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Judgment
Ashok Bhushan, J.
This Appeal has been filed against the order dated 23.08.2019 passed by the Adjudicating Authority (National Company Law Tribunal) New Delhi Bench-II rejecting Section 9 application filed by the Appellant. This Appeal was decided by judgment of this Tribunal dated 10.08.2020 allowing the Appeal by setting aside the order of the Adjudicating Authority and remitting the case to the Adjudicating Authority for admitting the application under Section 9. Aggrieved by the order of this Tribunal dated 10.08.2020, the Corporate Debtor- M/s. Compack Enterprise India Pvt. Ltd. filed Civil Appeal No.3119 of 2020 before the Hon’ble Supreme Court. Hon’ble Supreme Court vide its judgment and order dated 18.04.2023 disposed of the Appeal setting aside the judgment and order dated 10.08.2020 of this Tribunal and remitted the matter to this Tribunal for fresh determination. Direction of the Hon’ble Supreme Court shall be noticed hereinafter. After the order of the Hon’ble Supreme Court dated 18.04.2023, this Appeal has been heard on 02.07.2025 and judgment reserved.
We proceed to notice brief facts of the case leading to filing of Section 9 application by the Operational Creditor, the Appellant herein.
The Appellant is a company which deals in the business of wholesale trading/ distributorship of paper and paper board for various paper mills such as Khanna Paper Mills Ltd., Century Textiles & Industries Ltd., Sidharth Papers Ltd. etc. Appellant has been supplying paper and paper board to the Respondent based on written/verbal orders received from the Respondent from time to time. Both Operational Creditor and the Corporate Debtor carried out their business from the F.Y. 2013-14 to 2018-19. Corporate Debtor has been making payment to the Operational Creditor from time to time and both Operational Creditor and the Corporate Debtor has maintained their ledgers. The Operational Creditor was also issuing credit notes to the Corporate Debtor towards ‘special quantity discount’. Till mid of September 2018, no dispute arose between the parties. Operational Creditor sent a letter dated 13.09.2018 to the Corporate Debtor asking for issue of certificate to certify that the Corporate Debtor had neither purchased goods and nor claimed of CENVAT credit of 166 bills issued by Khanna Paper Mills Ltd. The Corporate Debtor issued a certificate as desired by letter dated 13.09.2018 informing that he had not received any paper/duplex board either directly from Khanna Paper Mills Ltd., Amritsar, Punjab or through Operational Creditor against 166 invoices mentioned in the letter. W.e.f. 20.09.2018, the Corporate Debtor stopped business with the Operational Creditor and did not issue any purchase order from 20.09.2018. Corporate Debtor also made a payment after stopping issue of purchase order to the Operational Creditor. Corporate Debtor made payment of Rs.10 lakhs on 20.11.2018 and other payment of Rs.10 Lakhs on 20.12.2018. The Operational Creditor issued a demand notice dated 28.12.2018 claiming an operational debt of Rs.1,81,45,943/-. The date of default was mentioned as 07.05.2018. Along with demand notice, Operational Creditor annexed ledgers statement for period 01.04.2017 to 31.03.2018 and 01.04.2018 to 28.12.2018. E-mail confirmation dated 17.05.2018 claiming to have been issued by the Corporate Debtor confirming balance of Rs.2,34,10,945/- as on 30.04.2018 was relied. Outstanding tax invoices issued by the Operational Creditor to the Corporate Debtor in the F.Y. 2018-19 were also attached along with E-Way Bills. The Corporate Debtor received the notice dated 28.12.2018 on 01.01.2019 and sent its reply to notice dated 28.12.2018 by letter dated 11.01.2019. In the reply to the notice, Corporate Debtor denied claim made by the Operational Creditor of Rs.1,81,45,943/-. Corporate Debtor also denied having issued e-mail dated 17.05.2018 confirming the balance as on 30.04.2018. It was said that the confirmation mail dated 17.05.2018 was never sent by the Corporate Debtor. Opening balance of Rs.2,39,80,892/- as claimed by Operational Creditor on 01.04.2018 was denied. It was pleaded that between 01.04.2018 to 28.12.2018, total payment of Rs.2,39,80,892/- have been made by the Corporate Debtor. It was further pleaded that the Operational Creditor has not issued credit notes for the period 01.04.2018 to 30.06.2018 and for the period 01.07.2018 to 30.09.2018 towards special quantity discount as per agreed business terms. The Corporate Debtor pleaded that the amount balance to be paid by the Corporate Debtor is Rs.22,56,833/-. Mention of two debit notes and two invoices, with regard to which material was rejected, was also made. It was pleaded that the Corporate Debtor is ready and willing to pay balance outstanding amount of Rs.22,56,833/- towards full and final settlement with all outstanding claim. It was pleaded that the Operational Creditor is making wrong and incorrect statement about outstanding amount. It was further pleaded that the Corporate Debtor did not place any order after 20.09.2018. Claim of two bills dated 22.10.2018 and 23.10.2018 as claimed in the notice was denied stating that neither any goods were received by the Corporate Debtor with regard to aforesaid two bills nor any order was placed. Along with reply to legal notice, the correct statement of account maintained by the Corporate Debtor for the period 01.04.2017 to 31.12.2018 was also annexed. It was further pleaded that the Corporate Debtor stopped placing orders to Operational Creditor since Operational Creditor was charging higher rates which was not liked by the Corporate Debtor and Corporate Debtor has always made all due payments with respect to supply receipt as per mutually agreed terms and there has been never any dispute between the parties in the last five years. After receiving the reply to demand notice, Section 9 application was filed by the Operational Creditor claiming amount of Rs.1,81,45,943/- in Part-IV. It was pleaded that the amount fell due on several dates from 17.05.2018. Ledger account of the Operational Creditor for F.Y. 2017-18, e-mail confirmation dated 17.05.2018 was also annexed along with Section 9 application. Section 9 application was filed by the Operational Creditor on 18.01.2019. Reply was filed by the Corporate Debtor on 14.02.2019. In the reply filed by the Corporate Debtor, Corporate Debtor pleaded that 166 bills were sent by the Operational Creditor to Corporate Debtor issued by Khanna Paper Mills Ltd. in the name of Corporate Debtor asking Corporate Debtor to give a certificate that Corporate Debtor has not received any CENVAT credit with regard to which letter was issued by Corporate Debtor stating that the Corporate Debtor never received any paper or paper board with respect to 166 bills issued by Khanna Paper Mills Ltd. nor it received any CENVAT credit. It was pleaded in the reply that Operational Creditor has not filed statement of accounts for the F.Y. 2013-14, 2014-15, 2015-16 and 2016-17 but had filed only statement of accounts for the F.Y. 2017-18 and 2018-19. The Corporate Debtor filed copy of the statement of accounts as maintained by the Corporate Debtor from F.Y. 2013-14 till 31.12.2018 along with the reply. It was further pleaded that the Applicant had issued credit notes for the F.Y. 2013-14, 2014-15, 2015-16, 2016-17 and 2017-18 towards special quantity discount. On the basis of their letter dated 28.12.2013 and 16.04.2016, Applicant has agreed to grant special quantity discounts @ Rs.3/- / Rs.2.5/- per kg and 16 credit notes along with the supporting documents were annexed with the reply. Corporate Debtor further pleaded that as per the statement of accounts maintained by Corporate Debtor, amount outstanding is only Rs.22,56,833/- which Applicant is willing and ready to pay.
