Consolidated Shipping Line India Private Limited vs Supreme And Company Private Limited

Per: D. Arvind, Member (Technical)

The Court congregated through hybrid mode.

We have heard the Learned Counsel for both parties.

The instant petition has been preferred under Section 9 of the Insolvency and Bankruptcy Code, 2016, for brevity “I&B Code”, by Consolidated Shipping Line India Private Limited, hereinafter referred to as “Petitioner” or “Operational Creditor” against Supreme and Company Private Limited, hereinafter referred to as “Respondent” or “Corporate Debtor” seeking to commence the Corporate Insolvency Resolution Process, for brevity “CIR Process” in respect of the Corporate Debtor, Supreme and Company.

The Operational Creditor, Consolidated Shipping is engaged in freight forwarding services and allied cargo handling and transport related services. The Corporate Debtor, Supreme and Company had approached the Operational Creditor to provide the logistic support for various consignment orders. Accordingly, the Operational Creditor had provided the service to the Corporate Debtor and raised tax invoices upon the Corporate Debtor from time to time.

That, the Corporate Debtor had not released its outstanding debts towards the Operational Creditor of Rs. 2,95,20,933/- along with interest thereat at the rate of 24% per annum on and from the last date of on-account payment received against such services amounting to Rs. 1,04,48,871/- on October 10, 2022. Hence, this petition.

The Learned Counsel, Ms. Sonal Shah for the Petitioner submit that the Corporate Debtor has made the last on-account payment of Rs. 1,91,496/- against the services rendered by the Operational Creditor on October 10, 2022. After that, the Corporate Debtor has not paid any amount. The Learned Counsel has drawn our attention to the ledger maintained by the Operational Creditor, annexed at pages 387-400 to the application which gives an overview of the transactions between the parties and reflects that there were numerous invoices from November 2019 to September 2022 for supply of Services.

Further, it is submitted that the Corporate Debtor issued a balance confirmation on July 19, 2022, annexed at pages 401-407 to the petition, where it confirms a sum of Rs. 2,41,10,427.15/- and USD 24,336.63/-as due and payable to the Petitioner as on June 30, 2022. After that, further transactions have been made and the revised outstanding as on January 02, 2023, is Rs. 2,41,37,797/- and USD 65,648/- (equivalent to INR 53,83,136/-) being a total amount of Rs. Rs. 2,95,20,933/-.

That, the Statutory Notice of Demand as per Section 8 of the I&B Code, 2016 has been issued by the Operational Creditor on January 02, 2023, which is delivered to the Corporate Debtor on January 05, 2023. However, no reply is given to such Section 8 Notice by the Respondent.

The Learned Counsel, Ms. Urmila Chakraborty for the Respondent per contra submits that the petition is not maintainable under Section 4 read with Section 10A of the I&B Code. She claims that the bills were raised from 10.04.2020 to 24.03.2021 amounting to Rs. 1.6 Crore during the prohibitive period as prescribed under Section 10A of the Code. Thus, if such an amount stands deducted from the principal amount claimed to be in default, the balance debt due will be less than the prescribed financial threshold limit as per Section 4 of the Code.

Further, she submits that the ledger is for a period starting from 01.04.2019 to 02.02.2023, which starts with an opening balance as on April 01, 2019, of Rs. 1,17,28,413.30/-. There is no basis for such an opening balance as no bills or invoices have been provided concerning that opening balance of Rs. 1,17,28,413.30/-.

It is claimed that some sales transactions from 04.04.2019 to 31.10.2019 do not have any tax invoices or any documents to substantiate the transactions. However, concerning the entries made on and after 24.03.2021 in the ledger, the Petitioner has relied upon some tax invoices, but no documents are given to substantiate the service of those tax invoices upon the Respondent. Further, it is submitted that the Petitioner has furnished through the Supplementary Affidavit dated January 17, 2024, merely some tax entries in the GST Portal, not the relevant statement of the Electronic Cash Ledger or Electronic Liability Ledger of the Petitioner as per the GST Act, which would match the GST paid or set-off against the invoices as annexed to the petition.

Further, it is claimed that the Petitioner has not issued any separate chart for the tax invoices having foreign currency elements (in USD). Further, the basis of the conversion rate from USD to INR has not been disclosed.

It is alleged that the Section 8 Demand Notice issued by the Petitioner is not in proper form. The Petitioner has not annexed any tax invoices/ bills etc. to substantiate the transactions with the Respondent and to corroborate its claim. Thus, the petition is liable to be dismissed. Reliance is placed on the judgment rendered by the Hon’ble NCLAT in Neeraj Jain v. Cloudwalker Streaming Technologies Private Limited reported in 2020 SCC OnLine NCLAT 445, at para 48, 51.

