Aparna Enterprise Ltd vs Sjr Prime Corporation Pvt Ltd

NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI Company Appeal (AT) (Insolvency) No. 632 of 2020 (Arising out of Impugned Order Dated 18.06.2020 passed by National Company Law Tribunal, Bengaluru Bench in CP(IB) No.34/BB/2020)

In the matter of: Aparna Enterprise Ltd. D.No.8-2-293/82/A, Plot No.1214, Road No.60, Jubilee Hills, Hyderabad Telangana - 500 033 ....Appellant Vs.

SJR Prime Corporation Pvt. Ltd. 'The Hub' S.Y.No.8/2, Sarjapur Road, Ambalipura Village, Varthur Hobli, Bangalore East Bangalore, Karnataka - 560 102 ....Respondent

Present: Appellant: Mr. Virender Ganda, Senior Advocate with Mr. Vishal Ganda, Mr. Vipul Ganda, Mr. Ayandeb Mitra, Ms. Shelly Khanna, Advocates.

Respondent: Mr. Ajesh Kumar Shankar, Ms. Garima Jain, Ms. Saranya, Advocate.

DR. ASHOK KUMAR MISHRA, TECHNICAL MEMBER

1. The present Appeal has filed by the Appellant - Aparna Enterprises Limited

under Section 61 of the Insolvency and Bankruptcy Code, 2016 (in short

'Code') against the Impugned order dated 18.06.2020 passed by the

Company Appeal (AT) (Insolvency) No. 632 of 2020

Page 1 of 20 Adjudicating Authority (National Company Law Tribunal, Bengaluru

Bench) in CP(IB) No. 34(BB) of 2020.

2. The Adjudicating Authority vide impugned order dated 18.06.2020

disposed of the Company Petition and passed the following orders:

"Para -10. In the result, CP(IB) No.34/BB/2020 is

hereby disposed of with the following directions:

(1) The parties are at liberty to prosecute the Arbitration

Application bearing A.A No.25025 of 2019 pending

before the XXVIII Additional City Civil Sessions

Judge, Mayo Hall Unit (CCH-29), Mayo Hall,

Bengaluru.

(2) The Petitioner is granted liberty to take appropriate

legal course of action, subject to result of the above

Arbitration case.

(3) No order as to costs."

3. The Adjudicating Authority has decided the case on the reason that the

Company Petition has been filed with an intention to recover the disputed

outstanding amount in question & Arbitration Application bearing A.A No.

25025 of 2019 is pending before the XXVIII Additional City Civil Sessions

Judge, Mayo Hall Unit (CCH-29), Mayo Hall, Bengaluru.

Company Appeal (AT) (Insolvency) No. 632 of 2020

Page 2 of 20

4. The Appellant has submitted that it is the Corporate Debtor which

approached the Appellant for supply of Ready-Mix Concrete (RMC), Tyles,

UPVS and Blocks (Materials) in 2014 onwards and under the arrangement

between the parties the Corporate Debtor (Respondent) i.e. SJR Prime

Corporation Private Limited would raise purchase orders upon the

Appellant and the Appellant would supply the specified quantity of the

desired material alongwith invoices. Form -3 Annexure 1A reflects that the

Invoice submitted by the Appellant from 16.04.2018 to 23.02.2019 has

been defaulted (Paper Book page No.85 to 95) by the Respondent. The

Default period is varying from over 200 days to approximately 500 days.

As per Form - 5, filed by the Appellant, before the Adjudicating Authority

total amount of Debt is Rs.8 ,44,49,943/- which includes interest at the

rate of 20% amounting to Rs.1,49,65,555/- as on the date of issue of

Demand Notice. These dues are against the supplies made against

purchase orders (five numbers) dated 01.07.2017 to 01.03.2018. The

Appellant auditor vide their letter dated 22nd March, 2019 asked for

confirmation of balance from Respondent & that on March 28, 2019 the

confirmation of balance as per Books of Corporate Debtor of Rs.

