Anjani Gases, A Sole Proprietorship ... vs B.P Projects Pvt Ltd

[Arising out of order dated 3rd May, 2019 passed by the Adjudicating Authority, National Company Law Tribunal, Kolkata Bench, Kolkata in CP(IB) No. 802/KB/2018]

IN THE MATTER OF:

Anjani Gases, Room No. 26, 249/B, G.T. Road, Liluah, Howrah- 711204 .. Appellant

Vs.

B.P. Projects Pvt. Ltd. S3, 352/(140) G.T. Road, Baidyabati, Hooghly WB- 712 222 .. Respondent

Present:

For Appellant: Mr. Anirudh Wadha, Mr. Keshav Gulati, Mr. P. Surya Teja and Shri Rohit Sharma, Advocates

For Respondents: Mr. Jishnu Saha, Sr. Advocate along with Mr. Praveen Kapoor, Advocate

JUDGMENT

(29th January, 2020)

KANTHI NARAHARI, MEMBER(T)

The Appeal is against the order passed by the Adjudicating

Authority (National Company Law Tribunal) Kolkata Bench, Kolkata

rejecting the Application filed by the Appellant under Section 9 of

Insolvency and Bankruptcy Code, 2016 (in short IBC).

Company Appeal(AT)(Insolvency) No. 661 of 2019 Page 1 of 14

2. The Appellant filed the Application before the Adjudicating

Authority invoking Section 9 of IBC in the capacity as Operational

Creditor for initiation of Corporate Insolvency Resolution Process (in

short CIRP) of the Corporate Debtor, namely B.P. Projects Pvt. Ltd.

Respondent herein. Since the Corporate Debtor allegedly committed

default in paying the operational debt of Rs. 1,45,74,133/-. The

Adjudicating Authority rejected the Application on the ground of

existence of serious dispute pending between the Appellant and the

Respondent and further holding that the same is required proper

adjudication.

3. From the perusal of the Application filed before the

Adjudicating Authority in requisite Form-5 at Part-4 (page -72 Vol.

I) in particulars of the Operational Debt, the amount of debt shown

as Rs. 1,10,23,431.38. The cause of the debt shown as the

transaction between the Appellant and the Respondent. The

contention of the Appellant is that they supplied Natural Oxygen

Cylinder, Carbon Dioxide Cylinders and LPG Gas Cylinders against

the Purchase Order received by the Appellant from the Corporate

Debtor. However, the amount claimed to be defaulted was Rs.

1,45,75,133.33 which includes 12% interest per annum.

4. Learned Counsel for the Appellant contended that the

Appellant had earlier issued two Demand Notices on 17.06.2016

and 13.07.2016 on account of non-payment of outstanding dues,

Company Appeal(AT)(Insolvency) No. 661 of 2019 Page 2 of 14 however, no reply received from Respondent/Corporate Debtor. It is

submitted that the Respondent defaulted in the payment of invoices

that were raised from June, 2014 in spite of follow up. The Appellant

served notice under Section 8 of IBC dated 31.03.2018 demanding

Rs. 1,10,23,431.38 and Rs. 35,50,701.95 totalling to Rs.

1,45,74,133.33. Learned Counsel for the Appellant submitted that

the Appellant received reply dated 13.04.2018 to this notice.

However, in their reply, the Respondent stated that there is no debt

payable by the Corporate Debtor as alleged in their Notice.

5. Having not received the debt due and payable by the

Respondent-Corporate Debtor, the Appellant was constrained to file

the Application as stated supra before the learned Adjudicating

Authority. It is submitted that the Appellant and Respondent having

a business relationship since the year 2005 wherein the Appellant

supplied gas cylinders to the Respondent on a routinely basis and

the payment was made by the Respondent in cycled basis.

6. While the Respondent stopped making payment to the

Appellant since the year 2014 and large amount stood due from the

Respondent and the Appellant stopped the supply of gas cylinders

to the Respondent. It is stated that the supply of gas cylinder to the

Respondent is an important requirement in their business and the

Respondent met the Appellant around May, 2014 and convinced

them to continue the supply of gas and assured the Appellant with

respect to the payments. It is stated that the Respondent was paying

Company Appeal(AT)(Insolvency) No. 661 of 2019 Page 3 of 14 the bills in cyclic way until 20.10.2016 and the Appellant continued

to deliver the Gas cylinders to the Respondent. It is stated that the

bills raised on and after June 2014, the Respondent defaulted in

payment of the bills raised for supply of gas cylinders and the bills

remained unpaid in spite of several follow up by the Appellant.