Further, it is claimed that the purported confirmation of accounts annexed at pages 401-407 to the petition is forged and manufactured by the Petitioner to show the acknowledgement of the Corporate Debtor. The documents are on the letterhead of the Operational Creditor with merely a round stamp of Corporate Debtor. The alleged account confirmation documents have never been issued by the Corporate Debtor.

Further, it is submitted that the present petition has been preferred only with the intention to recover the money not to resolve the debtor company. The petition is a malicious proceeding preferred in abuse of the process of law. Reliance is placed on the decision in TATA Chemicals Limited v. Raj Process Equipments and Systems Private Limited passed by the NCLT Mumbai Bench in CP 21/I&BP/NCLT/MAH/2018.

That, the provision of Section 10A will not be applied here as the default on the part of the Corporate Debtor has been committed prior to the period as prescribed under Section 10A of the Code. Even assuming that the provision under Section 10A would be applicable and the period as emanated under Section 10A need to be excluded then also the petition will be maintainable as per Section 4 of the Code, as:

That, the details and relevant documents of each shipment as well as the invoices were sent to the Corporate Debtor to its emails i.e., [email protected] and [email protected] to which no demur regarding the quality, quantity and/or receipt of the shipment has ever been raised. Further, all the invoices were raised upon the Corporate Debtor and the same were confirmed by the Corporate Debtor’s director on the Balance Confirmation sheet.

Further, the Section 8 Demand Notice is in proper form and duly served upon the Corporate Debtor on January 05, 2023, at the office of Corporate Debtor situated at L.R. Sarani.

Further, some invoices are raised in USD and the currency exchange rate as on the date of raising the invoice in mentioned in the relevant invoices along with the other details, annexed at pages 337-386 to the Petition.

It is the claim of the Respondent that the bills were raised from 10.04.2020 to 24.03.2021 amounting to Rs. 1.6 Crore during the prohibitive period as prescribed under Section 10A of the Code. We have noted the counter submissions of the Petitioner that the default has been made on the part of the Corporate Debtor prior to the period as per Section 10A.

We note that if the outstanding invoices raised and became payable during the Section 10A period is deducted from the principal amount claimed to be in default, the outstanding amount will still be in excess of the prescribed threshold financial limit as per Section 4 of the I&B Code.

Further, we have noted that the Section 8 Notice of demand has been issued on January 02, 2023, which has been delivered through India Speed Post January 05, 2023, and this petition has been preferred on 21.02.2023, which is well within the limitation period. Hence, the Petition is maintainable on threshold limit as well as on limitation.

We find that the argument taken by the Respondent with regard to opening Balance of the Corporate debtor in the books of the Operational creditor at this stage, without raising this point any time before, seems to be frivolous, particularly when Notice issued under section 8 of I&B Code was not answered. We also see that corporate debtor and operational creditor had long years of business relationship and therefore to question the opening balance without any valid evidence is not maintainable. This seems to be an afterthought to bring the debt below the threshold limit.

We also note that corporate debtor has taken a point that Operational creditor has not paid the GST amount to the government and consequently not entitled to recover the same from corporate debtor. Non-payment of GST by Operational creditor to the government would impact the Input tax credit of GST. Corporate Debtor is eligible to take credit of GST payable by the Operational creditor only when GST is paid to government.

GST is leviable on Supply of goods and Services and the same is recoverable from the recipients of service, being Indirect tax. In this case there is no dispute with regard to supply of services. We have noted from the additional document filed by the operational creditor, that invoices raised on the corporate debtor has been included in the GST returns filed by the operational creditor from time to time. Once a GST compliant Invoice is raised on the recipient of Service, upon supply of service, it is not open for the corporate debtor to claim that GST on such invoices would become payable only upon payment of GST on such Invoices by the operational Creditor. Once GST Return is filed by including the Invoices raised on the corporate debtor, the operational is liable to pay the amount to government and recover it from corporate debtor. If at all corporate debtor is impacted in terms of Input credit due to non-payment of GST by the operational creditor, he can take it up with the operational creditor separately and legally too. Therefore, we find no force in this argument and accordingly reject it.

In the light of the enumerations supra, the application bearing C.P. (IB) No. 70/KB/2023, and the evidence placed on record and the discussion hereinabove, we allow this application filed under Section 9 of I&B Code, and accordingly, we order the initiation of Corporate Insolvency Resolution Process (CIRP) in respect of the Corporate Debtor by the following Orders:

Urgent certified copy of this order, if applied for with the Registry, be supplied to the parties, subject to compliance with all requisite formalities.

Post the matter on 18/07/2024 for hearing the Periodical Progress Report by the IRP/RP.