Patnaik Steel International Limited vs SSAB Energy And Minerals Limited

a. The Applicant is an Operational Creditor (hereinafter referred to as "OC"), Patnaik Steel International Limited (hereinafter referred to as "PSIL") engaged in the business of trading of Iron Ore and the Respondent is the Corporate Debtor (hereinafter referred to as "CD"), SSAB Energy and Minerals Limited (hereinafter referred to as "SEML"), engaged in the business of manufacturing of refined petroleum products.

b. Pursuant to the purchase order dated 31.12.2021, issued by CD to OC for the supply of 7,700 MT of Iron Ore Fines at a rate of Rs. 3,200/- per MT. PSIL subsequently supplied the materials through invoices dated 17.01.2022, and 04.02.2022 to SEML amounting to Rs. 1,43,45,213/- and Rs. 1,43,45,590/- respectively totalling a gross value of INR 2,86,90,803/- (Rupees Two Crore Eighty-Six Lakh Ninety Thousand Eight Hundred and Three only).

c. It is averred by the Applicant that out of the total invoice amount of Rs. 2,86,90,803/-, the CD made partial payments totalling Rs. 1,55,00,000/- through bank transfers. Despite receiving and accepting the full supply of Iron Ore Fines, the CD failed to repay the outstanding balance of Rs. 1,31,90,803/-. The Applicant submits that this remaining debt has been due and outstanding since 13.05.2022, marking the date of continued default.

d. In view of the continued default, the OC issued a statutory demand notice in Form-3 dated 03.02.2025. The Applicant/OC averred that the said notice was served upon the CD via e-mail on 04.02.2025 and through Speed Post on 05.02.2025, with delivery confirmed on 07.02.2025 and 10.02.2025. Despite receipt of the notice, the Applicant contends that the CD failed to clear the outstanding operational debt, thereby establishing a clear instance of default under the Code.

e. Upon receipt of the demand notice, the CD issued a reply dated 12.02.2025, raising several contentions to dispute the claim. The CD alleged that a Memorandum of Understanding (“MOU”) existed between the CD and one Gleancore Minerals Private Limited (GMPL) dated 31.12.2021, under which GMPL was purportedly responsible for all procurement liabilities and raw material expenses. Furthermore, the CD challenged the validity of the Purchase Order, claiming it was issued by an unauthorized person, and raised a plea that the claim is barred by the laws of limitation.

f. In response to the aforesaid contentions raised by the CD, the Applicant has dealt with the same as follows:

The Applicant submitted that neither the CD nor GMPL ever intimated or informed the Applicant/OC about the existence of the alleged MOU dated 31.12.2021. The Applicant further contended that the Purchase Order was issued by the CD on its own letterhead and was expressly communicated to the OC without any caveat or condition stating that the payment obligations would be borne by GMPL.

The invoices for the supplies were raised in favour of the SEML and the GST input was deposited in favour of SEML.

Out of the total invoice amount of Rs. 2,86,90,803/-, the CD has paid Rs. 1,55,00,000/- through bank transfers, which implies the CD was aware of the supply of goods and had made payments for such supply.

Regarding the payment of Rs. 25,00,000/- from GMPL on 13.05.2022, the Applicant stated that initially, the OC was not aware of the source. However, based on subsequent communications, the said amount was credited into the ledger of the CD, for which the OC issued a letter to the CD confirming the receipt of such payment.

Regarding the Corporate Debtor's plea that the claim is barred by limitation, the Applicant submitted that the invoices were issued on 17.01.2022 and 04.02.2022, and subsequent payments were received on 02.02.2022, 03.03.2022, 29.04.2022, and 13.05.2022. The Applicant contended that these payments serve as an acknowledgment of debt under the Limitation Act, 1963. Consequently, it is averred that the three-year limitation period is applicable from the date of the last payment, making both the Demand Notice and the present application well within the prescribed period of limitation.

g. The Applicant averred that a total operational debt of Rs. 1,31,90,803/- is due and payable by the Corporate Debtor. It is submitted that this amount has remained outstanding since 13.05.2022, which is the date of the last partial payment. In compliance with the statutory requirements of the Code, the Applicant has filed an affidavit under Section 9(3)(b) affirming that no notice of dispute was received from the Corporate Debtor regarding the unpaid operational debt prior to the issuance of the Demand Notice. Furthermore, the Applicant has placed on record certificates from Federal Bank, Barbil Branch, to demonstrate that the claimed debt remains unpaid.