7. The Respondent has filed Reply Affidavit to this Appeal.

Learned Counsel for the Respondent submitted that they have

replied to the notice issued by the Appellant vide their reply dated

13.04.2018 whereby they have categorically stated that there is no

debt due and payable by the Respondent. However, in their reply

dated 13.04.2018 at paragraphs 4 & 5 (page 62, Vol. I) to the

Demand Notice they have further stated:

...

"4. That you have supplied Annexure-A (from the

period 15.06.2014 to 31.05.2016), Annexure-B (from

the period 15.06.2014 to 31.05.2016), Annexure -E

(from the period 1st December 2010 to 31st December,

whereas the Annexures C, D and F are not supplied.

5. That the transactions between M/s Anjani

Gas and M/s B.P. Projects Pvt. Ltd. were going on

before 2005. Hence without the complete set of

documents i.e. copies of invoices, complete ledger of

account (from the period 2204 to 2018), and the copies

Company Appeal(AT)(Insolvency) No. 661 of 2019 Page 4 of 14 of Annexures C, D and F, it is not possible to give

appropriate reply to this letter at this stage"

8. Learned Counsel for the Respondent submitted that in so far

as the payment of Rs. 1,10,23,431.38 is concerned, the Respondent

had paid Rs. 86,30,000/- and excess amount of Rs. 5,56,889/-

during the period of June, 2014 to October, 2016 and the same is

not adjusted by the Appellant. However, the Appellant lodged FIR

against the Directors of the Respondent Company under Sections

120-B, 406, 420 and 506 of IPC on 07.09.2016 for the act of

cheating and not paying the amount of Rs. 1,10,23,403.63 to the

Appellant. He submitted that there is serious dispute between the

Appellant and Respondent. As stated supra, the Respondent had

paid the amount of Rs. 86,30,000/-.

9. Heard learned Counsel appearing for the respective parties.

Perused the pleadings and documents filed in their support. The

main issue for consideration is whether there is existence of pre-

existing dispute between the Appellant and the Respondent.

Learned Adjudicating Authority dealt the above issue and concluded

that there is serious dispute between the Appellant and the

Respondent and for the said reason the Application has been

rejected. It is an admitted fact that the Section 8 Notice was issued

by the Appellant to the Corporate Debtor/Respondent demanding

the debt on 31.03.2018. However, the Appellant lodged the FIR on

07.09.2016 against the Directors of the Respondent under Sections

Company Appeal(AT)(Insolvency) No. 661 of 2019 Page 5 of 14 120-B, 406, 420 and 506 of IPC which offences are serious in nature

and the Appellant specifically mentioned the same amount i.e., Rs.

1,10,23,403.63 as claimed in the Application and Demand Notice.

In the Demand Notice and Section 9 Application, the Appellant

claimed the principal amount of Rs. Rs. 1,10,23,431.38 which is the

same amount the Appellant is claiming from the Respondent-

Corporate Debtor. However, as per the complaint of the Appellant,

the contents of the FIR clearly states that due to the acts of the

accused person, the Informant (Appellant) sustained wrongful loss

of Rs. 1,10,23,403.63 and the accused persons i.e. Directors of

Respondent Company wrongfully gained Rs. 1,10,23,403.63.

10. It is seen that the Appellant filed the above complaint

specifically alleging cheating the Appellant by not paying the due

amount towards supply of Oxygen Cylinders, Carbon dioxide

Cylinders and LPG Cylinders. The Respondent filed quashing

proceeding of the alleged FIR before Hon'ble High Court of Calcutta,

Kolkata. The Hon'ble High Court, vide order dated 17.01.2017 in

C.R.R. No. 130/2017 (Page- 1193- Vol. VI) stayed the proceeding of

FIR dated 07.09.2016 for a period of six weeks or until further orders

whichever is earlier. Thus disputes had arisen.

