9911796707
TMI Blog2023 (7) TMI 1484X X X X Extracts X X X X X X X X Extracts X X X X ..... ner/operational creditor, the receipt of which has been acknowledged by the respondent, GST has been paid by the petitioner on all these invoices. That apart, part payment in respect of some of these invoices has even been made by the respondent through pre-arrangement of LCs, post claim of audit of the records by the respondent. The Petitioner also enclosed e way bills in respect the goods supplied under the said invoices. The contention of the Petitioner that the respondent had claimed credit input pursuant to filing GST R1 by the Petitioner/operational creditor, is not disputed by the respondent. It is strange that, when it is the case of the Petitioner that the supplies under the invoices were genuinely made after making paying GST, accompanied by e-way bills and the delivery challans, the least that is expected from the respondent which is disputing these invoices is to exercise its statutory right of raising a dispute before the Authorities under the GST, Act stating that the said invoices are fake by submitting GST R-3, so that, the genuineness or otherwise of the subject invoices would have been decided. The Petitioner has established clearly the existence of an operational ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amount of Rs. 3,79,06,143/- (Rupees three crores seventy nine lacs six thousand one hundred and forty three only) as on 31.05.2022. The Operational Creditor seeks admission of this petition, initiation of Corporate Insolvency Resolution Process (CIRP), granting moratorium and appointment of Interim Resolution Professional as prescribed under the Code and Rules thereon. II. The averments made in the application are: (i) The petitioner, at the request of the respondent, has supplied goods, viz. C.R.F.H. Strips, C.R.F.H. Coils, Steel Strapping Seals, etc. in the year 2019. It was the practice between the petitioner/ Operational Creditor and respondent/ Corporate Debtor to make payments against the goods supplied by issuing Letter of Credit. (ii) The respondent/ Corporate Debtor has made last payment on 20.12.2021 amounting to Rs. 92,01,161/- against Invoice No. GST/21-22/ 0250, and GST/21-22/ 0251. The Corporate Debtor has undertaken to pay outstanding dues of Rs. 2,88,79,417/- plus mutually agreed interest by way of Affidavit dated 15.03.2022 (Annexure-1). The petitioner/ Operational Creditor had addressed several communications to clear outstanding dues, the latest being e-mail date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Bank, which was duly registered. Thus, the respondent/ Corporate Debtor group became the owner of the properties together with plant and machinery at: Plot No. 6 and 4C Survey No. 79, Jeedimetla Village. At that time, the Corporate Debtor engaged the services of Allu Nagesh, a former employee of Axis Bank to advise the Corporate Debtor in its financial matters. Said Allu Nagesh was a classmate of the Managing Director of the Corporate Debtor. He was appointed as independent Director of the Corporate Debtor. (iii) The respondent/ Corporate Debtor further submitted that the Corporate Debtor had carried on all necessary repairs and brought the said sick company into production during May 2018. (iv) It is submitted that suppliers of raw materials to the Corporate Debtor were the earlier suppliers of raw materials of M/s Midfield Industries Limited. During December 2021, it is observed by the management of the Corporate Debtor that the payments made against the payables is getting higher than the amounts receivable from the receivables from the said activity of steel strapping. At that time Letters of Credit opened by the steel strips unit have fallen due, which prompted the accou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Credit and all payments were received by the Operational Creditor through discounting. However, during audit, it is noticed that in respect of the invoices mentioned at page 15-17 of the Counter, though payments were made actually, stocks were not received by the Corporate Debtor. On careful perusal it has become evident that the same were copies of the earlier invoices. (x) The respondent submitted that against the aforesaid invoices the Corporate Debtor has issued letters of credit and all the payments were received by the Operational Creditor through discounting. However, during the audit the respondent discovered that though payments were made actually, stocks were not received by the Corporate Debtor. Besides, the quantities purported to have been supplied were far in excess and beyond the carrying capacity of the vehicles. (xi) The respondent Corporate Debtor answers the claims made by the Operational Creditor in Form-5 as under: In reply to Para g, Part-V of Form-5 it is stated that the petitioner is engaged in business of supply of various goods to various debtors and also dealing in supply of CRFH strips, CRFH coils, Steel Strapping Steels is true. In reply to para h of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt and invoices pending for payment. 