The Appellant filed rejoinder affidavit. Appellant in the rejoinder pleaded that the letters filed by the Corporate Debtor dated 28.12.2013 and 16.04.2016 claiming special quantity discounts are forged letters. It was further pleaded that the false and fabricated credit notes have been annexed with the reply. Operational Creditor, however, in the rejoinder affidavit admitted having issued only 8 credit notes with respect to special quantity discounts, rest of the credit notes were denied and was claimed to have been manufactured by the Corporate Debtor.
The Adjudicating Authority heard the Counsel for the parties and by impugned order dated 23.08.2019 rejected Section 9 application. Adjudicating Authority also noticed the case of the Corporate Debtor that amount of Rs.22,56,833/- is due to be paid for which Corporate Debtor has handed over cheque before the Tribunal which was refused by the Operational Creditor. Aforesaid has been noticed in paragraph 4 of the order which is as follows:-
“4.The Respondent made a categorical statement that only Rs. 22,56,833/- was due to be paid to the Applicant and he has also handed over the cheque to this Tribunal for the same. however, the Applicant has refused to accept the cheque and is pressing the application on basis of the original claim of Rs. 1,81,45,943/-. The issue to be determined here is whether the actual amount claimed by the Applicant in the application is due and whether the Respondent has committed a default in payment of that amount.”
The Adjudicating Authority returned a finding that both the parties have consistently approbated and reprobated throughout the proceedings. It was further observed by the Adjudicating Authority that the opportunity given by the Tribunal to the parties to reconcile their accounts has also not lead to any fruitful results. It was held that the Applicant due to its inconsistent conduct has been unable to establish that the amount being claimed by it was owed by the Respondent and the Respondent has defaulted in the payment of the claimed amount. Application was dismissed accordingly. Observations were made in paragraphs 5 and 6 to the following effect:-
“5.After a perusal of the pleadings and the accounts filed by the parties it is concluded that both the parties have consistently approbated and reprobated throughout the proceedings. While the Applicant in its pleadings and in the accounts filed has shown that a balance of 1,64,98,604/- was due from the Respondent to the Applicant at the end of FY 2016-2017, the Applicant in a letter dated 25.08.2017 addressed to the accountants of the Respondent has stated that the balance receivable from the Respondent as on 31.03.2017 was Rs.72,71,010. The Respondent on the other hand, in the e-mail dated 17.05.2018 has admitted that as on 30.04.2018 the amount due from the Respondent to the Applicant was Rs.2,34,10,945/-, but the ledger filed by the Respondent shows that as on 30.04.2018 the balance payable by Respondent to the Applicant was Rs 92,33,736/-The opportunity given by the Tribunal to the parties to reconcile their accounts has also not lead to any fruitful results.
6.The Applicant due to its inconsistent conduct has been unable to establish that the amount being claimed by it was owed by the Respondent and that the Respondent has defaulted in the payment of the claimed amount. Thus, this application is dismissed with no costs.”
As noted above, against the order rejecting Section 9 application the Operational Creditor filed this Appeal in this Tribunal which Appeal was allowed by judgment of this Tribunal on 10.08.2020. Against the judgment dated 10.08.2020, Corporate Debtor has filed Civil Appeal No. 3119 of 2020 which Civil Appeal has been decided by the Hon’ble Supreme Court on 18.04.2023. The Hon’ble Supreme Court noticed the respective contention of the parties. It noticed that the claim of the Appellant was to the extent of Rs.1,81,45,943/- whereas according to the statement of accounts maintained by the Corporate Debtor and Corporate Debtor owed only Rs.22,56,833/-. The Hon’ble Supreme Court also noticed the judgment of the NCLAT that according to the Corporate Debtor, amount of Rs.22,56,833/- is due which amount is more than Rs.1 Lakh, application filed under Section 9 was sustainable. The Hon’ble Supreme Court had expressed disagreement with the reasoning of the NCLAT that on account of admission of amount of Rs.22,56,833/- which is more than Rs.1 Lakh, the application deserves to be admitted. The Hon’ble Supreme Court noticed that the Corporate Debtor has pleaded that the Corporate Debtor is ready to pay the said amount. The Hon’ble Supreme Court held that if the conclusion was to the effect that the amount above Rs.22,56,833/- was due, the NCLAT would have been justified in remitting the matter to the NCLT. It is useful to notice the observations of the Hon’ble Supreme Court in the judgment dated 18.04.2023 which are as follows:-
“Be that as it may, in the present circumstance when the claim as put forth by the respondent is to the tune of Rs.1,81,45,943/-after referring to the earlier deductions and the appellant herein is presently contending that only a sum of Rs.22,56,833/-was due and was offered to be paid but declined to be received by the respondent, the said amount itself was made the basis by the NCLAT to arrive at its conclusion that in any event, the due admitted is more than Rs. 1,00,000/-.
The said reasoning in this context would not be justified inasmuch the appellant having admitted that the amount of Rs. 22,56,833/ was due, were also ready to pay the said amount. According to them that was the only amount due. Therefore, what was required of the NCLAT was to arrive at the conclusion as to whether any amount over and above Rs.22,56,833/ was due and if the conclusion was to the effect that the amount above Rs.22,56,833/-was due, the NCLAT would have been justified in remitting the matter to the NCLAT.
Presently, it is not in dispute that insofar as the said amount of Rs. 22,56,833/-, the appellant have already deposited the same before the NCLT. Therefore, in the present circumstance we are of the opinion that the judgment dated 10.08.2020 is liable to be set aside and the matter is to be remitted to the NCLAT to undertake the said exercise to find out as to whether any amount more than Rs.22,56,833/ is due as claimed by the respondent herein and thereafter arrive at its conclusion in accordance with law.
Needles to mention that on the said determination as indicated being done, the NCLAT will also keep in view the principles laid down in the case of Mobilox (supra) with regard to the pre-existing dispute or otherwise, insofar as the amount beyond the extent as has been indicated above.
In this regard, all contentions of the parties are left open to be urged before the NCLAT.
With the above observations and direction the appeal is disposed of.”
From the judgment of the Hon’ble Supreme Court, as noticed above, following are two considerations which has to be undertaken by this Tribunal in pursuance of the order dated 18.04.2023: -
Therefore, in the present circumstance we are of the opinion that the judgment dated 10.08.2020 is liable to be set aside and the matter is to be remitted to the NCLAT to undertake the said exercise to find out as to whether any amount more than Rs.22,56,833/ is due as claimed by the respondent herein and thereafter arrive at its conclusion in accordance with law.
Needles to mention that on the said determination as indicated being done, the NCLAT will also keep in view the principles laid down in the case of Mobilox (supra) with regard to the pre-existing dispute or otherwise, insofar as the amount beyond the extent as has been indicated above.
We have heard Learned Counsel for the Appellant and Learned Counsel for the Respondent.
