Agarwal Coal Corporation India Pvt. Ltd. vs Shri Tradco Deesan Private Limited

Per: V. Nallasenapathy, Member (Technical)

This Petition is filed by Agarwal Coal Corporation India Pvt. Ltd. (“Petitioner”) against Shri Tradco Deesan Private Limited (“Corporate Debtor”) for initiating Corporate Insolvency Resolution Process (“CIRP”) as provided under section 9 of the Insolvency & Bankruptcy Code, 2016 (“Code”) read with rule 6 of Insolvency and Bankruptcy Board of India (Application to Adjudicating Authority) Rules, 2016 (“Rules”) alleging that the Corporate debtor defaulted in making payment to the extent of Rs. 21,82,821 /-.

Petition reveals that the petitioner supplied coal to the Corporate debtor and raised invoice No. STC/01/18/4042 dated 22/10/2018 for Rs. 17,74,070/- and invoice No. STC 01/18/4135 dated 31.01.2018 for Rs. 20,88,174/- and after adjustment of the on account payment received from the Corporate Debtor to the extent of Rs. 16,79,423/-, there is an outstanding of Rs. 21,82,821/-. The petitioner issued a demand notice in Form 3 enclosing the above said invoices and demanded the said amount from the Corporate Debtor. The petitioner filed an affidavit under Section 9 (3) (b) of the Code stating that the Corporate Debtor has not raised any dispute of the unpaid operational debt.

The Corporate Debtor filed reply to the petition and raised the following contentions:-

a. No amount is payable by the Corporate Debtor to the petitioner. On the contrary the petitioner is liable to pay a sum of Rs. 95,70,000/- for loss and damages suffered by the Corporate Debtor on account of short supply of coal by the petitioner as expressly the petitioner has not supplied the agreed quantity.

b. There are pre existing disputes between the parties relating to short supply of coal which lead to reduction in production capacity and resultantly the Corporate Debtor suffered losses and damages.

c. The petitioner malafiedly suppressed its admitted failures under various purchase orders and admitted his defects and defaults.

d. The invoices as demanded in the demand notice were never been provided/issued to the Corporate Debtor and the Corporate Debtor came to know about these invoices only at the time of receipt of the demand notice from the petitioner and coal referred in the invoices were not received by the Corporate Debtor and the invoices are fraudulent invoices.

e. Even a perusal of GSTIN portal maintained by the central/state government under the Goods and Services Tax Act, 2017 bore no detail or mention of any such invoice raised by the petitioner on the Corporate Debtor.

f. The perusal of the Ledger account of the petitioner shows that there were credit / debit entries in respect of another entity of the petitioner group namely Agarwal Transport Corporation Private Limited (ATCPL) but the Corporate Debtor is unaware of the dealings between the petitioner and Agarwal Transport Corporation Private Limited (ATCPL).

g. On 29/06/2017 the petitioner debited the account of the Corporate Debtor with Rs. 12,32,816/- which is reflected in the statement of account enclosed to the amended Form 5 filed by the petitioner. However, previously the petitioner sent an Email on 30/06/2017 enclosing the statement of account of the Corporate Debtor in the books of the petitioner wherein the said debit entry was missing and the said Email is enclosed to the reply as Exhibit “L” at page 44. It is submitted that this shows the fraud played by the petitioner on the Corporate Debtor.

h. Since there are pre-existing disputes in respect of the quality & quantity of the goods supplied, the nature of transaction between the parties does not fall within the definition of operational debt as defined under the Code. The petitioner has not supplied the full quantity of coal as ordered in the purchase orders and due to this the Corporate Debtor, who is engaged in the continuous manufacturing process, faced production loss.

j. Again the Corporate Debtor failed to complete the supply of coal in purchase order No. 1,2 & 3 which lead to huge loss to the extent of Rs. 95,70,000/-. The Corporate Debtor has made payment to the petitioner to the tune of Rs. 3,57,13,225/- against purchase orders No. 1,2,3,4 & 5, despite the fact that the Corporate Debtor failed and neglected to supply required quantity of coal as referred in the purchase orders.

Heard the counsel on either side. This Bench has gone through the pleadings of both sides. The following are the observations of this Bench:-

a. The claim in this petition arises out of supply of goods by the petitioner to the corporate debtor and hence debt claimed in this petition is an operational debt as defined under section 5(21) of the Code.

b. The contention of the Corporate debtor that the loss suffered by them to the extent of Rs. 95,70,000/- on account of short supply of goods has to be taken into account while deciding this petition and in such a eventuality the Petition has to be dismissed is a far fetching argument considering the fact that the proceedings under the Code is of summary nature.

c. Even though the Corporate Debtor submits that there are pre existing disputes, no record/material has been produced by the Corporate Debtor in support of his contention and hence the submission in this aspect cannot be accepted and the same is rejected.

d. Mere short supply of goods will not fall within the definition of dispute as provided under section 5 (6) of the Code which reads as below:

e. The petitioner explained that the debiting of account to the extent of Rs. 12,32,816/- on 29/06/2017 was on account of some debit notes raised by the petitioner for certain payments made by a sister concern of the petitioner, namely Agarwal Transport Corporation Private Limited, cannot be accepted as the said amount is not agreed by the Corporate Debtor, which was also missing in the statement of account sent by the petitioner to the Corporate Debtor previously and hence the said amount has to be deducted from the amount claimed of Rs. 21,82,821/- and after this adjustment the claim has to be scaled down to Rs. 9,50,005/-.

f. The submission of the Corporate Debtor that the abovesaid debit entry to extent of Rs. 12,32,816/- made on 29/06/2017 by the petitioner should be a credit entry instead of debit, is wholly baseless and is rejected.

g. The submission of the Corporate Debtor that the two invoices claimed in the demand notice / petition were not received by them is unacceptable for the following reasons:

The above discussion clearly shows that the Corporate Debtor is liable to pay sum of Rs. 9,50,005/- to the petitioner in view of the fact that the amount debited to the extent of Rs. 12,32,816/- has to be excluded from the claimed amount of Rs. 21,82,821/-. The corporate debtor defaulted in making payment to the petitioner.

This Bench having been satisfied with the application filed by the Operational Creditor which is in compliance of provisions of Section 8 & 9 of the Insolvency & Bankruptcy Code admits this application declaring Moratorium with the directions as mentioned below:

The Registry is hereby directed to communicate this order to both the parties and to the Interim Resolution Professional immediately.