5,86,75,288/- and Rs.29,34,864/- towards RMC and Tyles respectively

were received from the Corporate Debtor. The said balance confirmation

was revoked by Corporate Debtor on 03rd May, 2019 due to some

accounting issues and the Corporate Debtor assured to provide a new

Company Appeal (AT) (Insolvency) No. 632 of 2020

Page 3 of 20 balance confirmation upon reconciliation. The Corporate Debtor assured

to pay the outstanding operational dues in tranches vide their letter dated

10th April, 2019 and paid only Rs.2.10 crore (Approx.) by September, 2019

to the Appellant and again revised balance confirmation was received by

the Corporate Debtor in September, 2019 for a total sum of Rs. 6.80 Crore

(Approx.). The Appellant repeated request failed to get the payments of the

pending invoices and as a result of which the Appellant has issued a

Demand Notice on 18th November, 2019 under Section 8 of the Code on

the Corporate Debtor by email and on 21st November, 2019 via speed post.

On 13th December, 2019 the Corporate Debtor filed the Application under

Section 9 of the code before the Adjudicating Authority. On 13th December,

2019 the Appellant has received the reply of Demand Notice and also the

information that a Petition under Section 9 of the Arbitration and

Conciliation Act, 1996 has been filed against the Appellant on 03rd

December, 2019.

5. The Appellant has also submitted certificate of default from National E-

Governance Services Limited vide their report dated 24th January, 2020

(page 178 to 184 of Appeal Paper book). The Appellant has raised the issue

of initiation of unlawful Arbitration including unlawful issuance of notice

under Section 21 of the Arbitration and Conciliation Act, 1996. The

Appellant has also raised the issue of unrelated FIR filed on 12th

September, 2018 as the name of the Appellant is not in the FIR and

Company Appeal (AT) (Insolvency) No. 632 of 2020

Page 4 of 20 allegation is of manipulation of accounts department. They have also

raised the issue of consideration of economic distress due to pandemic

having been considered by the Adjudicating Authority which is against

their powers. The Appellant has also clarified the inapplicability of the

judgments cited by the Respondent and the same are reproduced below:

 Yash Technologies Private Limited Vs. Base Corporation Limited,

Company Appeal (AT) (Ins) No.01 of 2019.

Facts : the Appellant had filed a petition under section 433 (e) and Section

343(1) of Companies Act, 1956 which was transferred pursuant to Rule 5

of Companies Act (Transfer of Pending Proceeding) Rules, 2016. The Ld.

Adjudicating Authority vide its order dismissed the application under

section 9 of IBC, 2016 on the ground of pre-existing dispute.

Distinguishing note:

Hon'ble NCLAT has held that in the present there is existence of dispute

prior to the filing of Petition under Section 433(e) and section 343(1) of

companies Act, 1956 and therefore the application under section 9 of the

code was not maintainable. Since, the Corporate Debtor had raised

objections with regard to non-completion of project within time and defects

in work done in haste (Paragraph 4 @ page no.1 of respondent's

Compilation of judgments)

Company Appeal (AT) (Insolvency) No. 632 of 2020

Page 5 of 20 Whereas, the said case in not applicable in the present proceedings since

there is no such pre-existing dispute. The Respondent has not produced a

single email/ letter relating to existing quality issues.

 Jaya Patel Vs. Gas Jeans Private Limited and Others, Company

Appeal (AT) (Ins) No. 308 of 2018

Facts: the Appellant had filed a petition under section 433 (e)and

section 343(1) of companies Act, 1956 which was transferred

pursuant to Rule 5 read of companies Act (Transfer of Pending

Proceeding) Rules, 2016. The Ld. Adjudicating Authority vide it order

admitted the application under Section 9 of IBC, 2016 and

appointed interim resolution Professional.