Learned Counsel for the Appellant in support of the Appeal submits that from the materials which have been brought on the record by the Operational Creditor, Operational Creditor has successfully proved that the amount outstanding to be paid by the Corporate Debtor is the amount of Rs.1,81,45,943/-. It is submitted that the amount of Rs.1,81,45,943/- is fully proved from the ledger accounts for the F.Y. 2013-14 to 2018-2019 as has been brought on the record by the Operational Creditor. It is submitted that prior to sending the statutory notice dated 28.12.2018, no dispute was raised by the Corporate Debtor and for the first time in the reply dated 11.01.2019 dispute has been raised by the Corporate Debtor. Counsel for the Appellant has relied on e-mails dated 08.10.2016 and 17.05.2018 sent by the Corporate Debtor confirming the opening balance of F.Y. 2016-17 i.e. Rs.2,01,48,487/-and opening balance of F.Y. 2017-18 i.e. Rs.1,64,98,604/- respectively vide e-mail dated 17.05.2018. It is submitted that the Corporate Debtor having acknowledged the balance of Rs.1,64,98,604/- as on 01.04.2018. The case set up by the Corporate Debtor that only Rs.22,56,833/- is payable is unfounded. It is pleaded that the letters dated 28.12.2013 and 16.04.2016 by the Operational Creditor which were filed by the Corporate Debtor in the reply allegedly agreed for granting special quantity discount are forged letters. The Corporate Debtor has claimed issuance of 16 credit notes out of which only 8 credit notes were admitted and rest were forged credit notes. Ledgers statement prepared by the Corporate Debtor is on the basis of 16 credit notes which cannot be accepted. It is submitted that according to the Corporate Debtor, the total sales and purchase for the F.Y. 2018-19 is Rs.1,97,75,383/-. Admission by the e-mail dated 17.05.2018 that amount due is Rs.2,34,10,945/- does not sink with claim of the Corporate Debtor. Operational debt being more than Rs.1 Lakh, Section 9 application deserves to be admitted. Appellant had successfully proved that due amount is more than Rupees One Lakh, hence, Section 9 application deserves admission and order rejecting the application by the Adjudicating Authority was without proper consideration. It is submitted that although in the application under Section 9 only ledger balance for the F.Y. 2017-18 and 2018-19 were filed but along with rejoinder-affidavit entire ledger balance for the F.Y. 2013-14 till 2018-19 was brought on the record. Corporate Debtor have been relying on forged letters and forged credit notes and is trying to make out a case on forged and fabricated documents. E-mail dated 17.05.2018 was sent from registered e-mail address of the Corporate Debtor which cannot be permitted to be denied.
Counsel appearing for the Corporate Debtor refuting the submissions of the Counsel for the Appellant submits that the Adjudicating Authority has rightly returned a finding that Operational Creditor due to his inconsistent conduct has been unable to establish that the amount being claimed by Operational Creditor was owed by the Respondent. It is submitted that the Corporate Debtor has been making payment from time to time and the parties were in business for the last five years and Corporate Debtor stopped issuing any further purchase order only after 20.09.2018 and on the date when demand notice was issued, amount of Rs.10 Lakhs was paid by the Corporate Debtor. Appellant is on incorrect basis claiming due of Rs.1,81,45,943/-whereas Corporate Debtor has filed all its ledgers from F.Y. 2013-14 till 2018-19 which clearly reflect that the amount outstanding is only Rs.22,56,833/-. Corporate Debtor has offered the said amount to the Operational Creditor before the Tribunal which was not accepted by the Appellant and the cheque was kept by NCLT on record which fact has been recorded in the order dated 14.05.2019 of the NCLT. It is submitted that the demand notice was immediately refuted by the Appellant by filing a reply to the demand notice dated 11.01.2019 where Appellant has claimed that only amount due is Rs.22,56,833/- which Corporate Debtor was ready to pay. Corporate Debtor has categorically disputed the claim of the Appellant raised in the demand notice of Rs.1,81,45,943/-. The reply to demand notice clearly raised a dispute between the parties, hence, the application under Section 9 could not have been admitted. It is submitted that the Appellant in his Section 9 application has pleaded that there was no agreement between the parties to give special quantity discounts. Letters dated 28.12.2013 and 16.04.2016 filed by the Corporate Debtor in the reply were stated to be forged letters. It is submitted by Counsel for the Corporate Debtor that all credit notes, 17 in numbers, which were issued by Appellant were relied in reply to the Section 9 application. In the rejoinder affidavit, the Operational Creditor has admitted 8 credit notes, thus, the case of the Operational Creditor that there was no agreement between the parties to give special quantity discounts is belied by own case of the Operational Creditor. Admission of 8 credit notes in the rejoinder clearly means that the special quantity discounts was given by the Operational Creditor and not reflecting 9 credit notes is only to deny the benefit of the credit notes to the Corporate Debtor which was agreed business terms between the parties. Corporate Debtor was entitled to receive the special quantity discounts @ Rs.3 per kg as per letter dated 28.12.2013 and Rs.2.5 per kg as per letter dated 16.04.2016 and the credit notes were issued to give special quantity discounts which has been duly reflected in the ledger account of the Corporate Debtor. Operational Creditor in its ledger account although has mentioned issuance of 8 credit notes but rest 9 credit notes are denied. Counsel for the Respondent submits that the Respondent vide letter dated 02.08.2017 requested the Appellant to confirm the balance amount owed by the Corporate Debtor to the Operational Creditor as on 31.03.2017 and Appellant vide letter dated 25.08.2017 confirmed that as on 31.03.2017 an amount of Rs.72,71,010/- is due and payable by Corporate Debtor to Operational Creditor. The figure Rs.72,71,010/- is clearly reflected in the ledger accounts filed by the Corporate Debtor, hence, the ledger account of the Corporate Debtor is in accordance with the said confirmation. It is stated that insofar as e-mail dated 17.05.2018 is concerned, although said was issued from e-mail address of the Corporate Debtor but it was not sent by any Director but claimed to be sent by one Santosh which email was clearly denied even in the reply to demand notice. It is submitted that the Appellant with dishonest intention had issued Section 8 notice and false and concocted figures are being claimed by the Appellant after Corporate Debtor stopped giving purchase order from 20.09.2018. Appellant is in habit of manipulating bills and ledger which is clear from the fact that the Appellant wanted to claim CENVAT of Rs.19,63,390.19/- from the Central Government on basis of bogus invoices which was prepared in the name of the Corporate Debtor issued from Khanna Papers Mills Ltd. and it is admitted fact that no goods were received under 166 invoices for which certificate was asked for by Operational Creditor itself. It is submitted that the present was a case where pre-existing dispute was very much there and Corporate Debtor having issued reply to demand notice has issued a notice of dispute. Notice of dispute having given by Corporate Debtor, the application could not have been admitted under Section 9 as per the law laid down by the Hon’ble Supreme Court in “Mobilox Innovations Private Limited vs. Kirusa Software Private Limited- (2018) 1 SCC 353”.
We have considered the submissions of the Counsel for the parties and perused the record.
As per the judgment of the Hon’ble Supreme Court dated 18.04.2023, as noticed above, this Tribunal needs to consider following two issues for deciding this Appeal:-
Whether any amount more than Rs.22,56,833/- is due on the Corporate Debtor to be paid to the Operational Creditor?
Whether there was any pre-existing dispute between the parties as per the principles laid down by the Hon’ble Supreme Court in “Mobilox Innovations Private Limited” (supra)?
Question No. (I)
Notice under Section 8 was issued by the Operational Creditor in which notice the Operational Creditor has claimed an amount of Rs.1,81,45,943/-and date of default was mentioned as 07.05.2018. Demand notice dated 28.12.2018 was replied by the Corporate Debtor vide its reply dated 11.01.2019. The Corporate Debtor refuted the claim of Operational Creditor of Rs.1,81,45,943/-. The Corporate Debtor also denied having issued e-mail dated 17.05.2018 confirming the amount of Rs.2,34,10,945/- as on 30.04.2018. It is useful to notice paragraphs 3 to 8 of the reply:-
“3.It is vehemently denied that my clients vide mail dated 17.05.2018 confirmed that as on 30.04.2018, an amount of Rs. 2,34,10,945/- is due and outstanding against your clients. It is pointed out that alleged mail dated 17.05.2018 was never sent by my clients. In fact your client has placed before you a false and fabricated mail.