a. The Respondent submitted that it is the sole owner of an Iron Ore Benefaction Plant with an approved capacity of 8,00,000 MTPA. It is averred that the CD entered into a MOU dated 31.12.2021 with one M/s. Gleancore Minerals Private Limited (GMPL) to jointly use the said unit on a "Contract Operation Basis". Under the terms of this MOU, which was for a five-month period from 31.12.2021 till 30.05.2022, GMPL was solely responsible for managing operations and providing funds for all raw materials and related expenses. The Respondent specifically contended that according to the MOU, all statutory and other liabilities arising during this agreement period were to be borne by GMPL. Consequently, the Respondent stated that it has no relation to the transaction in dispute and that the Operational Creditor should hold GMPL responsible for the outstanding dues of Rs. 1,31,90,803/-.

b. The Respondent averred that it has not issued any Purchase Order to the Operational Creditor, asserting that the signature of the "Authorised Signatory" appearing on the purported Purchase Order is not an authorized signature of the Corporate Debtor. It is further submitted that the purported invoices were never received or acknowledged by the Respondent. The Respondent contended that where there is no acknowledgment of liability, the mere raising of invoices in the name of the Corporate Debtor does not create a right to payment or a remedy under the law. Furthermore, the Respondent stated it is not aware of any delivery or supply of goods made during the Contract Period, as GMPL was responsible for the operation and management of the unit at that time.

c. The Respondent submitted that Torque along-with GMPL has assured payment to the OC. It is averred that the Director of Torque as well as GMPL executed an affidavit dated 20.03.2025 before the Sub-Registrar, Keonjhar, stating that by virtue of various agreements dated 30.04.2021, 31.08.2021, 31.12.2021 and registered agreement dated 16.08.2022 vide document number 1002201400 with the CD, he had procured Iron Ore fines from different suppliers. In the said affidavit, the Director of Torque/GMPL acknowledged that an amount of Rs. 1,31,90,803/- is outstanding and payable by him to the Applicant. The Respondent further contended that the present application cannot be filed against the CD, who has no relation to the purported transaction. It is averred that since Torque along-with GMPL has assured to make the entire payment, the OC should demand the said amount from them and not the purported CD. Additionally, the Respondent pointed out that the last payment of Rs. 25,00,000/- made on 13.05.2022 was received from GMPL, which was acknowledged by the OC via a letter dated 11.11.2022.

d. The Respondent contended that the last payment made by the CD was on 28.04.2022 for an amount of Rs. 30,00,000/-, and thereafter, subsequent payments were made by GMPL. Consequently, the Respondent submitted that the three-year limitation period for filing the application expired on 27.04.2025. It is further averred that although the application was purportedly filed on 09.04.2025, it was only duly registered on 01.05.2025, which is beyond the limitation period. The Respondent emphasized that limitation should be calculated up to the "date of registration" rather than the "date of filing," rendering the present application bad in law and time-barred.

e. The Respondent contended that the application is liable to be dismissed on the ground of misjoinder of parties. It is averred that pursuant to the agreements and arrangements between the CD and Torque along-with GMPL, it was GMPL that had agreed to pay various suppliers, including the OC. The Respondent submitted that the OC failed to make Torque along-with GMPL a necessary party to the application and has instead wrongfully filed the petition against the CD, who has no relationship or association with the alleged transaction. It is further stated that all raw materials supplied by the OC were utilized by Torque along-with GMPL, and as such, they are the rightful entities responsible for any unpaid dues. The Respondent emphasized that an affidavit has been provided by the Director of Torque and GMPL confirming that the outstanding amount is payable by them and not the CD. Consequently, the Respondent asserted that the application is bad in law and should be dismissed in limine as the CD is not connected with the transaction in question.

f. The Respondent stated that the OC has failed to annex a record of default from an Information Utility, which is a mandatory requirement under the Code as per the notification dated 03.04.2023. It is submitted that Regulation 20(1A) of the IBBI (Information Utilities) Regulations, 2017, necessitates the filing of such information before initiating CIRP under Section 9. The Respondent contended that the absence of this record makes the present application defective and liable to be dismissed.

g. The Respondent further averred that the Adjudicating Authority cannot be used as a recovery forum, as the primary objective of the Code is the revival of the CD. It is stated that the CD is an active and compliant company and that sending it into CIRP for a debt it is not liable to pay would be unjustified. The Respondent contended that the OC has filed the present application as an arm-twisting tactic to recover an alleged outstanding amount that is properly the liability of Torque along-with GMPL.

h. The Respondent submitted that the filing of GST returns by the OC does not prove the existence of an operational debt. It is averred that there must be unimpeachable proof of delivery of goods to establish such a debt. The Respondent stated that it does not have access to the OC's GST portal and, therefore, cannot verify the veracity of the information contained therein.

