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Judgment
ORDER
Order pronounced in open Court vide separate sheets.
IB 933/ND/2020 stands dismissed.
PER: BACHU VENKAT BALARM DAS, MEMBER (JUDICIAL)
This is an application filed by the Petitioner i.e., M/s. Drive India Enterprise Solutions Limited on 18.07.2020 through Authorised Representative, Mr. Suman Kumar, duly Authorised vide Letter of Authority dated 14.03.2020, to initiate Corporate Insolvency Resolution Process (“CIRP”) under Section 9 of the Insolvency and Bankruptcy Code 2016 (“the Code’) of the Respondent i.e., M/s. BTM Exports Limited for the alleged default on the part of the Respondent in clearing the debt of Rs.7,77,78,667/- (Rupees Seven Crore Seventy Seven Lakhs Seventy Eight Thousand Six Hundred Sixty Seven), including 18% interest annually till 15th June 2020 as alleged by the Applicant. The details of transactions leading to the filing of this application as averred by the Applicant/Operational Creditor are as follows:
That the Operational Creditor is a company engaged in business of import, procurement, distribution, providing logistics services and selling of telecommunication devices and its components.
That the Corporate Debtor is a company engaged in business of design, development, distribution, marketing and maintenance of mobiles, tablet, computer, accessories and electronics goods etc. of various international and local brand / products.
That the Operational Creditor had executed a Master Agreement dated 5th February 2016 [hereinafter referred to as "the Master Agreement") with Corporate Debtor by and under which the Operational Creditor was appointed as the 'National Distributor' by the Corporate Debtor for supply, sale and distribution of the telecommunication devices. Under the Master Agreement, the Operational Creditor had agreed to import, distribute and sell the products of "RAGE" or other brands, if any, to Corporate Debtor or its purchaser or through its distribution channel / customer subject to the terms and conditions provided in the Master Agreement.
The Master Agreement entailed the Operational Creditor to open Letters of Credit (hereinafter referred to as “LC”) on suppliers identified by Corporate Debtor on terms and conditions mutually agreed between them and to sell the same to the Corporate Debtor or its purchaser or its identified channels /manufacturers as and when advised by Corporate Debtor. The products imported by such LCs were to be sold by the Operational Creditor to either the Corporate Debtor or its purchaser, manufacturing partner or supply channels. It was understood that in furtherance of the Master Agreement, the Corporate Debtor would be solely responsible for sale and collection / recovery of sale proceeds from local and overseas suppliers, local manufacturing partner, unsold stock, liquidation loss, outstanding amount with distributor/ affiliates including other contractual obligations etc.
The aforementioned Master Agreement was amended by agreement between the parties vide letter dated 25th April 2017 addressed by the Corporate Debtor to the Operational Creditor. It was agreed that any statutory claims / demands, statutory levies present or future in furtherance of the Agreement shall be borne by the Corporate Debtor. Furthermore, Corporate Debtor undertook to defend, indemnify and hold harmless the Operational creditor against any claim, costs, losses etc. arising out of the said agreement.
Services were provided by the Operational Creditor to the Corporate Debtor until 1st August 2018 and accordingly, invoices were raised at regular intervals. Pertinently, the outstanding amount accrued against the Corporate Debtor over time under various heads such as sale invoice, balance transfer amount from distributors, import advances against material not received, interest recovery, liquidation for loss recovery, etc. As a practice since the inception, the Corporate Debtor has been making incomplete lump sum payment against consolidated amounts demanded under multiple invoices, without any proper bifurcation as to the invoice or the heads under which the payment was being made. As a result, it was impossible for the Operational Creditor to satisfy itself with full payment against any of the heads or to be able to ascertain how much payment has been made by the Corporate Debtor as against the demands raised by the Operational Creditor under various heads in its invoices from time to time.
However, by December 2019, an outstanding balance of about Rs.6.9 Crore had become due and payable by the Corporate Debtor to the Operational Creditor. In this regard, the Operational Creditor addressed various emails and letters reminding and requesting the Corporate Debtor to pay the outstanding debt, however the Corporate Debtor did not pay any heed to the same.