4.It is vehemently denied that during the period from 01.04.2018 till 28.12.2018, my clients made payment of Rs. 2,61,87,011/- to your clients. It is further denied that there was an opening balance of Rs. 2,39,80,892/- as on 01.04.2018. But the fact is that my clients during the period from 01.04.2018 till 28.12.2018 made a total payment of Rs. 2,59,80,892/- to yours clients leaving a balance of Rs. 22,56,833/, It is submitted that your clients have not issued credit notes amounting to Rs. 6,06,989.50 for the period 01.04.2018 to 30.06.2018 and Rs. 5,83,685/-for the for the period 01.07.2018 to 30.09.2018 towards special quantity discount as per the agreed business terms. Therefore my clients have issued two debit notes no. COM/DN/126 dated 20.07.2018 for RS. 6,06,989/- and COM/DN/22 dated 15.10.2018 for Rs. 5,83,685/- towards the same, which your clients have concealed. Copy of debit notes dated 20.07.2018 and 15.10.2018 are annexed hereto.
5.It is important to point out that your clients have intentionally and deliberately not reflected in their alleged statement of account the invoices no. 559 dated 04.09.2018 for Rs. 59,476/- and 560 dated 04.09.2018 for Rs. 21,250/- (which were duly received by your clients) towards rejected material returned to your clients. Copy of invoices both dated 04.09.2018 are annexed hereto.
6.It is pertinent to mention here that my clients are ready and willing to pay the balance outstanding amount of Rs. 22,56,833/- to your clients towards full and final settlement of all the outstanding claim. It is submitted that it is really unfair on the part of your clients to make wrong and incorrect statements about outstanding amounts.
7.It is vehemently denied that an amount of Rs. 1,81,45,943/- is due and outstanding against my clients as per computation in tabular form in schedule-l annexed with the legal notice. The fact is that your clients manipulated the accounts, made false entries in the statement of account and omitted some of the entries in the statement of account with the only Intention to blackmail my clients. It is further submitted that my clients have no intentions not to pay outstanding amount of Rs. 22,56,833/- but my clients told your client that payment would be made as per agreed terms.
8.It is most respectfully submitted that the alleged bills nos. 5480 dated 22.10.2018 for Rs. 2,25,957/- and 5506 dated 23.10.2018 for Rs. 48,902/-, as mentioned by your clients in the alleged statement of accounts (annexed with the notice) was never received by my clients nor any goods were received by clients against those alleged bills. It is pertinent to mention here that my clients never placed any orders on your clients after 20.09.2018. A true and correct statement of account maintained by my clients qua yours clients for the period 01.04.2017 till 31.12.2018 in the ordinary course of business is annexed with the reply to legal notice.”
It was after reply being given to the notice by the Corporate Debtor, Section 9 application was filed. In Section 9 application, the Operational Creditor has claimed total amount of Rs.1,81,45,943/- along with interest and date of default was mentioned as 07.05.2018. In Section 9 application, the Operational Creditor has relied on the e-mail confirmation dated 17.05.2018 copy of which e-mail was also filed. In paragraph 15 of the application, it was pleaded by Operational Creditor that there was no agreement between the Operational Creditor and the Corporate Debtor where the Operational Creditor has allegedly agreed to grant the Corporate Debtor any special quantity discount much less the one allegedly claimed by the Corporate Debtor. Reply to demand notice dated 11.01.2019 was also referred in paragraph 15. It is useful to notice pleadings in paragraph 15 of Section 9 application which is as follows:-
“15.It is also submitted that the Corporate Debtor upon receiving the Statutory Notice (u/s Form 3 of The Insolvency and Bankruptcy Code, 2016) from the Operational Creditor, has responded by way of reply dated 11.01.2019 claiming to have received the Statutory Notice on 01.01.2019 taking frivolous pleas clearly and noticeably afterthoughts. It is pertinent to mention that no pre-existing dispute has been highlighted or pointed out by the Corporate Debtor in its reply to the Statutory Notice. It is submitted that there was no agreement between the Operational Creditor and the Corporate Debtor where the Operational Creditor has allegedly agreed to grant the Corporate Debtor any Special Quantity Discount much less the one allegedly claimed by the Corporate Debtor. Reply dated 11.01.2019, sent by the Corporate Debtor to the Operational Creditor has been annexed herewith and marked as ANNEXURE-F.”
A detailed reply to Section 9 application was filed by the Corporate Debtor which is Annexure 11 to Appeal. In Paragraph 5 of the reply, Corporate Debtor has claimed that credit notes have been issued by the Operational Creditor for the F.Y. 2013-14 to 2017-18 and letters dated 28.12.2013 and 16.04.2016 have been issued by the Operational Creditor in that regard. Details of 16-17 credit notes have also mentioned in paragraph 5 of the reply. It is useful to notice paragraph 5 of the reply:-
“5.Without prejudice to the aforesaid preliminary objections, it is submitted that the applicant completely concealed the fact that the Applicant also issued credit notes in the financial years 2013-14, 2014-15, 2015-16, 2016-17 and 2017-18 to the Respondent towards special quantity discount on the basis of their letters dated 28.12.2013 and 16.04.2016. Therefore it does not lie in the mouth of the applicant to say that there is no agreement between the applicant and the respondent where the applicant agreed to grant the Respondent special quantity discount. Copy of letters dated 28.12.2013 and 16.04.2016 are annexed hereto as Annexures R-4 and R-5 respectively. Similarly the copy of credit notes issued by the applicant dated 31.03.2014, 30.06.2014, 30.09.2014, 31.12.2014, 31.03.2015, 04.07.2015, 05.10.2015, 03.01.2016, 31.03.2016, 05.07.2016, 05.10.2016, 10.01.2017, 31.03.2017, 06.12.2017, 07.12.2017, 31.12.2017 and 31.03.2018 with supporting documents are annexed hereto as Annexures R-6 to R-22 respectively.”
The Operational Creditor, on the other hand, has denied any agreement between the parties of giving special quantity discounts which has been pleaded by the Operational Creditor in paragraph 5 as noted above. A rejoinder-affidavit has been filed by the Operational Creditor to the reply filed by the Corporate Debtor where several credit notes which were relied by the Corporate Debtor were termed as ‘false and fabricated’. Under the heading ‘para-wise reply to the preliminary objections’, paragraphs 5 and 6 are relevant which is noticed as below:-
“5.The contents of Para 4 of the Preliminary Objections are denied being incorrect, baseless and misconceived, save and except being matter of record. Letters dated 28.12.2013 and 16.04.2016 are denied being forged and fabricated. It is vehemently denied that there was any agreement between the Applicant and the Respondent, where the applicant agreed to grant the Respondent special quantity discount. It is submitted that issuing credit notes was the sole discretion of the Applicant and the same were being issued whenever it was deem fit by the Applicant. It is submitted that the Applicant has issued only following credit notes being Credit Notes, dated 30.06.2014, 30.09.2014, 31.12.2014, 31.03.2015, 05.07.2016, 05.10.2016, 10.01.2017 and 31.03.2017 to the Respondent and the same were duly accounted in the ledger account statements sent to the Respondent time and again. All other credit notes mentioned in the para under reply are denied being forged and fabricated which were never issued by the Applicant. It is also submitted that vide email dated 20.01.2018 the Applicant had sent the statement of account qua the sale made by it to the Respondent for the period 01.11.2017 to 31.12.2018. Notably, the Respondent has never raised the issue regarding factoring of the forged credit notes dated 06.12.2017, 07.12.2017, 31.12.2017 and 31.03.2018 inasmuch as there existed none. As such the story regarding factoring of the Forged Credit Notes ought to be rejected by this Hon'ble Adjudicating Authority. Further, the contents of the aforementioned paragraphs are reiterated and reaffirmed. Email dated 20.01.2018 sent by the Applicant to the Respondent along with the statement of accounts for the period 01.11.2017 to 31.12.2018 is annexed herewith and marked as Annexure-A-7.