15.06.2022 The respondent/ Corporate Debtor sent Reply to Demand Notice Annexure-5, page 822 of the application. 30.06.2022 Respondent/ Corporate Debtor has filed F.I.R. No. 539 of 2022 dated 30.06.2022 with Jeedimetla Police Station under sections 420 and 496 of the IPC, (Page 25 of the Counter dated 26.10.2022). 29.08.2022 The present petition under section 9 of the I B Code is filed. Oct./ Nov. Writ Petition under section 482 of the Code of Criminal 2022 Procedure being Writ Petition No. 42528 of 2022, is filed before the Hon ble High Court of Telangana for quashing of FIR bearing No. 171 of 2023 dated 04.03.2023 registered with Jeedimetla Police Station, which is pending adjudication. 04.03.2023 Petitioner/ Operational Creditor has filed a cross-complaint registered as C.R. No. 171 of 2023 with SHO, Jeedimetla under sections 420, 403, 422 and 34 of the IPC against the respondent/ Corporate Debtor and its Directors and the same is pending on the file of learned VIII Metropolitan Magistrate, Medchal. A copy of FIR is at page 86 of this Additional Counter. (ii) The invoices relied on by the Operational Creditor are false, for which F.I.R. No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he facts and materials on record to come to the conclusion that there was pre-existing dispute between the parties. 9. We are of the view that IBC proceedings are not for the purposes of adjudicating such dispute between the parties and are not the recovery proceedings to recover the unpaid amount by the official creditor whose claim is disputed by the Corporate Debtor . We, thus, do not find any error in the order of the Adjudicating Authority, the appeal is dismissed. (vii) The respondent submitted that the proceedings under the I B Code shall not be instituted for recovery of amounts and a profit making and solvent company shall not be subjected to CIRP as was decided by the NCLT and the Hon ble Supreme Court in various cases. V. Operational Creditor has filed WRITTEN SUBMISSIONS dated 28.04.2023 submitting that: (i) The petitioner/ Operational Creditor is in the business of supply of CR Strips and CR Coils uses as raw material by the Corporate Debtor for manufacturing steel strips. The Operational Creditor supplied goods to the Corporate Debtor and thus both of them were in business relationship since 2019. (ii) The petitioner/ Operational Creditor submitted that the Corporate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TR 1 or 5 days of GSRT 2. The Corporate Debtor chose not to do so. From the above it is apparent that having received Demand Notice in Form-4 the respondent/ Corporate Debtor had cooked up a story of non-receipt of supplies post 21.12.2021. (viii) As regards the contention raised by the Corporate Debtor that quantity of goods was far in excess of capacity of vehicles (page 15 of the Counter), the Operational Creditor submitted that as per e-way bill and invoices, the quantity was within the carrying capacity of vehicles or slightly higher than the capacity, which is normal in transport industry. (ix) It is submitted that the Corporate Debtor has submitted in para 6 (page 23) of its Counter that a criminal case is pending at the applicant and its Director. It is submitted by the petitioner said criminal case was filed on 30.06.2022, only after receipt of Demand Notice from the petitioner on 31.05.2022. (x) As regards the contention raised by the Corporate Debtor that the Corporate Debtor is a profit making company having turnover of Rs. 300 crore for the last five financial years and it is a solvency company and that default a mere Rs. 1.31 crores cannot be a ground to initiate CIRP ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice raised by the petitioner/ Operational Creditor. It is contended that Invoices Nos.78, 92 and 124 dated 09.07.2021, 26.07.2022 and 28.08.2021 (Annexures R1, R2 and R3 of this Written Submission) have been paid fully. Whereas, Invoices No. 114, 115 and 116 are duplicates of Invoices No. 181, 182 NS 183 as demonstrated in Table-1, page 6 of this Written Submission. The same can be found at page 40 of the petition. As regards Invoices shown in Table-2 (Page 6 of this Written Submission), the same were adjusted against payment to be made by the petitioner to the respondent as shown in the tabula statement at pages 6 and 7 of this