11. Learned Counsel for the Appellant vehemently contended that

the Appellant had claimed holding charges i.e. rental charges. The

Adjudicating Authority had dealt with the issue at paragraph-9 of

the impugned order and was of the view that holding or the rental

Company Appeal(AT)(Insolvency) No. 661 of 2019 Page 6 of 14 charges or the delivery charges are concerned, there is no separate

written contract entered into between the parties and observed that

the invoices did not show that the Operational Creditor was entitled

to claim such holding charges. However, we are not going into those

issues. It is very clear that the IBC is a summary procedure fully

time bound as specified in the Act. The Adjudicating Authority

cannot go into the serious disputes which require adducing of

evidence. The Hon'ble Supreme Court in "Mobilox Innovations

Private Limited vs. Kirusa Software Private Limited" reported

in (2018) 1 SCC 353 at paragraphs 33 and 51 held:

"33. The scheme under Sections 8 and 9 of the

Code, appears to be that an operational creditor, as

defined, may, on the occurrence of a default (i.e. on

non-payment of a debt, any part whereof has

become due and payable and has not been repaid),

deliver a demand notice of such unpaid operational

debt or deliver the copy of an invoice demanding

payment of such amount to the corporate debtor in

the form set out in Rule 5 of the Insolvency and

Bankruptcy (Application to Adjudicating Authority)

Rules, 2016 read with Form 3 or 4, as the case may

be [Section 8(1)]. Within a period of 10 days of

the receipt of such demand notice or copy of

invoice, the corporate debtor must bring to the

Company Appeal(AT)(Insolvency) No. 661 of 2019 Page 7 of 14 notice of the operational creditor the existence

of a dispute and/or the record of the pendency

of a suit or arbitration proceeding filed before

the receipt of such notice or invoice in relation

to such dispute [Section 8(2)(a)]. What is

important is that the existence of the dispute

and/or the suit or arbitration proceeding must

be pre-existing i.e. it must exist before the

receipt of the demand notice or invoice, as the

case may be. ....."

"51. ..... 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." ....

[Emphasis supplied]

12. To support the existence of dispute, it is seen from the reply

of the Respondent dated 13.04.2018 to the Demand Notice dated

05.04.2018 whereby the Respondent has categorically stated that

there is no recoverable debt due against the Respondent as alleged

in the Demand Notice dated 05.04.2018. Further, the Respondent

in his Reply has stated that the Respondent had paid Rs.

86,30,000/- which is an excess amount of Rs. 5,64,889/- during Company Appeal(AT)(Insolvency) No. 661 of 2019 Page 8 of 14 the period from June, 2014 to October, 2016 and the same is not

adjusted by the Appellant.

13. In the Rejoinder filed by the Appellant simply denied and

disputed that the Respondent had paid an excess amount to the

tune of Rs. 5,64,889/- during the period from June, 2014 to

October, 2016. Further, at page-7 of the Rejoinder of the Appellant,

it is stated, "It is denied and disputed that the Respondent-Company

had paid more than actual amount due to it."

14. From the facts and records, it is emphatically clear that there

is serious dispute between the parties which are prior to issuance of

Demand Notice. Neither the Adjudicating Authority nor this

Appellate Tribunal sitting in a summary jurisdiction can go into

those issues which otherwise required regular trial. As per sub-

section 5 of Section 9 of IBC,

...

"9. ...

(5) The Adjudicating Authority shall, within

fourteen days of the receipt of the application under

sub-section (2), by an order -

(i) admit the application and communicate

such decision to the operational creditor and

the corporate debtor if, -

(a) the application made under sub-

section (2) is complete;

Company Appeal(AT)(Insolvency) No. 661 of 2019 Page 9 of 14 (b) there is no payment of the

unpaid operational debt;

(c) the invoice or notice for payment

to the corporate debtor has been

delivered by the operational creditor;

(d) no notice of dispute has been

received by the operational creditor or

there is record of dispute in the

information utility; and

(e) there is no disciplinary

proceeding pending against any

resolution professional proposed

under sub-section (4), if any;

(ii) Reject the application and communicate

such decision to the operational creditor and

the corporate debtor, if -

(a) The application made under sub-

section (2) is incomplete;

(b) There has been payment of the

unpaid operational debt;

(c) The creditor has not delivered the

invoice or notice for payment to the

corporate debtor;

(d) Notice of dispute has been received

by the operational creditor or there

Company Appeal(AT)(Insolvency) No. 661 of 2019 Page 10 of 14 is a record of dispute in the

information utility; or

(e) Any disciplinary proceeding is

pending against any proposed

resolution professional:

Provided the Adjudicating Authority, shall

before rejecting an application under sub-clause (a)

of clause (ii) give a notice to the applicant to rectify

the defect in his application within seven days of the

date of receipt of such notice from the adjudicating

Authority."