Distinguishing Note:

Hon'ble NCLAT has held that an application under section 9 of IBC,

cannot be preferred before the completion of 10 days from sending

the demand notice. Since the demand notice and application u/s 9

of the IBC were on the same date, the admitted section 9 application

filed by the Operational Creditor was not maintainable (para 1 @ 3

& para 4 @ page No.5 of Respondent's Compilation of Judgments)

Whereas, the said case in not applicable in the present proceedings

since the period of 10 days was provided prior to filing of the

application u/s 9 of the IBC. Relevant timeline is provided

hereinafter:

Company Appeal (AT) (Insolvency) No. 632 of 2020

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1.November 18, 2019 - Service of demand notice via email as per

Rule 5(2) (b) of the I&B (Application to Adjudicating Authority) rules,

2016 (Page No. 80-98 @ 80 of Appeal)

2. November 21, 2019 - Service of demand notice via speed post as

per Rule 5(2)(a) of the I&B (Application to Adjudicating Authority)

Rules, 2016 (Page No.80-100 @99-100 of Appeal)

3.December 13, 2019 - Filing of application u/s 9 of IBC (Page

No.258 of Appeal)

 Neeraj Jain Vs. Cloudwalker Streaming Technologies Pvt. Ltd and

ors, Company Appeal (AT) (Ins) no. 1354 of 2019.

Facts: the said appeal was filed by the erstwhile director of the

Corporate Debtor. The present appeal arose out of an order passed

by the ld. Adjudicating Authority, wherein the ld Adjudicating

Authority had admitted the application under section 9 of IBC,

2016.

Distinguishing note:

Hon'ble NCLAT in the present judgment had set aside the judgment

passed by the ld. Adjudicating Authority wherein the CIRP was

initiated against the Corporate Debtor.

Hon'ble NCLAT held that the operational Creditor failed to submit

any documents to prove the existence of the operational debt and

the amount in default. Furthermore, the operational creditor had

Company Appeal (AT) (Insolvency) No. 632 of 2020

Page 7 of 20 also failed to submit the copes of the invoice, copy of bank statement

and relevant documents. (Para 79 @ 34-35 of judgment).

The Operational Creditor had issued a notice for payment of due,

failing which the dispute shall be referred to arbitration. (Para 79 @

34 - 35 of judgment)

Whereas, the said case in not applicable in the present proceedings

since, the debt herein is due, admitted and defaulted:

 The Respondent provided a Reconciled balance confirmation

vide emails dated September 21, 2019 and September 25,

2019 for Rs. 6,80,57,809 (Page No. 68 - 70 of Appeal)

 Appellant has attached the Invoices for Rs. 7,46,286 raised by

the Appellant between the period of September 18, 2019 to

October 10, 2019 - invoices duly acknowledged by the

Respondent (Page No. 8-9; 144-169 of Appeal).

6. The Appellant has raised the issue of creation of false disputes and in that

context has cited the judgment of Mobilox Innovations Private Limited Vs.

Kirusa Software Private Limited in Civil Appeal No. 9405 of 2017.

7. The Respondent is a Real Estate Developer and over a period of time has

established a valuable reputation with regard to Real Estate Business

activity and has undertaken various commercial / residential and other

related activities in and around Bangalore for a value of about Rs. 1200

Crore. The Respondent has also entered into Joint Development

Company Appeal (AT) (Insolvency) No. 632 of 2020

Page 8 of 20 Agreement with Land owners for developing projects sites of over 5 million

square feet covering commercial and residential space (Annexure R2 of

Statement of Objections). The Respondent is duty bound to deliver the

property developed with best quality of construction as there is defect

liability clause in the respective agreements. The defect liability period is

varying up to 5 years. In order to finance the construction projects the

Respondent has availed various types of loans for a total sum of Rs.980.50

Crores. There are multiple clauses in the agreement which provides for

liability in respect of defects and delay in delivery in apartments. They are

engaging the best architects like Thomas Consultants, VVT Consortium,

Gridhar Associates etc.

8. Based on assurance from the Appellant that they will supply best quality

products and hence Respondent has placed the purchase order with the

Appellant for the stated materials as above. They have also attached a copy

of purchase order with terms and conditions at Page No.141 to 146 of the

Statement of Objections. The Terms and Conditions speaks of delivery

time, inspection, jurisdiction of Bangalore, Arbitration, Inferred Liquidated

Damages, per day of delay etc. Clause 10 and 11 of the purchase order for

ease of convenience is reproduced below:

Clause 10- Jurisdiction : This contract shall be deemed to have been made

under the Contract Act and the same shall be subject to the jurisdiction

of Bangalore.