Without prejudice to its preliminary objections, the Respondent specifically denied that an outstanding amount of Rs. 1,31,90,803/- is due and payable by the CD. The Respondent reiterated that it cannot be held liable for the said amount, as Torque along-with GMPL have submitted an affidavit admitting full responsibility for the payment of the claimed debt. The Respondent denied the Applicant's assertion regarding lack of notice of the MOU, pointing out that the OC's acceptance of a payment from GMPL on 13.05.2022 indicates awareness of GMPL's involvement in the transaction.

j. It is further contended that the payment of Rs. 1,55,00,000/- by the CD does not constitute an admission of liability for the total supply, as the Respondent was not privy to the specific dealings between GMPL and the OC. The Respondent emphasized that the proceedings under the Code are summary in nature and the Adjudicating Authority lacks the scope to adjudicate upon complex factual disputes or oral contracts, which should be referred to a civil court. In conclusion, the Respondent submitted that the total amount claimed and the date of default are strictly disputed, and as the application is devoid of merit, it should be dismissed with costs.

a. The Applicant, in its rejoinder, denied the preliminary objections raised by the Respondent and averred that the application is not barred by limitation, nor is it bad for misjoinder of parties. It is contended that the Respondent's reliance on MOU dated 31.12.2021 is entirely misplaced, as the Applicant was never a party to, nor informed of, any such arrangement. The Applicant submitted that the Purchase Order dated 31.12.2021 was issued directly by the CD on its own letterhead and the goods were supplied and invoiced to the CD alone. Consequently, the Applicant maintained that the private contractual arrangements between the CD and GMPL cannot supersede the direct contractual relationship and the resulting liability of the Respondent to settle the outstanding operational debt.

b. The Applicant contended that the alleged MOU between the CD and GMPL is res inter alios acta, meaning a matter between others which cannot affect the rights of the OC. It is averred that the Applicant was neither a party to nor had any knowledge of such an internal arrangement at the time of supply. The Applicant submitted that as a matter of settled law, a debtor cannot unilaterally absolve itself of a debt by entering into a private agreement with a third party. Consequently, the Applicant maintained that it is not bound by the said MOU and the CD remains the primary entity responsible for the discharge of the operational debt.

c. It is further averred by the Applicant that the CD's conduct in making substantial part payments totalling Rs. 1,30,00,000/- even after the execution of the alleged MOU constitutes an unequivocal acknowledgement of the debt. The Applicant contended that under the doctrine of estoppel, the Respondent is prevented from denying liability or knowledge of the transaction after having voluntarily made such payments. The Applicant submitted that the delivery of goods to the Respondent's premises and the subsequent payments recorded in bank statements establish a direct contractual relationship that the CD is now unable to discharge.

d. In response to the Respondent's denial of the Purchase Order, the Applicant asserted that the document dated 31.12.2021 clearly bears the letterhead of the CD and contains all specific terms of supply. The Applicant further highlighted that the GST returns on record reflect the supply made to the Respondent's GSTIN. It is specifically contended that the Respondent has availed the benefit of Input Tax Credit (ITC) for these transactions, which further substantiates the validity of the debt and the receipt of goods.

e. The Applicant averred that the affidavit dated 20.03.2025, executed by Mr. Sitesh Kumar Pradhan, pertains to an internal arrangement between the CD, Torque and GMPL, to which the OC was not a party. It is submitted that the OC had no knowledge of such arrangements at the time of supply and is not bound by the same. The Applicant contended that the execution of this affidavit occurred only after the issuance of the Demand Notice on 03.02.2025. It is further maintained that the CD remains liable for the unpaid operational dues, and the production of a third-party assurance does not absolve the Respondent of its primary obligation to pay for the goods received.

