M/s. Biswa Janani Serivces vs M/s. Shree Nokoda Ispat Limited

Ashok Bhushan, J:

This Appeal by an Operational Creditor has been filed against the Order dated 02^nd August, 2022 passed by the National Company Law Tribunal, Cuttack Bench, Cuttack (hereinafter referred to as “The Adjudicating Authority”). By which Order, the Application filed under Section 9 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as “The Code”) by the Appellant has been rejected on the ground of pre-existing dispute between the parties.

Brief facts for deciding this Appeal are:-

 The Appellant is a Partnership Firm engaged in executing contractual work. The Respondent issued Purchase Orders for supply of Crushed Iron Ore. The Appellant in pursuance of the Purchase Orders, supplied Crushed Iron Ore. Appellant claiming outstanding dues payable by the Respondent issued a Demand Notice under Section 8 of the Code on 01^st September, 2021.

 The Demand Notice dated 01^st September, 2021 was replied by issuing Notice of Dispute by the Corporate Debtor dated 14^th September, 2021.  Application under Section 9 of the Code was filed by the Appellant claiming outstanding amount of Rs. 5,41,88,211/-. In the Section 9 Application, Reply was filed by the Corporate Debtor disputing the claim of the payment. The Respondent’s plea was that it placed 12 Purchase Orders upon the Operational Creditor for supply of Iron Ore. Out of said 12 Purchase Orders, Operational Creditor supplied raw materials only against 8 Purchase Orders and even raw materials supplied against 8 Purchase Orders were found to be inferior quality. Corporate Debtor, from time to time, during 31^st December, 2019 to 31^st March, 2020 issued 8 Debit Notes adjusting the due amount mentioned in the invoices and in so far as remaining 4 Purchase Orders are concerned, Operational Creditor had failed and neglected to supply raw materials despite having received the advance amount of Rs. 1,21,00,000/- The emails dated 1^st June, 2020, 01^st September, 2020 and 15^th February, 2021 relied by Operational Creditor alleging that Corporate Debtor had accepted the liability, were neither issued by the Corporate Debtor nor can be read as in any manner as acknowledgement of debt as the aforesaid emails were sent through the Official Email Id unauthorizedly by one Ms. Mahi Batra who was no more in employment of the Corporate Debtor after May, 2020. There were materials evidencing pre-existing dispute. Debit Notes, last being sent on 31^st March, 2020 and emails / letters dated 22^nd April, 2021, 07^th May, 2021 and 12^th June, 2021 all prior to issuance of demand notice clearly proved pre-existing dispute between the parties.

 The Adjudicating Authority after hearing the parties passed the Order dated 2^nd August, 2022 rejecting Section 9 Application. The Adjudicating Authority came to the conclusion that the email sent by Ms. Mahi Batra allegedly acknowledging the liability were sent by Ms. Mahi Batra after she quit the employment. Hence for deciding the binding nature of alleged acknowledgement further investigation is necessary. The Appellant being aggrieved by the said Order, has come up in this Appeal.

Learned Counsel for the Appellant challenging the Order impugned contends that only 8 Purchase Orders were issued to the Appellant for which the necessary supply was made by the Operational Creditor and the Section 9 Application was filed claiming the debt pertaining to outstanding dues. It is submitted that in view of the three emails sent by the Ms. Mahi Batra acknowledging the debt, the Respondent cannot be heard in saying that there is any pre-existing dispute. The pre-existing dispute based on the alleged eight debit notes is spurious and illusory. All the supply of Iron Ore against each Purchase Orders were loaded to the wagon and dispatched after issuance of Form K and L. It was open for the Respondent not to accept the raw material if there were any issues in relation to the chemical. All the Adjudicating Authority was to see as to whether there is any plausible contention which requires further investigation and is not patently feeble the argument or assertion of fact is unsupported by evidence.

We have considered the submissions of Learned Counsel for the parties and have perused the record.

In the facts of the present case, Notice of Demand was issued by the Operational Creditor and by Demand Notice dated 01^st September, 2021 the Appellant demanded outstanding amount out of eight purchase orders with interest as Rs. 5,41,88,211/-. It is relevant to notice that Demand Notice under Section 8 was replied vide Letter dated 14^th September, 2021 by the Corporate Debtor stoutly refuting the claim of the Appellant. It is also relevant to notice the allegations in Paragraph 7 and 8 of the Reply-Notice to Demand Notice which are to the following effect:

Further in paragraph 10, it has been pleaded that amount of Rs. 1,21,00,000/- was advanced against the Purchase Orders to be supplied. With regard to the emails sent by Ms. Mahi Batra alleging acknowledgment on behalf of the Corporate Debtor which was denied, it was stated that Ms. Mahi Batra was working as a Manager from December, 2018 to May, 2020 and emails sent thereafter by Ms. Mahi Batra were immoral and illegal. It was further pleaded that since the materials supplied against the eight purchase orders were not as per agreed quality and standard, debit notes were issued based upon the NABL approved laboratory analysis reports. In the Reply to Section 9 Application, the details of the pre-existing dispute were again reiterated. It is sufficient to notice the averments made in paragraph 3 of the Reply of the Corporate Debtor which is to the following effect:

The Reply has specifically referred the email sent by the Corporate Debtor dated 22.04.2021 and other emails prior to receipt of the Demand Notice where as Demand was made to supply the material against the subsequent four purchase orders for which advance of Rs. 1,21,00,000/-was issued. The reply has categorically explained the alleged emails sent by Ms. Mahi Batra acknowledging the debt and I.A. was also filed by the Corporate Debtor under Section 65 and 76 of the Code asking to initiate proceeding under Section 76 of the Code against the Operational Creditor.

The Adjudicating Authority in the Impugned Order has in detail noticed the invoice amount as well as debit notes and net payable amount in paragraph 8 the amount of Rs. 11,58,03,708/- was paid hence nothing was due. In the Reply Notice as well as Reply details of all debit notes and debit note amount has been mentioned. There were sufficient materials on record to indicate that no amount was due which was clearly mentioned, as per Corporate Debtor the amount which was payable as against the 8 Purchase Orders were already paid and against each invoices debit notes were issued and Debit Note Amount was deducted and payments were made thereafter.

For further four purchase orders, advance was also made of Rs. 1,21,00,000/- for which, no supply was ever made. The Adjudicating Authority further considering the relevant materials, has come to the conclusion that there was pre-existing dispute between the parties hence the Application under Section 9 of the Code was liable to be rejected and was rejected.

We have carefully gone through the relevant materials brought on record. The Notice of Dispute issued by the Corporate Debtor after receiving the Demand Notice, which notice of dispute contains relevant facts indicating that there is pre-existing dispute. The Adjudicating Authority has rightly rejected the Application filed under Section 9 of the Code as per the provisions of the Code. We thus are satisfied that no illegality has been committed by the Adjudicating Authority in rejecting the Section 9 Application. There is no merit in the Appeal, the Appeal is dismissed.