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Judgment
ORDER
PER: SHRI ASHOK KUMAR BHARDWAJ, MEMBER (J) The captioned application has been preferred under Section 9 of IBC, 2016. The brief conspectus of the case as stated in the application is that the operational creditor (applicant) is into business of manufacturing, merchandising counters, maintenance & services of display counters, and other promotion of products. The CD is into business of cosmetics. Both the business entities came into contact with each other and it was understood between them that the applicant will supply articles to the CD as per its need and requirement.
As per the understanding, the CD places purchase order(s) specify the retails of articles and its prices in favour of the operational creditor. Operational creditor supplies requisite articles to the CD on credit basis through tax invoice(s). According to the OC, the CD defaulted to make payment of an amount of Rs. 1,43,82,868/- to the OC. Part-IV of the application reads thus:-
PART - IV
PARTICULARS OF OPERATIONAL DEBT
In the reply filed by it, the CD espoused thus:-
The application is not maintainable and is liable to be dismissed, since there is already a pre-existing dispute between the parties, as would be evidenced by reply dated 22.04.2026 given by the CD to OC in response to demand notice 16.04.2026, wherein besides denying the claim raised by the applicant, the CD claimed an amount of Rs. 1,90,04,690/-, due and recoverable from the applicant. Further, CD had categorically informed the applicant about pendency of investigation into fraudulent misconduct committed by erstwhile employees of CD in connivance with various vendors including the applicant, which action of the applicant caused huge financial losses to CD. In the light of pendency of pre-existing dispute between the parties, the petition is liable to be dismissed.
The applicant obtained purchased orders illegally, in collusion with erstwhile employees of CD and generated fake invoice upon it, without delivering any product or services to CD. No product or services have been rendered or supplied by applicant to CD w.e.f. April, 2025 and the applicant has raised fake invoices upon it.
The petition is liable to be rejected in view of pendency of criminal investigation initiated by CD in terms of the compliant dated 06.02.2026 made to SHO, New Friends Colony Police Station, South-East District, New Delhi. The complaint alleges that Vinay Kumar, Vice President-Brand Activation and Rohit Jaggi, Sr, Manager, Brand Activation had colluded with the applicant and illegally and wrongfully help the applicant in procuring fake and bogus purchase orders from CD, resulting in causing huge financial losses to the applicant. The independent investigation agency M/s Emst & Young engaged by CD for investigating the alleged misconduct on the part of vendors and erstwhile employees of CD had revealed that said employees of CD have received commission/kick-backs for issuing purchase orders to applicant and that too at an inflated price.
The CD had appointed a reputed external agency proficient in carrying audits and transaction of fraud within the organization and during the investigation, the agency submitted its report dated 16.01.2026 and 11.05.2026 affirming various acts of illegalities committed by erstwhile employees and various vendors including the applicant. While conducting the investigation, E & Y found that in lieu of purchase orders, Mr. Vinay Kumar was using a Ford Endeavour car registered in the name of Vista Retail an entity owned and controlled by promoters of the applicant and was registered vendor of the CD until the applicant requested the CD to close the books of Vista Retail and create new vendor i.e. the applicant. Besides the Ford Endeavour car, the ex-employees who had colluded with the applicant were also getting/commissions/kick-backs to the extent of 30%-50% of the invoice amount, from the applicant and its group companies.
We heard the counsels for the parties and perused the record. It is noticed that much before Demand Notice dated 16.04.2026, served by the applicant upon the respondent, the CD had lodged a complaint dated 06.02.2026 against Mr. Vinay Kumar for committing fraud in connivance with the various vendors in creating false liability on the CD. In para 5 of reply to Demand Notice, the CD categorically denied the supplied products by the OC. Paras 3 to 7 of the reply to Demand Notice reads thus:-
“3.Your attention is brought to the fact that there are pre-existing disputes amongst the parties, wherein your client and M/s Vista Retail (both having same official address i.e. Khasra No. 342, Sultanpur Village, New Delhi-110030) in connivance with one of the erstwhile employees of my Client namely Mr. Vinay Kumar who was serving as Vice President (Brand Activation) and other employees of Colorbar have committed acts of fraud and mis-representation for obtaining purchase order(s) at a higher value from my Client than the prevalent market rates. Your Client, in return had given kick-backs/commission to Mr. Vinay Kumar and other employees of Colorbar to the extent of 50% of invoice value, as admitted by Mr. Vinay Kumar during an internal enquiry initiated by my Client. Further, a Ford Endeavour car having registration No. HR26CZ3642 which was owned by M/s Vista Retail was being used and possessed by Mr. Vinay Kumar for his personal use i.e, given as a commission/kickback towards raising fake and inflated invoices by your Client and M/s Vista Retail w.e.f. April, 2025 till January, 2026.
