The Adjudicating Authority thus committed another mistake in holding that the default of the Corporate Debtor was hit by Section 10A of the IBC. 7. Refuting the submissions made by the Appellant, the Learned Counsel for the Respondent submitted that the Corporate Debtor had cleared all payments to the Operational Creditor and to their vendors and labourers. It was also asserted that detailed submissions have been made before the Adjudicating Authority to show that the entire payment had been made against the bills of the Operational Creditor either directly from the projec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resaid 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 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." 11. On the issue of outstanding operational debt payable by the Corporate Debtor, we notice that in all fairness, the Appellant has admitted that the Corporate Debtor has consistently denied debt and default. The Appellant has also admitted that it is the contention of the Corporate Debtor that all due payments have been made either to the Operational Creditor and/or to the labourers and vendors of the Operational Creditor directly. The same submissions of having cleared all payments were made by the Corporate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see contradiction with their own pleadings and the ledger maintained in their books." *** *** 41. Therefore, in absence of any supporting with any other documents as required in Regulation 7 (2) (b) of IBBI (Insolvency Resolution Process for Corporate persons) Regulations 2016 which requires operational creditor to provide contract for supply of goods, financial accounts, copies of GSTR-1 and GSTR -3B etc to be confirmed as operational debt, the invoices relied cannot be taken at face value, considering the facts and circumstances enunciated in this order." 13. From the above extracts it is clear that the Adjudicating Authority had applied its mind while considering the contention of the Appellant that the Respondent's claim of payments having been made by them was false. However, this contention of the Appellant was not found sustainable by the Adjudicating Authority and held to be a mere sweeping statement by the Appellant for reasons of being unsubstantiated with supporting documents. We also notice that the Adjudicating Authority has noticed contradiction in the pleadings made by the Operational Creditor with regard to outstanding payments and the ledger account of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t will be useful to find out how the Adjudicating Authority has considered the spectrum of facts and passed the impugned order to hold the third invoice as non-maintainable under Section 10A of the IBC.rejecting the Section 9 application on the grounds of pre-existing disputes. The relevant portions of the impugned order is as extracted hereunder: "33. Further we find that there is nothing on record to prove that the date of default is 02.04.2021. There is nothing in the invoices on payment terms, in the absence of which, we can only infer that the invoices are due for payment within reasonable time, from the date of receipt of such invoices. We are of the view that as per the trade practice of this Industry 30 days from the date of receipt of such invoices, is reasonable. 34. Based on admission made in the Notice issued under Section 8 of IBC by the corporate debtor that an amount of Rs.2,05,38,049/- has been received, we infer that first two Invoices have been paid in full. Therefore, substantial amount claimed to be due is with reference to invoice No. 3 and the said invoice is dated 24.03.2020, which is one day prior to the date of commencement of period covered under Sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovided that no application shall ever be filed for initiation of corporate insolvency resolution process of a corporate debtor for the said default occurring during the said period. Explanation. - For the removal of doubts, it is hereby clarified that the provisions of this section shall not apply to any default committed under the said sections before 25th March, 2020. Thus, from a plain reading of the above statutory provision, it becomes clear that the aim and objective of Section 10A was to protect a Corporate Debtor from the filing of any insolvency application against it for any default committed during the period when Covid-19 pandemic was prevailing. 19. We now come to the rationale followed by Adjudicating Authority in holding the third invoice as one hit by Section 10A of IBC. The Adjudicating Authority has opined that even though the invoice was issued one day prior to the commencement of prohibited period under Section 10A, it cannot escape the clutches of Section 10A since the date of issue of invoice cannot become the date of default since nothing has been placed on record by the Operational Creditor to show that the invoice had been delivered to the Corporate D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per Book. We find that the Operational Creditor was represented by their legal counsel on each of these dates. We also notice that opportunity was given to both the parties to file their written notes of arguments after pleadings were completed. We thus do not find any substance in the contention of the Operational Creditor of having been denied an opportunity of hearing or an opportunity to make any written submission. We are satisfied that the Adjudicating Authority had offered equal opportunity to both the parties and there is no evidence of any infringement of the principles of natural justice in the proceedings conducted by the Adjudicating Authority. 22. In sum, we are satisfied with the findings of the Adjudicating Authority that debt and default above the threshold limit has not been established by the Appellant qua the Respondent. Further from the sequence of events and the factual matrix, we are of the considered view that the Section 9 application has been filed with malicious intent to settle score between members of the family and not for the resolution of insolvency. We therefore affirm the decision of the Adjudicating Authority rejecting the Section 9 application an ..... X X X X Extracts X X X X X X X X Extracts X X X X
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