6.The contents of Para 6 are denied being incorrect, baseless and afterthought. It is denied that the Applicant was under obligation to issue any credit notes much less alleged credit notes amounting to Rs. 6,06,989.50 for the period 01.04.2018 to 30.06.2018 or Rs. 5,83,685/- for any period much less the period from 01.07.2018 to 30.09.2018. It is denied that any special quantity discount was agreed between the Applicant and the Respondents. It is submitted that Applicant had the discretion of giving credit notes in case it so deems appropriate and the same was purely a commercial call of the Applicant. It is denied that the Respondent had issued the alleged two debit notes no. COM/DN/126 dated 20.07.2018 for Rs. 6,06,989/- and COM/DN/227 dated 15.10.2018 for Rs. 5,83,685/-. It is reiterated that the same has been fabricated by the Respondent to mislead this Hon'ble Adjudicating Authority. It is denied that the Application is liable to be dismissed. Further, the contents of the aforementioned paragraphs are reiterated and reaffirmed.”
The bone of contentions between the parties, which ultimately is relevant for testing the respective ledgers account filed by both the parties is the credit notes with regard to special quantity discount. What is the ‘special quantity discount’ as was claimed by the Corporate Debtor needs to be noticed. The Corporate Debtor in its reply to Section 9 application has pleaded that the Operational Creditor has agreed to give special quantity discount on the orders which are placed by the Corporate Debtor to the Operational Creditor for supply of the paper/ paper board. In paragraph 5 of the reply under the heading ‘preliminary objections’, details of two letters dated 28.12.2013 and 16.04.2016 have been relied by the Corporate Debtor. All credit notes (17 in numbers) have been mentioned in paragraph 5 are already extracted above.
We need to notice letters dated 28.12.2013 and 16.04.2016 which are filed along with reply as follows:-
“Jitendra Impex Pvt. Ltd.
Deals in: Paper & Board 908/102; 1st FLOOR, MAHARAJA AGGARSEN MARKET, CHAWRI BAZAR, DELHI-110006 Dated 28th Dec.2013
Ref. No…………………..
M/s Compack Enteprises India Pvt. Ltd. B-71, G.T.Karnal Road, Industrial Area, Delhi-110033
Subject: Special Quantity Discount w.e.f. 01.01.2014
Kind Attn. Mr. Anil Gosain
Dear sir,
Please refer our discussions in your office yesterday regarding Special Quantity Discount applicable you to you on total sales from Jitendra Impex Pvt. Ltd. effective 1st Jan.-2014.
As agreed :-
1.We will give you Special Quantity Discount of Rs. 3/- per kg.
2.Special Qty. Discount will be effective 1st Jan.-2014 on our total Sales to you.
3.Credit Notes will be issued by us to you on quarterly basis after the end of each quarter @ Rs. 3/- per kg.
Regards,
For Jitendra Impex Pvt. Ltd. Vishal Jain Director”
“TIN : 07490238580 011-23243934 CIN: U17211DL1996PTC076873 011-23247015 E-mail: jitendra_impex @yahoo.com”
“Jitendra Impex Pvt. Ltd. Deals in: Paper & Board
908/102; 1st FLOOR, MAHARAJA AGGARSEN MARKET,
CHAWRI BAZAR, DELHI-110006
Dated 16-04-2016
Ref. No…………………..
Minutes of Meeting Held at Compack Enterprises India Pvt. Ltd. Office on 20th April-2016
Present: Vishal Jain, Director - Jitendra Impex Pvt. Ltd. Anil Gosain, Director - Compack Enterprises
India Pvt. Ltd.
Subject: Change in Special Quantity Discount w.e.f. 01- 04-2016
Dear sir,
Please refer our discussion in your office regarding change in Special Qty. Discount applicable to you w.e.f. 01-04-2016.
The following is discussed and mutually agreed:
1.Jitendra Impex Pvt. Ltd. have been giving special qty. discount of Rs. 3.00 pér kg. since January, 2014 to Compack Enterprises India Pvt. Ltd.
2.Henceforth, special qty. discount will be Rs. 2.50 per kg. with effect from 1st April-2016 on all supplies made to Compack Enterprises India Pvt. Ltd.
3.Credit Notes will be issued on quarterly basis as is being done at present.
Regards,
For Jitendra Impex Pvt. Ltd. For Compack Enterprises India Pvt. Ltd.
Vishal Jain Anil Gosain Director Director”
The above letters indicate that the Operational Creditor represented that it will give special quantity discount of Rs.3/- per kg meaning thereby on quantity of order issued by Corporate Debtor special quantity discount shall be granted quarterly. The above letters are being denied by the Operational Creditor as forged and fabricated. For the time being, we do not place reliance on the aforesaid letters but the fact is on the record that the Operational Creditor in its rejoinder-affidavit has categorically admitted 8 credit notes which were credit notes issued with respect to special quantity discount. Under the heading ‘para-wise reply to the preliminary objections’ which we have already extracted, in paragraph 5, following was pleaded by Operational Creditor “It is submitted that issuing credit notes was the sole discretion of the Applicant and the same were being issued whenever it was deem fit by the Applicant. It is submitted that the Applicant has issued only following credit notes being Credit Notes, dated 30.06.2014, 30.09.2014, 31.12.2014, 31.03.2015, 05.07.2016, 05.10.2016, 10.01.2017 and 31.03.2017 to the Respondent and the same were duly accounted in the ledger account statements sent to the Respondent time and again. All other credit notes mentioned in the para under reply are denied being forged and fabricated which were never issued by the Applicant.”.
We need to notice one credit note which has been admitted in above paragraph for example, the credit note dated 30.06.2014 which is admitted by the Operational Creditor and is part of the reply. Credit note dated 30.06.2014 which is part of the reply of the Corporate Debtor is as follows:-
“TIN : 07490238580 011-23243934 CIN: U17211DL1996PTC076873 011-23247015 E-mail: jitendra_impex @yahoo.com
Jitendra Impex Pvt. Ltd. Deals in: Paper & Board
908/102; 1st FLOOR, MAHARAJA AGGARSEN MARKET,
CHAWRI BAZAR, DELHI-110006
Ref. No…………………..
CREDIT NOTE
To : COMPACK ENTERPRISES INDIA (P) LTD Date 30th June 2014 Address: B-71, GT KARNAL ROAD, INDUSTRIAL AREA, DELHI TIN Number: 07800160082 Credit Note Number: 2014-2015/JIPL-Q1/30062014/0001-COMPACK Attention: Your Order Number:
DESCRIPTION Description Quantity Unit/Price Amount credited Special Quantity Discount Quarterly from July 2014 to September 2014 634374 KGS 3/- PERKGS 19,03,122 000 Total 21,66,567 000 VAT @__% N/A Round (+) 000 Total Credit Due 21,66,567 000
Authorised By: For Jitendra Impex. (P) Ltd. Name: Vishal Jain Signature: Date: Jitendra Impex Pvt. Ltd.