Company Appeal (AT) (Insolvency) No. 632 of 2020

Page 9 of 20 Clause -11: Arbitration - Any dispute arising out of the contract made by

this order shall be referred to arbitration as defined under the Arbitration

Act and statutory amendments made thereto or approach appropriate

legal forum for any loss suffered by the purchaser.

9. They have also produced details of payments made to Appellant from

September, 2014 to February, 2019 with varying in figures amounting to

approx. Rs. 125 crores. The Respondent has also annexed copy of emails

at Annexure R-8, 9 &10 at page No.154 to 191 of the Statement of

Objections. The copy of email and other debit notes issued for the defects

on various dates. All these reflect correspondence of August 2016,

February, 2018, September 2018 and then about the incomplete works

from email of June, 2019 and Debit note of November 2018.

10. The Respondent has alleged that Appellant have manipulated

some of the officers working the Respondent's Account Department and

obtained confirmation letter dated 22nd March, 2019 which was withdrawn

by the Respondent on 03rd May, 2019 and in the Process the Respondent

has also to file FIR against the Deputy General Manager for issuing such

balance confirmation certificate. The Respondent has also alleged that vide

A.A No. 25025 of 2019 has filed dated 03.12.2019 before the XXVIII

Additional City Civil Sessions Judge, Mayo Hall Unit (CCH-29), Mayo Hall,

Bengaluru under Section 9 of the Arbitration and Conciliation Act, 1996,

directing the Respondent to deposit a sum of Rs. 66 Crore Approx.

Company Appeal (AT) (Insolvency) No. 632 of 2020

Page 10 of 20

11. As far as Demand Notice is concerned, the Respondent has raised

that there was no provision to pay interest at the rate of 24 % per annum

as per the terms of the purchase order. No doubt it is mentioned in the

invoice but this is a unilateral Act by the Appellant and not accepted by

the Respondent. Similarly, the amount reflected in the invoice is not

tallying to the accepted confirmation of balances. They have also raised

the issue that certain documents produced in the Appeal, they are not part

of the proceedings before Adjudicating Authority and hence the same

cannot be considered to improve their case at a later stage and have cited

the judgment in MS Gill Vs. Chief Election Commissioner as reported in

AIR 1978 SC 851.

12. The Appellant has also produced the ICICI Bank Letter but the

same is unable to confirm how much money is received from the Corporate

Debtor. They have also alleged that the Appellant claim that they sent a

notice as well as an email dated 18/11/2019. The said email was not

produced along with the Petition before the Adjudicating Authority. The

only notice which was produced before the Adjudicating Authority is the

Form-3 and Form-4 notice dated 18/11/2019. The email dated

18/11/2019 refers to an attachment. However, no attachment is produced

alongwith the said notice. The Demand notice was received by the

Respondent on 06.12.2019 and the same was replied on 09.12.2019

wherein they have raised the issue of purchase orders, terms and

Company Appeal (AT) (Insolvency) No. 632 of 2020

Page 11 of 20 conditions particularly, inspection and rejection. They have also

mentioned that against the purchase order for a total value of Rs. 115.85

Crore, the Respondent has made a payment of Rs.125.36 Crores on

various dates. They have also raised the issue of debits notes and the

defects reported to the Respondent in April, 2019 and also certain other

snags as reports in various emails. They have also disputed charging of

interest at the rate of 24 % p.a which, nowhere was existing in the

purchase orders and has claimed an amount o f Rs. 9 Crore to be recovered

from the appellant towards defective goods supplied to the Respondent

and has resorted to Arbitration Proceedings in line with the purchase

orders terms and conditions. They have also raised that the case argued

in the Appeal is in variation to the case as argued before the Adjudicating

Authority and in variation to the notice issued under Section 8. They have

also raised the issue that there is a genuine pre-existing dispute which is

proved from the records and initiation of Arbitration Proceedings.