As a result, the Operational Creditor was constrained to issue a demand notice dated on 6th December 2019 to the Corporate Debtor in Form 3 under Section 8(1) of the Insolvency and Bankruptcy Code, 2016 r/w Rule 5 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 for the payment of Rs.6,94,33,151/- [Rupees Six Crore Ninety-Four Lakhs Thirty-Three Thousand One Hundred Fifty-One] along with interest accruing since 1st February 2017, which was due to the Operational Creditor on various accounts under the master agreement
The Demand Notice was also shared via email on 7th December 2020 with the Corporate Debtor. In reply to the same, the Corporate Debtor addressed a letter dated 14th December 2019 to the Operational Creditor denying the outstanding debt and raising a frivolous and ambiguous dispute as an afterthought.
It is pertinent to note that whilst the Reply vehemently denied the allegations of the Demand Notice, the Reply failed to rely on any evidence or documents to support the denial of existence of debt even though paragraph 4 of the Demand Notice very clearly stipulated that if the Corporate Debtor has repaid the debt they would have to send documentary proof of the same. The outstanding debt is still pending and the Operational Creditor has not received any payment from the Corporate Debtor after 26th March 2018 on which date a payment of Rs.20,00,000/- [Rupees Twenty Lakhs] was received by the Operational Creditor.
That there is no genuine dispute which has been raised or intimated by the Corporate Debtor as regards the said outstanding debt and there is a clear default in payment of the same till date.
Hence, the present Application under Section 9 of the IBC for initiation of Corporate Insolvency Resolution Process against the Corporate Debtor.
The Corporate Debtor has filed its reply and made following submissions: -
A. That the entire claim being set out in the Petition is in direct conflict with as well wholly contradictory to as well as in derogation of the express Payment clauses entered into between the parties and more particularly in terms of Article 5. 7 of the Agreement between the parties.
B. It is humbly submitted that as per the contents of the Petition the Petitioner has submitted that the payment was received by it in lump sum against invoices and this was the practice from the inception. This statement by the Petitioner is an admission on record that the Petitioner itself is guilty of violating the terms of the Agreement both in general and specifically in terms of Article 5 and having accepted the performance of the Respondent as well as monies therefrom, is now attempting to rely on a selective reading of the Articles under the Agreement to somehow create a fallacious claim in its favour.
C. That as per the Petitioners own admission throughout the Petition it has alleged that the relevant period of the debt was between 2016- 2018 yet the Petitioner chose to continue its transaction with the Respondent without any complain whatsoever throughout the said relevant period and by its own admission acted in derogation of the express terms of the Agreement dated 05.02.2016 and therefore, now it cannot be permitted to rescind its own admission as its conduct is bound by the principle of estoppel. In fact, the Petitioner has also admitted that the present claim is based upon several heads of payment but has miserably failed to either set out all such heads or even substantiate thereupon in its own Petition choosing instead to rely upon vague assessments and statements. Therefore, even if for the sake of arguments it is assumed that the claims of the Petitioner are genuine the same would raise several disputed questions of fact which cannot be decided in the present proceedings by this Tribunal.
D. The Petitioner had also further concealed the reply sent by the Applicant to the said legal notice dated 19.06.2020 which further exposes the fraud being perpetrated by the Petitioner in terms of the present Petition and only undertook to file it on October 28, 2020 after the Respondent entered appearance in the matter. Furthermore, the Petitioner by way of active mala fide towards the Respondent has also concealed the reply of the Respondent to the legal notice received on 02/06/2020 dated 19/06/2020, whereby the claims of the Petitioner were yet again denied as being false by the Respondent.
E. The Operational Creditor has set out different amounts of debt and allegedly claimed them as being due and payable under several 'undefined' heads of payment claimed but not substantiated by the Operational Creditor. As per the Synopsis and List of Dates filed by the Operational Creditor the amount of debt claimed is - Rs. 6,94,33,151/- At Page l1 of List of Dates the same debt claimed is for an amount of Rs. 7,77,78,667/- and by way of Application No. 1227 of 2022 dated 07.03.2022 the Operational Creditor has revised the amount of alleged debt to Rs. 3,22,84,414/- through newly self-created unsubstantiated table with differential dates of debt and contradictory references. Hence also the present Petition is bad in law and ought to be outrightly rejected as it is unable to even specify the principal debt alleged.