908/102; 1st FLOOR, MAHARAJA AGGARSEN MARKET,
CHAWRI BAZAR, DELHI
Party: COMPACK ENTERPRISES INDIA (P) LTD
From 1-4-2014 to 30-6-2014
| Date | Bill/Vch No. | Qty. | Unit |
|---|---|---|---|
| 09-04-2014 | RI/30/2014-15 | 4,585.00. | Kgs. |
| 11-04-2014 | RI/38/2014-15 | 24,159.200 | Kgs. |
| 11-04-2014 | RI/39/2014-15 | 17,532.900 | Kgs. |
| 11-04-2014 | RI/40/2014-15 | 15,030.200 | Kgs. |
| 11-04-2014 | RI/43/2014-15 | 13,817.600 | Kgs. |
| 12-04-2014 | RI/51/2014-15 | 11,347.300 | Kgs. |
| 12-04-2024 | RI/52/2014-15 | 24,473.600 | Kgs. |
| 14-04-2014 | RI/55/2014-15 | 25,800.400 | Kgs. |
| 15-04-2014 | RI/62/2014-15 | 25,261.200 | Kgs. |
| 16-04-2014 | RI/63/2014-15 | 23,388.700 | Kgs. |
| 21-04-2014 | RI/83/2014-15 | 3,107.500 | Kgs. |
| 21-04-2014 | RI/90/2014-15 | 5,538.300 | Kgs. |
| 22-04-2014 | RI/93/2014-15 | 10,277.800 | Kgs. |
| 01-05-2014 | RI/147/2014-15 | 8,108.100 | Kgs. |
| 01-05-2014 | RI/152/2014-15 | 4,357.800 | Kgs. |
| 01-05-2014 | RI/155/2014-15 | 2,127.900 | Kgs. |
| 01-05-2014 | RI/162/2014-15 | 10,808.900 | Kgs. |
| 03-05-2014 | RI/167/2014-15 | 5,774.200 | Kgs. |
| 03-05-2014 | RI/170/2014-15 | 11,683.100 | Kgs. |
| 03-05-2014 | RI/171/2014-15 | 19,065.900 | Kgs. |
| 05-05-2014 | RI/176/2014-15 | 8,985.800 | Kgs. |
| 05-05-2014 | RI/179/2014-15 | 10,984.800 | Kgs. |
| 06-05-2014 | RI/186/2014-15 | 15,184.500 | Kgs. |
| 06-05-2014 | RI/190/2014-15 | 14,985.900 | Kgs. |
| 08-05-2014 | RI/194/2014-15 | 19,343.300 | Kgs. |
| 10-05-2014 | RI/207/2014-15 | 7,453.200 | Kgs. |
| 12-05-2014 | RI/214/2014-15 | 16,726.000 | Kgs. |
| 14-05-2014 | RI/229/2014-15 | 13,974.500 | Kgs. |
| 14-05-2014 | RI/230/2014-15 | 21,332.400 | Kgs. |
| 14-05-2014 | RI/231/2014-15 | 13,875.700 | Kgs. |
| 14-05-2014 | RI/237/2014-15 | 15,129.600 | Kgs. |
| 15-05-2014 | RI/240/2014-15 | 14,153.800 | Kgs. |
| 15-05-2014 | RI/244/2014-15 | 7,660.200 | Kgs. |
| 15-05-2014 | RI/250/2014-15 | 11,130.500 | Kgs. |
| 16-05-2014 | RI/252/2014-15 | 8,786.400 | Kgs. |
| 02-06-2014 | RI/336/2014-15 | 2,283.600 | Kgs. |
| 03-06-2014 | RI/342/2014-15 | 5,958.200 | Kgs. |
| 04-06-2014 | RI/349/2014-15 | 2,995.200 | Kgs. |
| 05-06-2014 | RI/354/2014-15 | 7,249.500 | Kgs. |
| 05-06-2014 | RI/357/2014-15 | 13,518.100 | Kgs. |
| 05-06-2014 | RI/359/2014-15 | 4,243.900 | Kgs. |
| 05-06-2014 | RI/361/2014-15 | 5,776.400 | Kgs. |
| 06-06-2014 | RI/366/2014-15 | 7,130.700 | Kgs. |
| 06-06-2014 | RI/367/2014-15 | 18,050.400 | Kgs. |
| 06-06-2014 | RI/369/2014-15 | 21,492.900 | Kgs. |
| 09-06-2014 | RI/377/2014-15 | 3,830.000 | Kgs. |
| 09-06-2014 | RI/378/2014-15 | 9,916.400 | Kgs. |
| 09-06-2014 | RI/381/2014-15 | 22,903.100 | Kgs. |
| 10-06-2014 | RI/384/2014-15 | 19,482.000 | Kgs. |
| 11-06-2014 | RI/388/2014-15 | 4,658.500 | Kgs. |
| 13-06-2014 | RI/392/2014-15 | 5,357.800 | Kgs. |
| 16-06-2014 | RI/398/2014-15 | 8,416.100 | Kgs. |
| 18-06-2014 | RI/408/2014-15 | 6,971.600 | Kgs. |
| 21-06-2014 | RI/435/2014-15 | 11,745.600 | Kgs. |
| 21-06-2014 | RI/442/2014-15 | 15,918.200 | Kgs. |
| 23-06-2014 | RI/446/2014-15 | 6,159.700 | Kgs. |
| 24-06-2014 | RI/455/2014-15 | 10,258.000 | Kgs. |
| 24-06-2014 | RI/456/2014-15 | 3,979.500 | Kgs. |
| 25-06-2014 | RI/459/2014-15 | 18,978.600 | Kgs. |
| 26-06-2014 | RI/463/2014-15 | 13,131.400 | Kgs. |
| 30-06-2014 | RI/485/2014-15 | 5,832.000 | Kgs. |
| Total | 7,22,189.600 |
The above credit note which is admitted credit note indicate that @Rs.3/- per kg special quantity discount have been given quarterly i.e. from 09.04.2014 to 30.06.2014. The credit note was note given due credit of Rs.21,66,567/-. Total quantity is also mentioned in the credit note as Rs.7,22,189.600/- kgs. Along with the credit note, the details of invoice and quantity have been mentioned. We have noticed that all 17 credit notes which have been relied by the Corporate Debtor were filed along with the Reply with supporting documents. Supporting documents clearly indicate the date, invoice number/ Bill/Voucher No. and quantity and on total quantity, credit note is being claimed.
We have noticed that in Section 9 application, Operational Creditor has denied having any agreement between the parties to give any special quantity discount but when in the reply Corporate Debtor has come up with all credit notes with supporting documents, the Operational Creditor choose to admit 8 credit notes only. Admission of 8 credit notes itself prove the case of the Corporate Debtor that there was arrangement between the parties to give special quantity discount per kg. We will notice another credit note dated 05.07.2016 which has been admitted and is part of the reply which is to the following effect:-
“JITENDRA IMPEX PVT LTD
908/102, 1st Floor, Maharaja Aggarasain Mkt., Chawri Bazar, Delhi-110006
JIPL/2016-17/0001 Dated 05.07.2016
CREDIT NOTE
TO
M/s. COMPACK ENTERPRISES PVT LTD
B-71, GT KARNAL ROAD, INDUSTRIAL AREA, DELHI
S.No. DESCRIPTION QUANTITY RATE AMOUNT
Special Quantity Discount Quarterly 615485.00 0 2.5 1,538,712.50 from 01.04.2016 to 30.06.2016 Per kgs detail attached TOTAL 1,538,712.50 Rounded off 0.50 GRAND TOTAL 1,538,713.00 Authorised by:
Name: VISHAL JAIN signature
date
for JITENDRA IMPEX (P) Ltd.
