Universal Polychem (India) Pvt Ltd vs Krishna Electrical Industries Ltd

Invoice-wise ledger account maintained between the parties on FIFO basis, as tabulated in paragraph 7A above. ii. Copies of unpaid invoices and duly stamped and signed transport receipts evidencing receipt of goods by the Corporate Debtor. iii. Form “C” declarations filed by the Corporate Debtor under the Central Sales Tax Act. iv. Copy of the statutory Demand Notice dated 14.07.2015 under Section 434 of the Companies Act, 1956, along with proof of service.

Record of Default dated 01.08.2025 issued by the National E-Governance Services Limited (NeSL). vi. Documents placed on record pursuant to I.A. No. 360 of 2025, referred to in paragraph 12A below.

The debt of Rs. 1,87,90,993/- claimed by the Operational Creditor stands clearly established on the strength of the invoice-wise ledger tabulated in paragraph 7A above. Each of the said invoices is supported by a transport receipt duly stamped and signed by the Corporate Debtor acknowledging actual receipt of the goods, and is further corroborated by the Form “C” declarations issued by the Corporate Debtor and the Record of Default dated 01.08.2025 issued by NeSL. The Corporate Debtor has, at no stage, disputed the genuineness of these invoices, the receipt of goods thereunder, or the correctness of the running ledger, and has failed to place any material on record to rebut the same. The existence of the debt, in our view, is thus not a matter of inference but stands demonstrated directly from the documents on record.

The rate of interest at 18% per annum stands stipulated in the invoices raised by the Operational Creditor, and the said rate finds specific mention in the statutory Demand Notice dated 14.07.2015 calling upon the Corporate Debtor to pay the outstanding amount together with interest at the said rate. The Corporate Debtor did not, at any point prior to institution of these proceedings, raise any objection or dispute to the said rate of interest stipulated in the invoices.

The requirement of minimum default under the Code stands satisfied on the principal amount alone, which stands independently proved by the invoices duly acknowledged by the Corporate Debtor. The First Issue is accordingly answered in favour of the Operational Creditor, without this Tribunal going into the quantum of interest claimed.

It is an admitted and uncontroverted position on record that the Operational Creditor issued a statutory Demand Notice dated 14.07.2015 under Section 434 of the Companies Act, 1956, calling upon the Corporate Debtor to discharge the outstanding dues together with interest. The said notice was duly served upon the Corporate Debtor at its registered office on 17.07.2015, and the Corporate Debtor has, at no stage, disputed either the issuance or the receipt of the said notice.

The present proceedings, being a Transfer Petition arising out of a winding-up petition instituted prior to the enforcement of the Code, did not require the issuance of a fresh demand notice under Section 8 of the Code. The Full Bench of the Hon'ble NCLAT, in Rajeev Srivastava v. Ahluwalia Contracts (India) Ltd., 2023 SCC OnLine NCLAT 765 (Para 12), has held that a statutory notice under Section 434(1)(a) of the Companies Act, 1956, is pari materia to a demand notice under Section 8 of the Code, and that upon transfer of a winding-up petition to the Adjudicating Authority, no fresh notice under Section 8 is necessary or mandatory. We are in respectful agreement with the said view.

Accordingly, we hold that the Demand Notice dated 14.07.2015, duly served on 17.07.2015, satisfies the requirement of a demand notice preceding the present proceedings. The Second Issue is answered in favour of the Operational Creditor.

It is a settled position of law that a genuine pre-existing dispute bars initiation of Corporate Insolvency Resolution Process. The Operational Creditor has placed on record the ledger, invoices, transport receipts and Form "C" declarations referred to hereinabove, establishing the debt and default. The date of default stands established as 14.08.2014, being the date of the last payment, computed with reference to the last invoice dated 31.07.2014.

It is significant that the Operational Creditor instituted the Winding Up Petition before the Hon'ble High Court of Madhya Pradesh as far back as 15.12.2015, which came to be transferred to this Tribunal only vide order dated 28.05.2024, and has since been prosecuted continuously, without any intervening abandonment.