4.The internal investigations by our Client also establishes that your Client had raised inflated invoices by paying bribes, commissions and kick-backs to employees of my Client prior to April, 2025. Further, services claimed to have been rendered w.e.f. April, 2025 were not even received by my Client but only a superfluous approval and acceptance given by Mr. Vinay Kumar in collusion with your Client. The services of Mr. Vinay Kumar were terminated on 15.10.2025.
5.Your Client has not rendered any services or supplied any product to My Client pursuant to 01.04.2025. The Purchase Orders and invoices etc. are legally and factually inadmissible, as the same were raised only for obtaining wrongful gains at the cost of my Client, pursuant to the conspiracy between your Client and Mr. Vinay Kumar, wherein, your Client has raised fake invoices upon my Client without rendering any services. Further, no amount against invoices raised after April, 2025 was released to your Client, since invoices raised after April, 2025 are found to be fake and without any work being performed by your Client. Thus, amount claimed in the notice under reply is baseless and not payable.
6.You may note that internal enquiry by my Client have also surfaced various other acts of fraud committed by Mr. Vinay Kumar in connivance with various other vendors also, which have resulted in huge financial losses on account of unlawful and illegal conduct of various vendors including your client.
7.My Client has already filed a police complaint dated 06.02.2026 against Mr. Vinay Kumar for offences inter-alia including criminal breach of trust, cheating, data theft, criminal conspiracy and breach of privacy etc before P.S. New Friends Colony, New Delhi and the said complaint is pending investigations. My Client further reserves its rights to initiate appropriate civil and criminal actions against your Client once the final report is submitted by the police authorities.
In the light of the aforesaid facts, I hereby call upon your Client to immediately withdraw the Demand Notice under reply, otherwise, any action taken in pursuance of the same shall be at your Client's own risk and costs. A copy of this Reply is kept in my office for further necessary action.”
It is seen from the complaint dated 06.02.2026 made to SHO, New Friends Colony Police Station, South East District, New Delhi allegations were made against Mr. Vinay Kumar for entering into malpractices in conduct of business by the CD and extending unethical benefits to a group company of an applicant. Para 17 of the complaint reads thus:-
“17.In a separate instance, a contract was awarded to Retail Image, whose proprietor transferred an amount of Rs. 95000/- to Mr. Vinay Kumar as kickbacks. Additionally, the complainant company's vendor, Vista Retail, provided Mr. Vinay Kumar with a Ford Endeavour (registration number [redacted]) for his unrestricted personal use over an extended period. Such arrangements underscore Mr. Vinay Kumar's practice of conferring unethical benefits on favoured vendors. It is also establish that with said unethical/corrupt practices Accused Vinay kumar has cumulated huge disproportionate assets and wealth.”
When the employee of CD created its false liability in favour of a group company of applicant, the CD is not unjustified in suspecting the claim of the applicant, particularly, when its invoices mention the name of Mr. Vinay Kumar. Annexure R-2 to the reply indicate the nexus of employees of CD with vendors. The applicant has also placed on record a diagram to indicate the nexus between applicant and Vista Retail. We may also not ignore the fact that the applicant and vista retail is operate from same office. The diagram/chart placed on record reads thus:-
On perusal of the record, we are satisfied that the pre-existing dispute alleged by the CD is not a moon shine defense but is based on substantial material.
In view of the fact that the applicant has questioned the supply of the goods and has raised a dispute in this regard. As also regarding the liability of the CD viz. amount of debt, a due deference to the provisions of Section 5(6) r/w Section 9(5)(2) of IBC, 2016, we reject the application and dispose of the same.