f. The Applicant averred that the letter dated 11.11.2022, which acknowledged the receipt of Rs. 25,00,000/- from GMPL/Torque, does not establish that the debt was shifted from the CD to any third party. It is submitted that the said receipt was merely for the adjustment of the CD's dues and cannot be construed as an acceptance of the internal arrangements between the Respondent and GMPL. The Applicant contended that the letter categorically stated the payment was received "on behalf of the CD", which demonstrates that the OC has consistently recognized the liability as belonging solely to the Respondent under the original Purchase Order.

g. The Applicant averred that the Respondent's claim of being unaware of the delivery or supply of goods is fundamentally contradicted by its own conduct in making sequential payments from its bank accounts and availing GST input tax credit. It is contended that a party unaware of a transaction would not make multiple payments without objection, and such a payment history constitutes an admission that the supplies were received and accepted. The Applicant further submitted that the alleged MOU itself authorized GMPL to procure materials "on behalf of the CD," which squares with the fact that invoices were raised in the name of the Respondent with the consignee specified as the Respondent's plant.

h. In response to the contentions regarding limitation, the Applicant denied that the present petition is time-barred. It is submitted that the limitation period must be calculated from the "date of filing" of the application rather than the date of its registration, as supported by established judicial precedents. The Applicant averred that since the last payment was made on 28.04.2022, the filing of the present petition on 09.04.2025 is well within the prescribed three-year period.

In response to the plea of misjoinder, the Applicant submitted that the application is correctly filed against the entity that issued the purchase order and received the goods. It is contended that the Code does not provide for filing a single application against multiple parties for a single debt, and any internal arrangement between the Respondent and third parties does not absolve the Respondent of its direct liability towards the OC. The Applicant maintained that the Respondent is free to recover amounts from third parties as per their internal arrangements, but this is not a valid ground for the dismissal of the present insolvency resolution process.

j. The Applicant averred that the Respondent's denial of any relationship or association with the transaction is directly contradicted by the presence of invoices, GST returns, and records of payments made from the CD's own bank accounts. It is contended that the Respondent's admission of making payments for the supplies while simultaneously denying any contractual relationship reflects an intention to obscure the existence of the debt.

k. In response to the contention regarding the Information Utility, the Applicant submitted that a certificate from the Information Utility is not a mandatory requirement for filing an application under Section 9 of the Code. The Applicant relied on the decision of the Hon'ble NCLAT in Vijay Kumar Singhania vs. Bank of Baroda (Company Appeal (AT)(Ins.) No. 1058 of 2023), asserting that the Information Utility Certificate is not mandatory for proving default. Furthermore, the Applicant cited the order of this Hon'ble Tribunal in Sidhgiri Holdings Pvt. Ltd. vs. Bhilai Jaypee Cement Ltd. (C.P.(IB) No. 51/CB/2024), maintaining that such a certificate is directive in nature and not mandatory.

l. Regarding the contention that the Tribunal is being used as a recovery forum, the Applicant averred that the present case involves a clear operational debt that became due and payable with no genuine dispute existing at the time of the demand notice. The Applicant contended that the Respondent raised the alleged disputes for the first time only in response to the demand notice, indicating there was no pre-existing dispute. It is further submitted that the acknowledgment of debt through substantial payments made by the CD itself demonstrates that the application is filed for insolvency resolution and not mere recovery.

m. In response to the contention that GST filings do not prove the existence of an operational debt, the Applicant submitted that GST returns, when considered alongside invoices, purchase orders, and bank statements, collectively establish the existence of the debt. It is averred that GST invoices issued to and acknowledged by the CD serve as valid evidence of debt, supported by a catena of judicial precedents holding that GST returns are valid grounds for proof of operational debt. The Applicant highlighted that the Respondent has neither disputed the GST returns nor denied availing the benefit of ITC for the said transactions. Furthermore, the Applicant relied on Regulation 2B of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, which mandates the furnishing of Form GSTR-1 and GSTR-3B to prove the acknowledgment of debt and verify the genuineness of the transaction.

n. In response to the contentions regarding the nature of the debt, the Applicant submitted that the outstanding amount arises from the specific supply of Iron Ore Fines to the CD. It is averred that the debt is due and payable because the Respondent placed the orders, duly accepted the material, and made sequential payments from its own bank accounts for the said supplies. The Applicant contended that the debt and default are further established by the Respondent's own conduct in creating a purported MOU with a third party. It is maintained by the Applicant that this arrangement was an attempt to shift the Respondent's liability and convert a valid operational debt into a bona fide dispute.