Director”
The above credit note indicate that the special quantity discount is being given @ Rs.2.5 per kg and the quantity of the kg and total credit has been mentioned.
The admission of the Operational Creditor for 8 credit notes and further case of the Operational Creditor that the said credit notes were duly reflected in the ledger of the Appellant fully proves the case taken by the Corporate Debtor that the benefit of special quantity discounts was extended. It is further relevant to notice that issuance of credit note is not being denied and out of 17 credit notes, only 8 credit notes are being admitted and what is pleaded by the Appellant is that “It is submitted that issuing credit notes was the sole discretion of the Applicant and the same were being issued whenever it was deem fit by the Applicant”.
The trade practices adopted between the parties when are reflected by issuance of credit notes, we are not convinced with the submission of the Appellant that the credit notes were issued at the discretion of the Operational Creditor. In the ledger accounts submitted by the Corporate Debtor, all 17 credit notes were reflected and reflecting 17 credit notes as well as two debit notes claimed to be issued by the Corporate Debtor after 01.04.2018. The ledger accounts have been filed by the Corporate Debtor containing the outstanding balance of Rs.22,56,833/-. The carrying on business between the parties is matter of fact and it is also pleaded by the Appellant that there has been no dispute between the parties for the last few years and the Corporate Debtor’s case is that payments were made from time to time which were being reflected in the ledger statement of Corporate Debtor.
Counsel for the Appellant has laid much emphasis on the e-mail dated 17.05.2018 stating that e-mail was sent from the e-mail address of the Corporate Debtor admitting the ledger statement as on 01.04.2018. Copy of the e-mail dated 17.05.2018 which was part of the demand notice as well as Section 9 application is relevant to notice. The e-mail dated 17.05.2018 claimed to be issued from e-mail address of one Mr. Anil Gosain, Director of the Corporate Debtor, which is as follows:-
Subject: Re: BALANCE CONFIRMATION 30-04-2018 (COMPACK ENTERPRISES) From: Anil Gosain ([email protected]) To: [email protected] Date: Thursday, 17 May 2018 4:42 PM Dear Sir, Our balances on 30.04.2018 are under: Compack Enterprises
JITENDRA IMPEX PVT.LTD. Rs. 2,34,10,945.00 Cr.
JITENDRA & CO. Rs. 37,32,128.00 Cr. Unipack Industries
JITENDRA IMPEX PVT.LTD. Rs. 04,19,807.00 Cr.
JITENDRA & CO. Rs. 0.00 Regards Santosh
In the demand notice dated 28.12.2018, the e-mail dated 17.05.2018 was mentioned. When reply of demand notice dated 11.01.2019 was filed by the Corporate Debtor, Corporate Debtor specifically denied issuance of balance confirmation as claimed by the Operational Creditor. In paragraph 3 of reply to the demand notice, Corporate Debtor has vehemently denied that the Corporate Debtor had issued e-mail dated 17.05.2018 confirming the balance as on 30.04.2018. A perusal of the e-mail which is relied by the Operational Creditor indicate that although the e-mail was issued from the e-mail address of the Corporate Debtor and it was claimed to have been issued by Mr. Anil Gosain, one of the Director of the Corporate Debtor but e-mail is signed by one Mr. Santosh. The case of the Operational Creditor also is that the e-mail was sent by the employee of the Corporate Debtor. In view of the ledger statement which has been brought on the record by the Corporate Debtor supported by credit notes and agreement between the parties to give special quantity benefit, the case of the Corporate Debtor cannot be thrown out only on one e-mail dated 17.05.2018 which has been claimed to have been issued by the Corporate Debtor confirming the balance as claimed by the Operational Creditor.
The basis of ledger statement of the Operational Creditor and showing the balance as on 01.04.2018 of Rs.2,34,10,945/- is founded on by not reflecting the other 9 credit notes which are claimed by the Corporate Debtor to have been issued by Operational Creditor for giving special quantity benefit.
As noted above, the main issue of dispute between the parties is regarding special quantity benefit which according to the Operational Creditor itself has been extended by issuance of 8 credit notes but have been denied by not issuing 9 credit notes which have been claimed by the Corporate Debtor.
In all facts, circumstances and materials brought on the record, we find substance in the submission of the Respondent that there was business practice of giving special quantity benefit between the parties i.e. Rs.3/- per kg and thereafter Rs.2.5/- per kg on the purchase orders issued by the Corporate Debtor and the fact that 8 credit notes are being admitted fully proves that there was business terms between the parties to extend special quantity benefit to the Corporate Debtor on the orders issued by the Corporate Debtor. The Corporate Debtor after reflecting all credit notes as per the Corporate Debtor has prepared the ledger balance whereas the Appellant is denying issuance of 9 credit notes. Denial of letters dated 28.12.2013 and 16.04.2016 which was claimed by the Corporate Debtor of extending special quantity benefit to the Corporate Debtor becomes meaningless since in spite of the said denial of the letters, Operational Creditor had extended the said special quantity benefit which is admitted by accepting 8 credit notes and reflecting the said benefit in its ledger accounts according to own case of the Operational Creditor.
In view of the above circumstances, we are satisfied that the ledgers which have been maintained and submitted by the Corporate Debtor before the Adjudicating Authority from 2013-14 to 2018-19 are to be relied and the Corporate Debtor is correct in his submission that as per the ledgers maintained by the Respondent, the amount of Rs.22,56,833/- was outstanding. Corporate Debtor having expressed its willingness to pay the said amount and also gave a cheque before the Adjudicating Authority which was not accepted. We, thus, conclude that no amount above Rs.22,56,833/-was due, hence, we answer Issue No.(I) accordingly.
The Hon’ble Supreme Court has already disagreed with the view of the earlier judgment of the NCLAT that since the due is more than Rs.1 lakh, Section 9 application need to be admitted. The Hon’ble Supreme Court held that since the Corporate Debtor has offered amount of Rs.22,56,833/-, admission of Section 9 on the ground that amount due is more than Rs.1 Lakh was not to be sustained.
Question No. (II)
The Hon’ble Supreme Court in “Mobilox Innovations Private Limited” (supra) had occasion to consider the scheme of Sections 8 and 9 in detail. Section 8 of the IBC deals with ‘insolvency resolution by operational creditor’. Sub-sections (1) & (2) of Section 8 which are relevant are as follows:-
“8. Insolvency resolution by operational
creditor. - (1) An operational creditor may, on the occurrence of a default, deliver a demand notice of unpaid operational debtor copy of an invoice demanding payment of the amount involved in the default to the corporate debtor in such form and manner as may be prescribed.
(2)The corporate debtor shall, within a period of ten days of the receipt of the demand notice or copy of the invoice mentioned in sub-section (1) bring to the notice of the operational creditor –
(a)existence of a dispute, [if any, or] record of the pendency of the suit or arbitration proceedings filed before the receipt of such notice or invoice in relation to such dispute;
(b)the [payment] of unpaid operational debt-
(i)by sending an attested copy of the record of electronic transfer of the unpaid amount from the bank account of the corporate debtor; or
(ii)by sending an attested copy of record that the operational creditor has encashed a cheque issued by the corporate debtor.