F. That the present alleged debt is not merely on account of the Corporate Debtor but further also being allegedly claimed on account of its 'distributors'. One such alleged Distributor referred to is M/s Essline Engineers and Consultants Private Limited, which is a separate legal entity, against whom the same Operational Creditor filed another Petition under Section 9 titled Drive India Enterprises Solution Limited Vs. M/s. Essline Engineers and Consultants Private Limited, (IB)-932(ND)2020 which came to be dismissed on the same issues being re-agitated by the Operational Creditor herein by judgement dated 15.11.2021. In terms of the said two Petitions a Transfer Petition was moved by the Corporate Debtor which was listed as TP(IBC) 11/(PB)/2021 and disposed of by NCLT (Delhi) Principal Bench by order dated 20.07.2021 wherein it was categorically mentioned that the same debt cannot be claimed against the same entity in two proceedings. Hence the present attempt by the Operational Creditor to re-argue/ re-assert and seek an intra-court appeal against the judgements aforesaid would make the claim against Essline Engineers and Consultants Private Limited untenable before this Hon'ble Court. It is set out that the Judgement of the coordinate bench dated 15.11 .2021is binding on the Operational Creditor and it cannot seek modification thereof in this Petition. The fact of repeat claims is evident from Summary of Claim wherein both Essline's, now dismissed claims, have been re-iterated and re-argued by the Operational Creditor alleging relation of Guarantor which is non-existent. In fact, the Operational Creditor has categorically admitted that it dealt with Essline Engineers and Consultants Private Limited under more than 40 separate contracts referred to as 'High Seas Sales Agreement' of HSS Agreements which are separate contracts with wholly separate terms and conditions and bare no reference whatsoever to the Contract between Parties dated 05.02.2016. In fact every HSS Agreement was paid for in advance by way of Post Dated Cheques, which were handed over back, upon receipt of the same payments now being claimed by the same Operational Creditor under its own stamp and seal, which record has also been concealed by the Operational Creditor.
G. The Operational Creditor has with mala fide intent and to defraud this Tribunal concealed its own Audit Confirmation Letters dated 23.04.2018 wherein its own Auditor admitted a sum of Rs. 5,88,85,999 as being due and payable by the Operational Creditor upto the end of Financial Year 2017-2018. The same Audit Confirmation Letters in favour of the Corporate Debtor are part of record reproduced in the judgement of NCLT Delhi Bench -2 in the matter of Drive India Enterprises Solution Limited Vs. M/s. Essline Engineers and Consultants Private Limited, (IB)-932(ND)2020 dated 15.11.2021 dismissing the Section 9 Petition of the same Operational Creditor. Furthermore, the Operational Creditors own Audited Balance Sheets filed with MCA for the financial year 2017-18 clearly establishes the acceptance of an amount of due of Rs. 5.88 Crores towards the Corporate Debtor from entry no.479-496. Thus, the statements made in Form 5 Application claiming dues from 01"02.2017 or even from 2016 are wholly false and contrary to statutory record of the Operational Creditor who has concealed these facts to mislead this Tribunal and hence the present Section 9 Petition is a gross abuse of process.