...

[Emphasis supplied]

Sub-Section 5(ii)(d) of Section 9 refers to Notice of dispute has

been received by the Operational Creditor or there is a record of

dispute in the Information Utility, the Adjudicating Authority shall

reject the Application. While rejecting the Application, the

Adjudicating Authority also shall have to read with Section 8(2)(a) of

IBC where it refers to existence of dispute and the following Section

is reproduced hereunder:

...

"8 ...

(2) The corporate debtor shall, within a period of ten

days of the receipt of the demand notice or copy of the

Company Appeal(AT)(Insolvency) No. 661 of 2019 Page 11 of 14 invoice mentioned in sub-section (1) bring to the notice of

the operational creditor-

(a) existence of a dispute, if any, or record of the

pendency of the suit or arbitration proceedings filed before

the receipt of such notice or invoice in relation to such

dispute;"

[Emphasis supplied]

15. From the above provision it is mandatory that the Operational

Creditor on the occurrence of a default, deliver a Demand Notice of

unpaid operational debt, copies of invoices demanding payment of

the amount involved in the default to the Corporate Debtor in such

form and manner as may be prescribed. The Corporate Debtor shall,

within a period of 10 days of the receipt of the Demand Notice or

copy of the invoice mentioned in Section 8(1) of IBC bringing to the

notice of the Operational Creditor regarding existence of a dispute

(if any) record of pendency of the suit or the arbitration proceedings

filed before the receipt of such notice or the invoice in relation to

such dispute. In the present case, admittedly, there are disputes

between the Appellant and the Respondent which is evident from

the records as stated supra. From the FIR lodged by the Appellant

prior to sending of Section 8 Notice and the Respondent disputed

the debt to be payable by the Respondent in their reply to the

Demand Notice.

Company Appeal(AT)(Insolvency) No. 661 of 2019 Page 12 of 14

16. From the above provision of law, it is clear that the moment

there is an existence of a prior dispute, the Corporate Debtor gets

out of clutches of the rigors of the Court. Further the adequacy of

dispute is only to be seen whether the dispute raised by the

Corporate Debtor specifies as a dispute as defined under Section

5(6) of IBC.

17. In this case, the Appellant itself started dispute by filing an

FIR against the Directors of the Respondent Company for cheating

the Appellant for the same amount as claimed by the Appellant

before the Adjudicating Authority in Section 9 Application, which is

prior to the filing of the Section 9 Application. Further the

Respondent- Company have categorically stated that they have paid

an excess amount of Rs. 5,56,889/- apart from the amount of Rs.

86,30,000/-paid. The Appellant has disputed the said excess

amount. This is itself further considered as a clear dispute between

the parties prior to the issuance of Demand Notice by the Appellant.

The main dispute existed between the parties is with respect to filing

of FIR against the Directors of Respondent Company for the same

amount which they claimed in Section 9 Application.

18. Hence in view of Section 9(5)(ii)(d) of the IBC on the ground

that there is a record of dispute existence between the parties, which

dispute is serious in nature.

Company Appeal(AT)(Insolvency) No. 661 of 2019 Page 13 of 14

19. Accordingly, we hold that there is pre-existing dispute

between the parties which cannot be adjudicated in a summary

proceeding as held by the Hon'ble Supreme Court in the matter of

Mobilex (supra).

20. In view of the aforesaid reasons, we are not inclined to

interfere with the order passed by the Adjudicating Authority. The

Appeal is devoid of the merits and liable to be dismissed.

Accordingly, the same is dismissed. No orders as to cost.

[Justice A.I.S. Cheema] Member (Judicial)

(Kanthi Narahari) Member(Technical)

(V P Singh) Member(Technical) Akc

Company Appeal(AT)(Insolvency) No. 661 of 2019 Page 14 of 14