M/s. IFGL Refractories Ltd. vs M/s. Agrawal Structure Mills (P) Ltd.

[Per; Shreesha Merla, Member (T)]

Aggrieved by the Order dated 19.11.2019 passed by the Learned Adjudicating Authority, (National Company Law Tribunal, Cuttack Bench, Cuttack) in TP No. 100/CTB/2019 arising out of C.P. (IB) No.- 2348/ MB/2018, ‘M/s. IFGL Refractories Ltd.’ (hereinafter referred to as the ‘Financial Creditor’), preferred this Appeal under Section 61 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as ‘The Code’). By the Impugned Order, the Learned Adjudicating Authority has rejected the Application, preferred by the ‘Operational Creditor’, under Section 9 of the Code.

Succinctly put, the facts in brief are that the Appellant Company engaged in manufacturing, trading and selling of Refractories items used in Steel Plants. It is averred that pursuant to the Purchase Orders placed by the Respondent Company, the Appellant had supplied Laddle Refractories, to the Respondent from time to time and raised 7 invoices with respect to supply of goods for the period between November 2016 and January 2017. It is stated that the sum total of the amounts ‘due and payable’ excluding interest is Rs.3,05,809/-.

Learned Counsel for the Appellant submitted that a Demand Notice dated 16.05.2018 was issued to the Respondent Company under Section 8 of the Code, for which the Respondent disputed for the first time vide Reply dated 13.06.2018, stating that the goods supplied by the Appellant Company under the 7 invoices, were of poor/bad quality. It is submitted that the goods were supplied by the Appellant Company at a concessional rate of Central Sales Tax on the condition that the Respondent will provide the Statutory Declaration Form ‘C’ and thereafter the Respondent issued the said Statutory Declaration Form on 27.07.2017, without raising any issue of the quality of the goods supplied. It is further submitted that the dispute was raised by the Respondent Company for the first time on 13.06.2018 after the expiry stipulated period of 10 days as envisaged under the Code. As regarding the Debit Notes it is submitted by the Learned Counsel for the Appellant that subsequently fabricated Debit Notes with signature and phone number were filed with the show cause Reply. This clearly points out the discrepancy in the Debit Notes submitted by them before the Adjudicating Authority. It is also argued by the Appellant Counsel that the Ledger Accounts for the period 01.04.2016 to 31.03.2017 maintained by the Respondent Company in the name of the Appellant Company are incorrect. The Learned Counsel placed reliance on the ratio of the Hon’ble Supreme Court in ‘Mobilox Innovations Private Limited’ Vs. ‘Kirusa Software Private Limited’, (2018) 1 SCC 353, and also in the case of ‘Alluwalia Contract (India) Limited’ Vs. ‘Raheja Developers Ltd.’ decided on 23.07.2019 wherein it was held as follows:

It is further contended by the Learned Counsel that the Respondent had acknowledged the amount to be paid and sought to enter into a Settlement Agreement. He drew our attention to the Order of the Adjudicating Authority dated 16.10.2019, wherein the Adjudicating Authority has recorded that the matter would be posted to 21.10.2019 for reporting settlement, failing which the matter would be taken up for arguments.

The main point which falls for consideration in this Appeal is whether there is any ‘Pre-Existing Dispute’ between the parties prior to the issuance of the Demand Notice under Section 8 of the Code, as envisaged by the Hon’ble Supreme Court in ‘Mobilox Innovations Private Limited’ Vs. ‘Kirusa Software Private Limited’ (2018) 1 SCC 353.

It is the case of the Respondent Company that the following invoices were raised by the Appellant Company:

The Learned Counsel for the Respondent Company submitted that seven different Debit Notes were issued to the Appellant Company on account of defective goods, the details of which are as follows:

It is seen from the record that these Debit Notes correspond to the invoices raised by the Appellant. It is the case of the Respondent that the Appellant has not disputed the issuance and receipt of Form ‘C’ in respect of the said consignment but has denied the receipt of the Debit Notes which have been signed and acknowledged by the same person for and on behalf of the Appellant herein.

A perusal of the Ledger Account for the period 01.04.2016 to 31.03.2017 shows that these Debit Notes were issued by the Respondent Company to the Appellant Company contemporaneously. This Bench has perused the Debit Notes dated 23.01.2017, 31.12.2015 and 26.11.2015, wherein it is clearly specified that the debit note is being raised on account of ‘bad and rejected material’ dispatched by the Appellant Company. The Hon’ble Supreme Court in ‘Mobilox Innovations Private Limited’ Vs. ‘Kirusa Software Private Limited’, (2018) 1 SCC 353, has observed as follows:

Merely because there were settlement talks between the parties it cannot be construed that the debt is ‘due and payable’ as envisaged under the Code, specifically keeping in view the ratio of the Hon’ble Supreme Court in ‘Mobilox Innovations Private Limited’ (Supra). In their Reply to the Section 8 Notice, the Respondent Company has clearly raised a dispute and the material on record evidences that the Debit Notes were raised on account of rejection of poor quality material and therefore we are of the considered view that 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. This Tribunal is satisfied that the ‘dispute’ truly exists in fact and is not spurious, hypothetical or illusory and hence we find no substantial grounds to interfere with the well-reasoned Order of the Adjudicating Authority.

Hence, this Appeal fails and is dismissed accordingly. No order as to costs.