Written Submission. (v) As regards Invoices No. 196 dated 20.10.2021, 197 dated 20.10.2021, 201 dated 21.10.2021, the respondent submitted that there is no evidence of any goods being delivered to the petitioner and that e-way Bills (Annexures R5, R6 and R7 of this Written Submissions) of the petitioner are contradictory to Government records. (vi) The respondent submitted that Invoices No. 227, 228 and 229 relate to the goods rejected and returned. Invoice Nos.196, 197, 198, 201 and 202 are the fabricated ones. (vii) In support of its plea that e-way bills ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onal Counter stating that during the course of investigation they have identified fraud by the Operational Creditor. A copy of the Additional Counter filed by ACP, Economic Offence Wing, Cyberabad in W.P. No. 42528 of 2022 pending on the file of Hon ble High Court of Telangana is at pages 25-36. (iv) The writ petitioner has filed Additional Reply dated 30.03.2023 in W.P. No. 42528 of 2022 before the Hon ble High Court of Telangana, to the Additional Counter Affidavit filed by ACP, Economic Offence Wing, Cyberabad. A copy of the said Additional Reply is at pages 37-47. (v) The Corporate Debtor has filed Affidavit in W.P. No. 42528 of 2022 before the Hon ble High Court of Telangana narrating the facts and fraud committed by the Operational Creditor. A copy of said Affidavit dated 12.04.2023 filed by the Corporate Debtor is at pages 48-54 of this IA. (vi) The respondent Corporate Debtor has filed Affidavit dated 23.01.2023 in W.P. No. 42485 of 2022 before the Hon ble High Court of Telangana explaining the alleged fraud committed by the Operational Creditor. The said Affidavit is at pages 55-74 of this IA. (vii) The Operational Creditor has filed Reply Affidavit dated 06.02.2023 to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... / Operational Creditor: Contentions raised by the respondent/ Corporate Debtor. Defence by the petitioner/ Operational Creditor The respondent/ Corporate Debtor has filed FIR against the petitioner and criminal case is pending against the applicant/ Directors. Said Directors are absconding. Police is searching for them. (Para 5 of the Counter). It is true that FIR is lodged on 30.06.2022, after issuance of Demand Notice dated 31.05.2022. The Directors were granted anticipatory bail by the Hon ble High Court of Telangana and they are not absconding. Besides, a petition is filed for quashing the above FIR before the Hon ble High Court of Telangana, which is pending decision. The petitioner relied on judgment dated 11.05.2023 (ANNEXURE-of this Written Submission) in Subhash Chand Gupta Vs. Bhavesh Texo Fab Pvt. Ltd., Company Appeal (AT) (Ins.) No. 816 of 2022. One cannot take benefit of criminal proceedings and application u/s 9 of IB be considered and decided on its own merits. Regarding arbitration case. Corporate Debtor has admitted that there is no pending suits/ arbitration proceedings between the Operational Creditor and Corporate Debtor. (para 6, page 23 of the Counter). Mere p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s or record of pendency of suit or arbitration proceedings filed before the receipt of the Demand Notice of the unpaid operational debt in relation such dispute? XI. We have heard Shri Shaik Ghouse, learned PCS, Shri Mahadev Tirunagari, and Shri Venka Reddy Bathina, Advocates for the petitioner; and Shri Vivek Reddy, Senior Counsel along with Ms. Manasa, learned advocate for the respondent. Perused the record, the written submissions and the case law XII. At the outset, it may be stated that the present company petition being one under section 9 of IB Code, in order to succeed in this petition, the Petitioner shall establish that an operational debt of sum exceeding rupees one crore is due and payable by the respondent to the petitioner and that the respondent defaulted in repayment of the same. However, if the Respondent is able to show that a pre-existing dispute as to the operational debt exists prior to the receipt of the demand notice issued under section 8(2) of IB Code, notwithstanding the presence of operational debt and its default, the Petition is liable to be rejected. XIII. In this regard, reliance can be placed on the decision of the Hon ble Supreme Court in Innoventiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e petitioner requesting the respondent to clear outstanding dues are filed as Annexure-2. Ld. PCS, also referred to the statement of invoices pending payment which were filed under Annexure-9, and the bank statement which is Annexure-10 and contended that the said amount has not been paid despite acknowledgement of debt by way of Affidavit dated 15.03.2022. XVI. Ld. PCS, further