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TMI Blog2024 (12) TMI 91X X X X Extracts X X X X X X X X Extracts X X X X ..... ng dues in the payment of service charges to their vendors despite all their endeavours to pay off these dues in a timely manner. The email of 07.03.2016 also contains an admission on the part of the Corporate Debtor of the need to clear the dues of the Operational Creditor on priority by resorting to sale of stock lying in the Kolkata warehouse. Thus, no error was committed by the Adjudicating Authority in holding that the Corporate Debtor has duly admitted the outstanding debt and default which is a valid and proper admission in the eyes of law. Whether there is existence of dispute between the parties to satisfy the third test laid down in the Mobilox judgement [ 2017 (9) TMI 1270 - SUPREME COURT ]? - HELD THAT:- The Adjudicating Authority had ordered on 27.03.2023 to explain how the misappropriation of disputes was handled by the Corporate Debtor in their books of accounts following which the Corporate Debtor had submitted a single page screen shot of a ledger reflecting a ledger entry dated 30.06.2016, the amount of which roughly resembled the alleged misappropriated amount as is placed at page 388 of Appeal Paper Book - Besides the fact that the date in the ledger entry happe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ocate with Mr. Bipul Kedia , Mr. Anupam Prakash and Mr. Kumar Anurag , Advocates for R - 1. Mr. Akshay Petkar , Mr. Pranav Shah, Mr. Vishesh Kalra , Advocates for R - 2 ( RP ) JUDGMENT Per : Barun Mitra , Member ( Technical ) The present appeal filed under Section 61 of Insolvency and Bankruptcy Code 2016 ( IBC in short) by the Appellant arises out of the Order dated 06.12.2023 (hereinafter referred to as Impugned Order ) passed by the Adjudicating Authority (National Company Law Tribunal, Mumbai Bench-IV) in CP (IB) No. 678 of 2022. By the impugned order, the Adjudicating Authority has admitted the Section 9 application filed by the Operational Creditor and admitted the Corporate Debtor into the rigors of Corporate Insolvency Resolution Process ( CIRP in short). Aggrieved by the impugned order, the present appeal has been filed by the shareholder of the Corporate Debtor. 2. The brief facts of the case which are necessary to be considered for deciding the matter are as outlined below: The Corporate Debtor- Sahara Q Shop Unique Products Range Limited had entered into Service Agreement with Sigma Supply Chain Solutions Pvt. Ltd.-Operational Creditor for the purpose of handling, stora ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this clause, the Operational Creditor had denied the access of the warehouse to the Corporate Debtor. It was also submitted that the Operational Creditor had illegally withheld the assets of the Corporate Debtor lying in the various warehouses causing substantial financial losses to the Corporate Debtor. Elaborating further on the pre-existing disputes, it was also submitted that in breach of Clause 3B.9 of the Service Agreement, the Operational Creditor had failed to grant access to the agents of the Corporate Debtor for carrying out physical verification of inventory at the Kolkata warehouse even after having assured facilitation of the physical verification. It was further submitted that the Operational Creditor had failed to accede to the request made by the Corporate Debtor on 22.04.2015 to resume operations across all the warehouses. 4. It is also the contention of the Appellant that though the Operational Creditor was holding the stock of the Corporate Debtor in trust and was a handling and distribution agent, it wrongfully sold stocks valued at Rs 2.65 Cr. without the knowledge and consent of the Corporate Debtor. The Corporate Debtor had also notified the Operational Credi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... learly acknowledged their debt in their letter dated 22.04.2015 in which they had requested further time to make payments as they were facing financial difficulty. It was also mentioned that the Corporate Debtor had raised allegations against them of having misappropriated goods and illegally sold the stocks of the Corporate Debtor as an after-thought only after they received various e-mails from the Operational Creditor calling upon them to pay the outstanding dues. 8. Submission was pressed that the Corporate Debtor had continued their business activity with the Operational Creditor even after making allegations that the Operational Creditor had misappropriated their goods. Further, the Corporate Debtor had made payments to the Operational Creditor till 23.03.2017 which date is after the allegations made by the Corporate Debtor against the Operational Creditor for misappropriation of goods. It is the contention of the Operational Creditor that it remains unexplained as to why the Corporate Debtor had not filed any legal proceeding against the Operational Creditor for the illegal selling of goods. It was also pointed out that the Adjudicating Authority had sought explanation from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elation 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. 12. We now proceed to examine whether the first two tests laid down by Mobilox judgment supra of operational debt exceeding the threshold level having become due and payable but not yet paid is applicable in the present case. 13. The Operational Creditor has predicated his claim of operational debt as due and payable by placing on record a letter dated 22.04.2015 and an email dated 07.03.2016 to substantiate that the Corporate Debtor had clearly admitted the debt qua the Operational Creditor. It has been asserted by the Operational Creditor that Corporate Debtor had not only clearly acknowledged their debt in their letter dated 22.04.2015 but had requested further time to make payments as they were facing financial difficulty. The Adjudicating Authority has taken cognisance of these corre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the event of failure to do so the Company shall incur huge losses which in all fairness, the Company shall be constrained to