Hubergroup India Pvt. Ltd. vs Jalaram Flexo Laminates Ltd.

a. The Operational Creditor had sold, supplied and delivered printing inks of various descriptions (Goods) to the Corporate Debtor. The Outstanding pending sales amounted to Rs. 1,07,87,937/- (Rupees One Crore Seven Lakh Eighty-Seven Thousand Nine Hundred and Thirty-Seven Only). The overdue interest amounted to Rs. 9,67,723/- (Rupees Nine Lakh Sixty-Seven Thousand Seven Hundred and Twenty-Three Only). The pending Sales Tax Forms “C” Liability of Rs. 9,389/- (Rupees nine Thousand Three Hundred and Eighty-Nine Only).

b. Operational Creditor’s said claim is based on the invoices raised on the Corporate Debtor. The amount mentioned in the invoices fell due on different dates. The Particulars of Debt along with the date of each invoices amounts thereunder and their respective due date is enumerated as under:-

c. The Operational Creditor states that each invoice had certain standard terms and conditions. Each invoice was payable within 30 days of the date of the invoice and the interest @ 24% p.a. was to be charged in case of default in payment of the invoice. The Corporate Debtor was to make arrangement to test the goods within 48 hours of the delivery supplied and also satisfy about the suitability of such goods before putting them to use. If the goods were not found satisfactory, the same was to be informed in writing within 5 working days of delivery of goods.

d. The Operational Creditor sent Demand Notice under Form 3 dated 08.02.2018 to the Corporate Debtor thereby demanding the amount. The said Demand Notice was delivered to and received by the Corporate Debtor via Speed Post on 19.02.2018. Corporate Debtor issued a response to the said Demand Notice dated 22.02.2018 i.e. after the expiry of the ten days period as stipulated under section 8 (2) of “the Code”.

e. The Corporate Debtor in its reply to the Demand Notice, denied any liability to pay to the Operational Creditor. The Corporate Debtor stated that two years ago, Corporate Debtor had claimed amount from the Operational Creditor towards rate difference and quality problem and the same was accepted by concerned sales person of the Operational Creditor who also assured to give discount to the Corporate Debtor. The Corporate Debtor stated that, yet they had not received any credit discount. The Corporate Debtor alleged an amount of Rs. 1.30 crores of which no calculation has been given by the Corporate Debtor. The Corporate Debtor also threatened to initiate Civil, Criminal, Suit for recovery, Insolvency Proceedings against the Operational Creditor and requested to withdraw the Demand Notice and pay an amount of Rs. 1.30 crores.

f. The Operational Creditor states that this was the first time when the Corporate Debtor made such a claim. There is no prior suit or arbitration proceeding initiated by the Corporate Debtor. The claim is un-particularized and vague. Further, no pre-existing dispute within the meaning of the Code exists between the parties. The only letter prior to the issuance of the Demand Notice itself admits liability of the Corporate Debtor to make payment to the Operational Creditor by way of postdated Cheques.

g. The OC has relied upon the Judgement in the case of Mobilox Innovation Vs. Kirusa Software Private Limited (Civil Appeal No. 9405 of 2017) wherein the Hon’ble Supreme Court in para 34 of the said Order observed as under:

h. Operational Creditor submits that there is an Operational Debt exceeding 1 lakh due and payable by the Corporate Debtor, all supporting documents have been provided in support of claim and that there was no pre-existing dispute or pendency of any proceedings relating to the dispute as on the date of receipt of Demand Notice by the Corporate Debtor. Further the conduct of the Corporate Debtor is evasive and dilatory. The Corporate Debtor did not appear on at least 5 occasions when the Petition was listed before the Hon’ble Tribunal. Therefore, the Petition deserves to be admitted.

The Corporate Debtor filed its reply dated 07.07.2018 to the said Petition. The Corporate Debtor stated that the present petition is not maintainable as the Operational Creditor had received ‘notice of dispute’ from the Corporate Debtor and the petition needs to be rejected. The Corporate Debtor stated that the reply cum notice of dispute dated 22.02.2018 reveal that the Corporate Debtor has brought to the notice of the Operational Creditor the existence of dispute since more than last two years. The said dispute was related to quality and rate difference which was accepted by the sales person of the Operational Creditor who had also assured to give discount.

j. The Corporate Debtor states that the Operational Creditor vide its letter dated 12.03.2018 has admitted that the Corporate Debtor had raised its concern with the Operational Creditor regarding the rate difference. This itself epitomize about the existing dispute between the parties. The part of the letter sent by the Operational Creditor to the Corporate Debtor sets out as under: -

k. Further, in response to the said letter the Corporate Debtor brought to the notice of the Operational Creditor the existence of the dispute between the parties. The dispute between the parties relate to the rate difference, quality problems etc. The existence of such dispute can be observed from copy of emails and other communications between the parties. Vide an email dated 16.01.2018, the Corporate Debtor stated that for 20 years they were in business but during such period they faced so many problems regarding quality and rate difference but did not say anything due to long standing business relations between the parties. The Corporate Debtor also stated that two officials of the Operational Creditor visited the Corporate Debtor office and acknowledged the problems faced by the Corporate Debtor regarding the poor quality and high rates and assured that Rs. 20 lakhs will be credited to the Corporate Debtor account after which the remaining amount will be paid by the Corporate Debtor by 12 months postdated cheques. Hence, the Corporate Debtor states that there existed an existing dispute before the issuance of the Demand Notice which is evident from the letter of the Corporate Debtor dated 16.01.2018. The said dispute being complex in nature affords a plausible contention which requires further investigation.

l. The Operational Creditor makes a point that mere pendency of any suit or arbitration proceeding amounts to dispute under the Code. But it is a settled position of law that the word ‘includes’ as mentioned in sub-section (6) of section 5 of the Code is not an exhaustive one but an illustrative one. The Legislature used the words dispute includes a suit or arbitration proceedings. If this is read with section (2) of section 8 of the Code, where words used are existence of a dispute, if any and record of the pendency of the suit or arbitration proceedings, the result is disputes, if any, applies to all kinds of disputes in relation to debt and default.

m. Further, the Corporate Debtor has also cited the Judgment passed by Hon’ble Supreme Court of India in Mobilox Innovations Private Limited Vs. Kirusa Software Private Limited (supra) wherein the Hon’ble Supreme Court clarified the interpretation of the term dispute under the Code and observed to include dispute raised by the Corporate Debtor prior to the issue of Demand Notice, even though no suit or arbitration is pending in respect of such dispute. The Corporate Debtor quotes the following para 45 of the Judgement….

n. Hence, the Corporate Debtor states that the adjudicating authority only has to examine at the stage of admitting or rejecting an application, whether there is a plausible contention which requires further investigation. However, the adjudicating authority is not required to satisfy whether the dispute would ultimately succeed or not. So long as the dispute truly exists in fact and is not spurious, hypothetical or illusory, the NCLT has to reject the Application.

o. The Corporate Debtor states that the Corporate Debtor is financially sound and healthy and gives an employment to 100 families. The Corporate Debtor Company is regular in filing its all legal obligations and the Corporate Debtor Company is fully solvent Company. Hence the Corporate Debtor prays to reject the present Application.