submits that, since the attempts as above for payment of the balance amount did not fructify, on 31.05.2022 the petitioner has issued Demand Notice in Form-4 in terms of Rule 5 of Insolvency and Bankruptcy (AAA) Rule, 2016, by Speed Post, field as Annexure-3, followed by an e-mail dated 14,06.2022 filed as Annexure-4, demanding in all the sum of Rs. 3,79.06,143 which the respondent replied on 15.06.2022, raising untenable pleas. XVII. Thus, the Ld. PCS, strongly contended that, the above record clearly establishes existence of an operational debt of a sum over rupees one crore and also its default by the respondent hence the present application is deserves to be admitted. XVIII. Shri. Vivek Reddy, Ld. Sr. Counsel for the respondent while vehemently refuting the above submissions of the Ld. PCS, contended th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n F.I.R. in crime No. 539 of 2022 dated 30.06.2022 has been lodged against Mr. Allu Nagesh and others with Jeedimetla Police Station and the police investigation is on. It is further submitted that the authorised person, Piyush Mehta of the petitioner is absconding. In support of this submission Ld. Sr. Counsel relied on the F.I.R. No. 539 of 2022 dated 30.06.2022 with Jeedimetla Police Station, Case Diary Part-11, Remand Report, and the Remand Case Diary. XX. Strongly refuting the above submission of the Ld. Sr. Counsel, Ld. PCS has submitted that the FIR has been lodged almost after lapse of one month after the receipt of the demand notice and the FIR has been challenged before Telangana High Court which is pending. Ld. PCS further submitted that the submission that the Authorised person of the petitioner has been absconding pursuant to the FIR, is false as the said person along with Allu Nagesh were granted Anticipatory Bail. XXI. Ld. PCS further contends that the plea of alleged detection of fraud in the month of December 2021 in respect of the supplies made, is falsified by the fact that for the supplies made in the month of December 2021 the respondent issued Letters of Credi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . That apart, part payment in respect of some of these invoices has even been made by the respondent through pre-arrangement of LCs, post claim of audit of the records by the respondent. The Petitioner also enclosed e way bills in respect the goods supplied under the said invoices. The contention of the Petitioner that the respondent had claimed credit input pursuant to filing GST R1 by the Petitioner/operational creditor, is not disputed by the respondent. XXIV It is strange that, when it is the case of the Petitioner that the supplies under the invoices were genuinely made after making paying GST, accompanied by e-way bills and the delivery challans, the least that is expected from the respondent which is disputing these invoices is to exercise its statutory right of raising a dispute before the Authorities under the GST, Act stating that the said invoices are fake by submitting GST R-3, so that, the genuineness or otherwise of the subject invoices would have been decided. XXV We are of the firm view that it is not proper to place reliance on the FIR, which was admittedly lodged post receipt of demand notice and which is under challenge before Hon ble High Court, in preference to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 30/06/2022 which has been lodged against the employees of the petitioner and also against the employees of the respondent revealed collusion and fraud committed by these persons in submitting fake invoices without supplying any material. In support of this plea, the ld. Senior Counsel relied on the Case Diary-Part II, Remand Report and the Remand Case Diary, etc. Placing heavy reliance on the above documents, besides the pleas put forth in the reply to the Demand Notice. The learned senior counsel thus, contended that as per the applicable law, a genuine pre-existing dispute as the operational debt claimed by the petitioner exists, hence the petition is liable to be rejected as these matters require investigation. XXIX. The learned senior counsel placed reliance in this regard on the ruling of the Hon ble Supreme Court in the case Mobilox Innovations Private Limited Vs. Kirusa Software Private Limited, which is as under: 40. 