Explanation. – For the purposes of this section, a “demand notice” means a notice served by an operational creditor to the corporate debtor demanding 3[payment] of the operational debt in respect of which the default has occurred.”
In the present case, after receipt of the demand notice dated 28.12.2018, reply to demand notice was issued on 11.01.2019 by the Corporate Debtor. The reply to demand notice specifically pleaded the dispute between the parties. Relevant paragraphs of reply to demand notice we have already extracted in foregoing paragraphs of the judgment. The Hon’ble Supreme Court in “Mobilox Innovations Private Limited” (supra) has laid down following in paragraph 34:-
“34.Therefore, the adjudicating authority, when examining an application under Section 9 of the Act will have to determine:
(i)Whether there is an “operational debt” as defined exceeding Rs.1 lakh? (See Section 4 of the Act)
(ii)Whether the documentary evidence furnished with the application shows that the aforesaid debt is due and payable and has not yet been paid? and
(iii)Whether there is existence of a dispute between the parties or the record of the pendency of a suit or arbitration proceeding filed before the receipt of the demand notice of the unpaid operational debt in relation to such dispute? If any one 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.”
The Hon’ble Supreme Court in paragraph 51 has elaborated on the existence of dispute. Observations made by the Hon’ble Supreme court in paragraph 51 are as follows:-
“51.It is clear, therefore, that once the operational creditor has filed an application, which is otherwise complete, the adjudicating authority must reject the application under Section 9(5)(2)(d) if notice of dispute has been received by the operational creditor or there is a record of dispute in the information utility. It is clear that such notice must bring to the notice of the operational creditor the “existence” of a dispute or the fact that a suit or arbitration proceeding relating to a dispute is pending between the parties. Therefore, all that the adjudicating authority is to see at this stage is whether there is a plausible contention which requires further investigation and that the “dispute” is not a patently feeble legal argument or an assertion of fact unsupported by evidence. It is important to separate the grain from the chaff and to reject a spurious defence which is mere bluster. However, in doing so, the Court does not need to be satisfied that the defence is likely to succeed. The Court does not at this stage examine the merits of the dispute except to the extent indicated above. So long as a dispute truly exists in fact and is not spurious, hypothetical or illusory, the adjudicating authority has to reject the application.”
The Hon’ble Supreme Court has categorically laid down that the Adjudicating Authority is to see at this stage as to whether there is a plausible contention which requires further investigation and that the “dispute” is not a patently feeble legal argument or an assertion of fact unsupported by evidence. The present is a case where from the ledgers as claimed by the Operational Creditor and the ledgers claimed by the Corporate Debtor the main dispute between the parties is with regard to issuance of credit notes with regard to special quantity benefit. On the other hand, Corporate Debtor claimed that special quantity benefit was agreed to be given by the Operational Creditor @ Rs.3/- per kg and Rs.2.5/- per kg respectively on purchase orders whereas the Operational Creditor said that issuance of credit notes at the discretion of the Operational Creditor and Operational Creditor out of 17 credit notes has accepted only 8 credit notes leading to difference in the ledger statement maintained by both the parties. The Corporate Debtor in the reply to demand notice issued on 11.01.2019 itself has pleaded that the Operational Creditor has been given special quantity discount as per the agreed business terms between the parties. Complaint was made that no credit notes have been issued for the period 01.04.2018 to 30.06.2018 and for the period 01.07.2018 to 30.09.2018. It is useful to notice paragraph 4 of the reply which is as follows:-
“4.It is vehemently denied that during the period from 01.04.2018 till 28.12.2018, my clients made payment of Rs. 2,61,87,011/- to your clients. It is further denied that there was an opening balance of Rs. 2,39,80,892/- as on 01.04.2018. But the fact is that my clients during the period from 01.04.2018 till 28.12.2018 made a total payment of Rs. 2,59,80,892/- to yours clients leaving a balance of Rs. 22,56,833/-, It is submitted that your clients have not issued credit notes amounting to Rs. 6,06,989.50 for the period 01.04.2018 to 30.06.2018 and Rs. 5,83,685/- for the for the period 01.07.2018 to 30.09.2018 towards special quantity discount as per the agreed business terms. Therefore my clients have issued two debit notes no. COM/DN/126 dated 20.07.2018 for RS. 6,06,989/- and COM/DN/22 dated 15.10.2018 for Rs. 5,83,685/- towards the same, which your clients have concealed. Copy of debit notes dated 20.07.2018 and 15.10.2018 are annexed hereto.”
In above paragraph, it was clearly pleaded by the Corporate Debtor that the total balance to be paid is Rs.22,56,833/- and the Corporate Debtor has been claiming the above balance after taking account of all credit notes issued towards special quantity discount. The Corporate Debtor in reply to demand notice has claimed that the special quantity discount is being given and has not been given for the period 01.04.2018 to 30.06.2018 and for the period 01.07.2018 to 30.09.2018 meaning thereby, that it has not been given only in the year 2018 for two quarters. Categorical case of the Corporate Debtor was that special quantity discount was given as per agreed business terms. When the Operational Creditor denied the issuance of 9 credit notes as claimed by the Corporate Debtor, the Operational Creditor itself is raising dispute with regard to not issuing credit notes on all quantities of sale. When the Corporate Debtor has categorically denied the claim of the Appellant of outstanding of Rs.1,81,45,943/- as claimed in the demand notice and has come with a clear case that the total balance is Rs.22,56,833/- and said outstanding of Rs.22,56,833/- is being supported by special quantity discount as was agreed between the parties, we are of the view that the reply notice dated 11.01.2019 was clearly a notice of dispute issued by the Corporate Debtor and the defence which has been claimed in the reply to legal notice cannot be said to be patently feeble legal argument or an assertion of fact unsupported by evidence.
Counsel for the Appellant submitted that in reply to demand notice, Corporate Debtor has not referred to all credit notes nor filed the credit notes along with the reply to demand notice. We do not find any substance in the above submission, when the Corporate Debtor claims that there is business terms between the parties of special quantity discount by the Operational Creditor and Operational Creditor has not given special quantity discount for the period 01.04.2018 to 30.06.2018 and 01.07.2018 to 30.09.2018, the case is clear that with regard to all other period on all quantity supplied by the Corporate Debtor, special quantity discount has been given. There was no occasion to file all credit notes and letters along with the reply to demand notice. The stage of replying to demand notice is not to plead or refer to all relevant materials which Corporate Debtor rely. It is on the record that the Corporate Debtor has filed reply to Section 9 application. All credit notes with supporting documents and the letters have been brought on the record in the reply to Section 9 application. We thus, do not find any substance in the submission of the Appellant that the Corporate Debtor was required to refer to and rely on all credit notes and file the same along with the reply to demand notice. We, thus, are satisfied that the reply to demand notice submitted by Corporate Debtor raises a pre-existing dispute and the application filed under Section 9 was required to be rejected on the ground of pre-existing dispute. We are conscious of the fact that the Adjudicating Authority while determining Section 9 proceedings have not to embark upon detail enquiry and investigation regarding claims of either of the parties regarding outstanding amount. We are satisfied that the Corporate Debtor has supported its case of outstanding amount of Rs.22,56,833/- only which amount was refused to be accepted by Operational Creditor. We do not find any ground to interfere with the order of the Adjudicating Authority rejecting Section 9 application. Corporate Debtor having offered to pay the said amount, in event the Appellant is ready to accept the said amount on communicating the details of bank account by the Appellant, the Corporate Debtor shall remit the said amount by bank transfer within two weeks thereafter.
Subject to the above, the Appeal is dismissed.