H. That the Operational Creditor has already argued all facts relating to 'Account Adjustment for Rs. 3.99 Crores', validity of Audit Confirmations dated 23.04.2018 between itself and the Corporate Debtor, the ground of Assumed Guarantor as well as issues pertaining to the debt of Essline as being a separate debt on which the Co-ordinate bench of this Tribunal has expressly rejected all submissions made by the Operational Creditor more particularly in Para 10, 11 , 12, 13,14 and l5 found at Page No.'s 15- 18 of the said judgement. The said findings against the Operational Creditor confirm 'no objection to the Account Adjustment between Parties for Rs. 3.99 Crores as dealt with in detail above dated 04.10.2018 and duly acknowledged by the Operational Creditor in its e-mail dated 23.10.2018. Further the said judgement clarifies that the 'relationship between' the Operational Creditor, Corporate Debtor and Essline is unclear and hence the argument of Corporate Debtor being Guarantor for Essline has been rejected. Also, the said judgement has recorded that all the said communications being relied upon occurred prior to the date of Notice of Demand and holding existence of dispute rejected the overlapping claims of the Operational Creditor. The Operational Creditor concealed this Judgement and it was brought on record by the Corporate Debtor on 05.01.2022. Also, the Operational Debtor has despite the express judgement of this Hon'ble Court attempted to re-argue and re-assert the claims of Essline in the present Petition, in complete derogation of legal process seeking an intra-court appeal which cannot be allowed.
I. The present Petition raises several disputed questions of fact which are beyond the jurisdictional competence of this Tribunal as per the terms of the IBC. The entire claim is belied hence the claim is not maintainable.
We have gone through the documents filed by the Operational Creditor as well as Corporate Debtor and have heard the arguments made by the counsels appearing for both the parties. The Operational Creditor initially filed the section 9 petition with annexures consisting more than 2900 pages However, subsequently the Petitioner filed an IA No 1227/ND/2022 to place on record additional documents through which the Operational Creditor reduced the number of documents which was allowed by this Tribunal vide order dated 21.03.2022. Through the additional document the alleged debt claimed in section 9 petition was reduced to Rs. 3,22,84,414/-.
On perusal of records, it is apparent that some of the invoices raised in the present application are also there in the matter of Drive India Enterprises Solution Limited Vs. M/s. Essline Engineers and Consultants Private Limited, (IB)- 932(ND)2020 which was dismissed by the Tribunal (NCLT, New Delhi Bench II) vide order dated 15.11.2021. It is pertinent to refer paras of the aforesaid judgement which is reproduced as under: -
12.That the Corporate Debtor has also placed on record the letters dated 23.04.2018 written by M/s. BTM Exports Pvt. Ltd. to the Operational Creditor, showing outstanding dues of Operational Creditor towards M/s. BTM Exports Pvt. Ltd. Here it is observed that the business relationship amongst the Operational Creditor, the Corporate Debtor and M/s. BTM Exports Pvt. Ltd. is not clear from the records placed before us.
14.That all these communications (letter dated 23.04.2018, 04.10.2018 and 24.10.2018) relied upon by the Corporate Debtor pertain to the period prior to the issuance of demand notice dated 11.12.2019, which indicate dispute towards the quantum of debt due and payable by the Corporate Debtor. Further, the voluminous records and the multiple communications between the parties raise a plausible contention, which require further investigation warranting cross examination, adducing of further evidence, which is not permissible under the summary jurisdiction of this Adjudicating Authority under IBC 2016.
15.At this juncture, it is worthwhile to refer to the Judgement of Hon’ble Supreme Court in the matter of Mobilox Innovations Private Limited Versus Kirusa Software Private Limited, Civil Appeal No. 9405 of 2017 dated 21.09.2017 : “40 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.”
16.In view of the above, the Petition is dismissed.
We are also in consonance with the judgement of NCLT, (New Delhi, Bench II). Initially the Operational Creditor has filed voluminous petition with more than 2000 pages, subsequently, the petitioner filed IA 1227/ND/2022 to include 28 pages on the record, resulting in a reduction of the alleged debt to Rs. 3,22,84,414/-.
Further serious allegations of fraud and forgery were made in the pleadings which this Tribunal cannot adjudicate since the Adjudicating Authority is not expected to ascertain the veracity of documents produced.
In the light of the above said facts and after giving careful consideration to the entire matter and hearing the arguments of the learned counsel for the Operational Creditor as well as the reply filed by the Corporate Debtor and upon appreciation of the documents placed on record to substantiate their respective claims, this Adjudicating Authority dismisses this application filed by the Operational Creditor under Section 9 of Insolvency and Bankruptcy Code, 2016. However, the claim under any other law, if permissible, can be pursued by the Petitioner and the parties are at liberty to approach appropriate forum and may explore other legal remedies available as per law.