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 cre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ST Act, R-1 returns are necessarily to be filed within 10 to 11 days of each subsequent month of sale. Therefore, in respect of the supplies made during the calendar month of January, GST R1 should be filed by 10th or 11th day of February month. Learned PCS further contended that the returns submitted in respect of the subject supplies by the petitioner can be verified in the GST Portal within five days of filing GST R-1 Returns. According to the learned PCS since GST law allows for disputing the invoices filed under GST-R returns, the respondent ought to have asked for rejection, if it is really sure that the invoices are fake, which can be by 20th day from GST-R-1 or five days from GST R-2. However, the Corporate Debtor has not chosen to raise any dispute as regards the GST returns that were filed in respect of the supplies made by the petitioner under the invoices referred (supra). XXXIV. So much so the plea that the petitioner raised all the above invoices without effecting any supply amount has been claimed fraudulently in collusion with some of the employees of the Corporate Debtor is absolutely false and baseless, besides an afterthought to evade the legitimate dues of the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /Counter the pre-existing dispute so raised, shall be the one that should existed prior to receipt of demand notice. XXXVIII In this regard reliance can be placed on the ruling of the Hon ble Supreme Court of India in Mobilox, wherein it is held that: Pre-existing Dispute: The Hon'ble Supreme Court held that the existence of the dispute and/or suit or arbitration proceeding necessarily be pre-existing , that is to say, it should exist prior to receipt of the Demand Notice. XXXIX Therefore, on the above touchstone of well settled law, we proceed to examine the defence of pre-existing dispute put forth by the respondent is tenable or not. XL We are also conscious of the fact that in our endeavour to separate grain from chaff in order to unearth spurious defence if any, we need not go into the question whether the disputes are bona fide, and whether they are likely to succeed or not. Reliance can be placed in this regard in re. Rajaratan Babulal Agarwal (supra) relied on by the respondent. XLI The petitioner had filed GST R-1 and contended that the Corporate Debtor had also claimed credit input pursuant to filing GST R-1 by the operational creditor. It is pertinent to note that wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de part payments in respect of some of the invoices, without any demur which are now being termed as fake, post December 2021. XLIII Therefore, viewed from all angles, we are of the firm view that the plea of pre-existing dispute is spurious, hypothetical, illusory, non-existing and an assertion of fact unsupported by any evidence. We therefore, hereby reject the same. The Point is answered accordingly. In so far as the other contention of the Ld. Senior Counsel for the Respondent that the Respondent is a profit making company having an annual turnover of Rs. 300,00,00,000 (Rupees three hundred crores), hence cannot be plunged into Corporate Insolvency Resolution Process on the basis of spurious plea of existence of debt and its default in the light of the ruling of Hon ble NCLAT in Mahesh Hardware (supra), which is as below: 23. Ld. Adjudicating Authority also held that no case has been made out that the Corporate Debtor has become insolvent and has lost its substratum such that it is unable to pay its debts or run its business . We would like to refer the Judgment of this Appellate Tribunal in the case of Monotrone Leasing Pvt. Ltd. (Supra) coordinate Bench of this Tribunal held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntained in any other law for the time being in force, a license, permit, registration, quota, concession, clearances or a similar grant or right given by the Central Government, State Government, local authority, sectoral regulator or any other authority constituted under any other law for the time being in force, shall not be suspended or terminated on the grounds of insolvency, subject to the condition that there is no default in payment of current dues arising for the use or continuation of the license, permit, registration, quota, concessions, clearances or a similar grant or right during the moratorium period. (E) That the provisions of sub-section (1) of Section 14 shall not apply to such transactions as may be notified by the Central Government in consultation with any financial sector regulator. (F) That the order of moratorium shall have effect from the date of this order till the completion of the Corporate Insolvency Resolution Process or until this Bench approves the Resolution Plan under Sub-Section (1) of Section 31 or passes an order for liquidation of Corporate Debtor under Section 33, whichever is earlier. (G) That the public announcement of the initiation of Corpo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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