o. In response to the Respondent's contention of not being privy to the transactions between the OC and GMPL, the Applicant averred that such a claim is directly contradicted by the CD's own bank statements. The Applicant submitted that it is standard business practice that a party unaware of a transaction does not make deliberate payments totalling Rs. 1,30,00,000/- or avail the benefit of ITC for said transactions. It is further contended that the Respondent cannot simultaneously deny knowledge of the supply while producing its own ledger entries proving and remitting these payments. The Applicant highlighted that in its reply to the demand notice, the CD admitted that GMPL was authorized "on behalf of" the CD. Consequently, the Applicant maintained that the Respondent's attempt to use the MOU to shift liability for materials procured during the contract period is inconsistent with its own acknowledgment of payments made to the OC.

p. The Applicant averred that the Respondent has failed to raise any specific or genuine pre-existing dispute apart from its reliance on an internal arrangement with GMPL. It is submitted that the Respondent's attempt to characterize this arrangement as a "dispute" is an afterthought, as the payments made by the Respondent and the receipt of goods were never questioned prior to the demand notice. The Applicant contended that the internal disputes or liabilities between the CD and its third-party contractors (GMPL/Torque) cannot be used as a shield to deny the operational debt owed to the Applicant. It is further maintained that the responsibility for the payment of the operational debt rests solely with the CD, which has admitted to its inability to discharge the same by attempting to shift the burden to a third party.

q. The Applicant averred that the Respondent has failed to raise any specific or genuine dispute in its reply, and the contentions raised therein are a mere afterthought. It is denied that there is any merit in the Respondent's defence regarding the internal arrangements with third parties. The Applicant maintained that all other allegations and contentions made by the CD in its Reply, which are not specifically admitted by the Applicant, are denied as being false and baseless.

Whether there exists an "operational debt" and a subsequent "default" as defined under the Code;

Whether the said debt exceeds the threshold limit of Rs. 1 Crore as stipulated under Section 4 of the Code;

Whether there exists any "pre-existing dispute" between the parties prior to the issuance of the Demand Notice; and

Whether the application is within the period of limitation.

- BSNL v. BPL Mobile Cellular Ltd. (2008) 13 SCC 597

- Nagendra Kumar Brijraj Singh v. Hindustan Salts Ltd., 2000 GLH (3) 402

- Chandrasekhara Hebbar v. Vittala Bhandari [1965 SCC OnLine Kar 54]

- BRS Ventures Investments Ltd. v. Srei Infrastructure Finance Ltd. [(2025) 1 SCC 456]

- Vijay Kumar Singhania v. Bank of Baroda [Company Appeal (AT)(Ins.) No. 1058 of 2023]: Wherein the Hon'ble NCLAT held that an Information Utility Certificate is not mandatory for proving the existence of a default.

- Sidhgiri Holdings Pvt. Ltd. v. Bhilai Jaypee Cement Ltd. [C.P.(IB) No. 51/CB/2024]: Wherein this Adjudicating Authority, vide order dated 15.10.2024, held that the requirement for such a certificate is directory in nature. While the Information Utility (NeSL) serves as an efficient record of default, its absence is not a fatal defect that warrants the dismissal of a Section 9 application, provided the default is otherwise established through “unimpeachable” documentary evidence. In the present case, the Applicant has placed on record the Purchase Order, Invoices, Bank Statements, and GST Returns, which collectively provide a clear trail of the operational debt and the subsequent default. Following the ratio laid down in Vijay Kumar Singhania (Supra) and our own earlier findings in Sidhgiri Holdings (Supra), we hold that the Information Utility Certificate is directory in nature. Since the existence of the debt and the default is substantiated by other statutory records, the objection raised by the Respondent on this ground is rejected.

a. The institution of suits or continuation of pending suits or proceedings against the CD, including execution of any judgment, decree or order in any court of law, tribunal, arbitration panel or other authority;

b. Transferring, encumbering, alienating or disposing of by the CD any of its assets or any legal right or beneficial interest therein;

c. Any action to foreclose, recover or enforce any security interest created by the CD in respect of its property, including any action under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act,2002;

d. The recovery of any property by an owner or lessor where such property is occupied by or in the possession of the CD.

e. The moratorium shall remain in force from the date of this order till the completion of the CIRP or until this Adjudicating Authority approves a resolution plan under section 31(1) of the code or passes an order for liquidation of the CD under Section 33 of the Code, whichever is earlier.