On the question of pre-existing dispute, we have examined the pleadings relied upon by the Corporate Debtor, namely, Miscellaneous Civil Case No. 318/2017 and the FIR dated 06.06.2018. Miscellaneous Civil Case No. 318/2017, instituted after the Demand Notice dated 14.07.2015, was in the nature of a recovery proceeding consequent to the pendency of the winding-up petition; the filing of a recovery proceeding subsequent to the statutory demand notice does not, by itself, bar admission of the Corporate Debtor into CIRP. Further, the said proceeding had no existence independent of Company Petition No. 11/2015 (transferred as the present Transfer Petition) and stood disposed of in terms of the order dated 28.05.2024 passed in CP No. 11/2015. No ground pertaining to the quality, quantity, or manner of supply of goods was in any event raised therein so as to substantiate a valid pre-existing dispute.

Similarly, the FIR dated 06.06.2018, apart from being an independent criminal proceeding with a distinct cause of action, was lodged nearly three years after the Demand Notice dated 14.07.2015, and cannot be treated as evidence of a dispute pre-existing the said notice.

It is well settled that for a dispute to qualify as a pre-existing dispute within the meaning of the Code, it must be a real and substantial dispute on facts or law, and not spurious, hypothetical, illusory, or a moonshine defence raised only to defeat the claim of the Operational Creditor. The Hon'ble Supreme Court, in Mobilox Innovations Pvt. Ltd. v. Kirusa Software Pvt. Ltd., (2018) 1 SCC 353, has held that while the Adjudicating Authority is not required to examine the merits of the dispute, it must be satisfied that a real dispute exists between the parties, and not one that is a patched-up or feeble defence without any evidence to back it.

Tested on this touchstone, we find that the sole plea of quality defects raised by the Corporate Debtor for the first time in IA No. 3941/2019, filed as late as 20.09.2019 — four years after the Demand Notice — is wholly unsubstantiated, bereft of particulars, and unsupported by any correspondence, testing report, rejection memo, or other contemporaneous material. Such a bald and unparticularised plea does not meet the threshold of a genuine pre-existing dispute.

We accordingly hold that no dispute, much less a pre-existing dispute, existed between the parties prior to the Demand Notice dated 14.07.2015. The Third Issue is answered against the Corporate Debtor and in favour of the Operational Creditor.

The Transfer Petition bearing TP (IBC)/1 (MP) 2024 (CP No. 11/2015), filed by the Operational Creditor under Section 9 of the Code r/w Rule 6 of the Adjudicating Authority Rules for initiating CIRP against the Corporate Debtor, is admitted.

Corporate Insolvency Resolution Process is hereby initiated against the Corporate Debtor, Krishna Electrical Industries Limited.

Moratorium is declared under Section 14 of the Code, prohibiting: (a) institution of suits or continuation of pending suits or proceedings against the Corporate Debtor, 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 any assets or any legal right or beneficial interest therein by the Corporate Debtor; (c) any action to foreclose, recover or enforce any security interest created by the Corporate Debtor in respect of its property; and (d) the recovery of any property by an owner or lessor where such property is occupied by or in possession of the Corporate Debtor.

The supply of essential goods or services to the Corporate Debtor, if continuing, shall not be terminated, suspended or

The moratorium shall have effect from the date of this order till completion of the Corporate Insolvency Resolution Process, subject to the provisions of the Code.

Bishwa Ranjan Chatterjee, Reg. No. IBBI/IPA-002/IP-N00877/2019-2020/12806, is appointed as the Interim Resolution Professional, subject to filing of the requisite consent in Form-2 and disclosure under the applicable Regulations, to carry out the functions under Sections 15, 17, 18, 20 and 21 of the Code. The IRP shall make a public announcement in terms of Section 13 read with Section 15 of the Code within three days of receipt of this order.

The Operational Creditor is directed to deposit a sum of Rs. 1,00,000/- (Rupees One Lakh only) with the Interim Resolution Professional to meet immediate expenses, subject to adjustment and recovery from the Committee of Creditors, in terms of the Code and the Regulations framed thereunder.

The Registry is directed to communicate this order to the Operational Creditor, the Corporate Debtor, and the Interim Resolution Professional, forthwith, and to send a copy of this order to the Insolvency and Bankruptcy Board of India for its record.