debit to your accounts to that extent. ii. Email Correspondence dated 07.03.2016. The relevant extract is reproduced below : There is a dire need of conducting the physical Inventory (PI) for assessing the quantity stock value of Sahara's product as on date, which are lying at your warehouse in Kolkata in order to sale for the realization of capital. Certainly, as concurred by Mr. Romie Dutt (CEO) also, the amount to be so realised will be utilised towards the clearance of the dues of the vendor with you being on the priority. This bench notes that the contents of the emails cited supra are enough to establish admission of liability by the Corporate Debtor. Moreover, the Corporate Debtor has also paid amount of Rs. 15 lakhs in January 2015 and Rs. 11 Lakhs on 23.04.2015 towards outstanding dues. This bench further observes that, the pre-existing dispute raised by the Corporate Debtor is just a way to escape paying of the legitimate dues owed to the Operational Creditor. Various payments were received by the Corporate Debtor which are reflected in the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eventing movement of goods and resumption of their operations across all the warehouses causing substantial financial losses to the Corporate Debtor. It was also submitted that the Operational Creditor had denied access to the agents of the Corporate Debtor for carrying out physical verification of their inventory at the Kolkata warehouse even after having assured facilitation of the physical verification. It was further contended that the Operational Creditor had wrongfully sold stocks valued at Rs 2.65 Cr. without the knowledge and consent of the Corporate Debtor and therefore the Corporate Debtor had notified the Operational Creditor vide their e-mail dated 22.09.2016 that they would debit the amount of Rs 2.65 Cr. in their books of account. In support of their averment, it was pointed out that besides notifying the Operational Creditor on 22.09.2016, the Corporate Debtor had adjusted the amount of Rs 2.65 Cr in its ledger account by a debit entry and that this debit entry was duly verified and confirmed by the statutory auditor. It was admitted by the Ld. Counsel for the Appellant that the Adjudicating Authority had sought clarifications regarding the ledger filed earlier follo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... books of account. The Appellant in their explanation proffered to the Adjudicating Authority had submitted two ledger statements and belatedly changed the entry in the new detailed ledger. As the financial records produced by the Corporate Debtor were manipulated, the Adjudicating Authority had rightly not been persuaded to accept the reasonings adduced by the Corporate Debtor to justify the alleged misappropriation of goods. 19. Further refuting the contentions of the Appellant, it was submitted by the Operational Creditor that the Corporate Debtor had raised these allegations against them of having misappropriated goods and illegally sale of stocks subsequent to having addressed several e-mails calling upon the Corporate Debtor to pay the outstanding amount of service charges. It was stoutly contended that the allegation of illegal sale of stocks is unfounded which explains why the Corporate Debtor had not initiated any action or filed any criminal complaint against the Operational Creditor. Further the very fact that the Corporate Debtor had continued their business transactions with the Operational Creditor even after making allegations of misappropriation of goods shows that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ced on the different ledger copies produced by the Corporate Debtor, which appear manipulated. This Bench observes that the Corporate Debtor has expressly admitted its outstanding liability of 1.75 Cr in 2015. Subsequently, as an afterthought the issue of misappropriation was raised on the said amount which was an admitted transaction liability. ( Emphasis supplied ) 21. From the material placed on record, we find that the Adjudicating Authority had ordered on 27.03.2023 to explain how the misappropriation of disputes was handled by the Corporate Debtor in their books of accounts following which the Corporate Debtor had submitted a single page screen shot of a ledger reflecting a ledger entry dated 30.06.2016, the amount of which roughly resembled the alleged misappropriated amount as is placed at page 388 of Appeal Paper Book ( APB in short). Moreover, while this entry was dated June 2016 in the ledger, the Corporate Debtor had claimed the alleged misappropriation to have happened in September 2016 and thus the ledger entry and misappropriation of goods are not directly attributable to each other. Besides the fact that the date in the ledger entry happened to be a date which prece ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xcess of the threshold limit. The contents of the letter dated 22.04.2015 and email dated 07.03.2016 make it amply clear that the Corporate Debtor had admitted the operational debt. The aforementioned admissions by the Corporate Debtor amounts to be a clear acknowledgment of debt being due and payable. We also do not find any material which has been placed on record by the Corporate Debtor to show that they had categorically rejected the outstanding dues claimed by the Operational Creditor prior to issue of demand notice. When the operational debt had already arisen and become due and invoices raised were not specifically disputed, there is nothing on record which detracts from the operational debt having become due and payable. For reasons already elucidated in the immediately preceding paragraph, the grounds on which alleged disputes have been claimed by the Corporate Debtor are feeble and not supported by credible evidence. This puts a serious question mark on the bona-fide of the bogey of pre-existing disputes raised by the Corporate Debtor. The Adjudicating Authority therefore does not appear to have committed any error in holding that all requisite conditions necessary to tri ..... X X X X Extracts X X X X X X X X Extracts X X X X
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