Ap Coated Drums & Barrels Pvt. Ltd & Anr vs Haresh Dharmani

AP Coated Drums and Barrels Pvt. Ltd. & Anr. ...Appellants

Vs.

Haresh Dharmani ...Respondents

Present: For Appellants: - Mr. Amol Chitale, Mr. Nirnimesh Dube and Mr. Akur Kulkarni, Advocates.

ORDER

21.01.2019─ Having heard learned counsel for the Appellant and

being satisfied with the ground, delay of 3 days in preferring the appeal

is hereby condoned. I.A. No. 133 of 2019 stands disposed of.

2. The Appellant-'AP Coated Drums & Barrels Pvt. Ltd.' ('Corporate

Debtor') preferred this appeal against the order dated 16th October, 2018

passed by the Adjudicating Authority (National Company Law Tribunal),

Mumbai Bench, Mumbai, whereby and whereunder, the application

under Section 9 of the Insolvency and Bankruptcy Code, 2016 ('I&B Code'

for short) preferred by Mr. Haresh Dharmani ('Operational Creditor') has

been admitted and order of 'Moratorium' has been passed and 'Interim

Resolution Professional' has been appointed.

3. Learned counsel appearing on behalf of the Appellant referred to

the documents including the tax invoices to suggest that certain amount 2

was due from the 'Operational Creditor' and if such amount is set off then

it will be evident that no amount is payable to the 'Operational Creditor'.

4. It is not in dispute that the 'Operational Creditor' has supplied

goods to the 'Corporate Debtor' and has timely raised invoices. However,

the payment against the two of the invoices, by way of which the

'Operational Creditor' has supplied 'CR Sheet' to the 'Corporate Debtor'

on 30th November, 2014, remained partly unpaid. The outstanding

amount against the invoices aggregates to Rs. 38,82,916/-. Out of which

the aggregate amount of only Rs. 1,10,486/- was paid by the 'Corporate

Debtor', leaving a balance to the principal amount of Rs. 37,72,430/-.

5. The case of the 'Operational Creditor' was that the last payment of

Rs. 10,00,000/- was paid on 15th and 18th September, 2017, thereby the

application under Section 9 of the 'I&B Code' was within time.

6. The 'Corporate Debtor' taken plea that the VAT amounting to Rs.

18,01,726/- is to be adjusted. On the other hand, the 'Operational

Creditor' had taken plea that VAT confirmation Certificate on entire

amount/ value of the goods supplied by the 'Operational Creditor' for F.Y.

2013-14, 2014-15, 2015-16 were issued. However, we are not going to

decide aforesaid issue as they are not required to be noticed. It is to be

seen as to whether there is a debt payable by the 'Corporate Debtor' and

whether there is an existence of dispute.

Company Appeal (AT) (Insolvency) No. 63 of 2019 3

7. In "Innoventive Industries Limited v. ICICI Bank and Another-

(2018) 1 SCC 407", the Hon'ble Supreme Court observed and held:

"29. The scheme of Section 7 stands in

contrast with the scheme under Section 8 where

an operational creditor is, on the occurrence of a

default, to first deliver a demand notice of the

unpaid debt to the operational debtor in the

manner provided in Section 8(1) of the Code.

Under Section 8(2), the corporate debtor can,

within a period of 10 days of receipt of the

demand notice or copy of the invoice mentioned

of a dispute or the record of the pendency of a

suit or arbitration proceedings, which is pre-

existing- i.e. before such notice or invoice was

received by the corporate debtor. The moment

there is existence of such a dispute, the

operational creditor gets out of the clutches of the

Code."

8. In "Binani Industries Limited Vs. Bank of Baroda & Anr. -

Company Appeal (AT) (Insolvency) No. 82 of 2018 etc.", this Appellate

Tribunal by its judgment dated 14th November, 2018 held that the

'Corporate Insolvency Resolution Process' does not amount to recovery

proceeding or a money claim. Therefore, the question of set off after

Company Appeal (AT) (Insolvency) No. 63 of 2019 4

determining the claim or counter claim cannot be decided by the

Adjudicating Authority.

9. The Adjudicating Authority having noticed that there is debt

payable which is more than Rs. 1,00,000/- and in absence of any

existence of dispute rightly admitted the application under Section 9 of

the 'I&B Code'.

10. At this stage, learned counsel appearing on behalf of the Appellant

submits that the Appellant is ready to settle the matter with the

'Operational Creditor'. However, even after such settlement, we cannot

set aside the impugned order to give any relief to the 'Corporate Debtor'.

11. In fact, the appeal at the instance 'Corporate Debtor'- 'AP Coated

Drums and Barrels Pvt. Ltd.' is not maintainable in the light of the

decision of the Hon'ble Supreme Court in "Innoventive Industries

Limited" (Supra), wherein the Hon'ble Supreme Court held:

"11. Having heard learned counsel for

both the parties, we find substance in the plea

taken by Shri Salve that the present appeal at

the behest of the erstwhile directors of the

appellant is not maintainable. Dr. Singhvi

stated that this is a technical point and he could

move an application to amend the cause title

stating that erstwhile directors do not represent

Company Appeal (AT) (Insolvency) No. 63 of 2019 5

the company, but are filing the appeal as

persons aggrieved by the impugned order as

their management right of the company has

been taken away and as they are otherwise

affected as shareholders of the company.

According to us, once an insolvency

professional is appointed to manage the

company, the erstwhile directors who are no

longer in management, obviously cannot

maintain an appeal on behalf of the company.

In the present case, the company is the sole

appellant. This being the case, the present

appeal is obviously not maintainable. However,

we are not inclined to dismiss the appeal on this

score alone. Having heard both the learned

counsel at some length, and because this is the

very first application that has been moved

under the Code, we thought it necessary to

deliver a detailed judgment so that all Courts

and Tribunals may take notice of a paradigm

shift in the law. Entrenched managements are

no longer allowed to continue in management if

they cannot pay their debts."

Company Appeal (AT) (Insolvency) No. 63 of 2019 6

12. While no relief can be granted in this appeal, make it clear that this

order will not come in the way of any other person to move an appropriate

application before the 'Committee of Creditors' under Section 12 A of the

'I&B Code' for appropriate relief.

(Justice S.J. Mukhopadhaya) Chairperson

(Justice Bansi Lal Bhat) Member(Judicial) Ar/uk

Company Appeal (AT) (Insolvency) No. 63 of 2019