13. We have gone through the various submissions made by the

parties and carefully gone through the Hon'ble Supreme Court Judgment

Mobilox Innovations Private Limited Vs. Kirusa Software Private Limited in

Civil Appeal No. 9405 of 2017. For the brevity or clarity, Section 8 &9 of

the Code is reproduced below:

Section 8 -Insolvency Resolution by Operational Creditor. - (1) An operational creditor may, on the occurrence of a default,

Company Appeal (AT) (Insolvency) No. 632 of 2020

Page 12 of 20 deliver a demand notice of unpaid operational debtor copy of an invoice demanding payment of the amount involved in the default to the corporate debtor in such form and manner as may be prescribed.

(2) The corporate debtor shall, within a period of ten days of the receipt of the demand notice or copy of the 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;

(b) the payment of unpaid operational debt--

(i) by sending an attested copy of the record of electronic transfer of the unpaid amount from the bank account of the corporate debtor; or

(ii) by sending an attested copy of record that the operational creditor has encashed a cheque issued by the corporate debtor.

Explanation.--For the purposes of this section, a "demand notice" means a notice served by an operational creditor to the corporate debtor demanding payment of the operational debt in respect of which the default has occurred.

Section 9. Application for initiation of corporate insolvency resolution process by operational creditor- (1) After the expiry of the period of ten days from the date of delivery of the notice or invoice demanding payment under sub-section (1) of section 8, if the operational creditor does not receive payment from the corporate debtor or notice of the dispute under sub-section (2) of section 8, the operational creditor may file an application before the Adjudicating Authority for initiating a corporate insolvency resolution process.

(2) The application under sub-section (1) shall be filed in such form and manner and accompanied with such fee as may be prescribed.

Company Appeal (AT) (Insolvency) No. 632 of 2020

Page 13 of 20 (3) The operational creditor shall, along with the application furnish--

(a) a copy of the invoice demanding payment or demand notice delivered by the operational creditor to the corporate debtor;

(b) an affidavit to the effect that there is no notice given by the corporate debtor relating to a dispute of the unpaid operational debt;

(c) a copy of the certificate from the financial institutions maintaining accounts of the operational creditor confirming that there is no payment of an unpaid operational debt by the corporate debtor, if available;

(d) a copy of any record with information utility confirming that there is no payment of an unpaid operational debt by the corporate debtor, if available; and

(e) any other proof confirming that there is no payment of an unpaid operational debt by the corporate debtor or such other information, as may be prescribed.

(4) An operational creditor initiating a corporate insolvency resolution process under this section, may propose a resolution professional to act as an interim resolution professional. (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;

(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 no 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.

Company Appeal (AT) (Insolvency) No. 632 of 2020

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(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 is a record of dispute in the information utility; or

(e) any disciplinary proceeding is pending against any proposed resolution professional:

Provided that Adjudicating Authority, shall before rejecting an application under subclause (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.

(6) The corporate insolvency resolution process shall commence from the date of admission of the application under sub-section (5) of this section.

In Mobilox Innovations Private Limited Vs. Kirusa Software Private Limited in Civil Appeal No. 9405 of 2017 Para 24 & 25 of Hon'ble Supreme Court Judgment reflects as below:

Para 24 - 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

Company Appeal (AT) (Insolvency) No. 632 of 2020

Page 15 of 20 period of 10 days of the receipt of such demand notice or copy of invoice, the corporate debtor must bring to the 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. In case the unpaid operational debt has been repaid, the corporate debtor shall within a period of the self-same 10 days send an attested copy of the record of the electronic transfer of the unpaid amount from the bank account of the corporate debtor or send an attested copy of the record that the operational creditor has encashed a cheque or otherwise received payment from the corporate debtor (Section 8(2)(b)). It is only if, after the expiry of the period of the said 10 days, the operational creditor does not either receive payment from the corporate debtor or notice of dispute, that the operational creditor may trigger the insolvency process by filing an application before the adjudicating authority under Sections 9(1) and 9(2). This application is to be filed under Rule 6 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 in Form 5, accompanied with documents and records that are required under the said form.

Under Rule 6(2), the applicant is to dispatch by registered post or speed post, a copy of the application to the registered office of the corporate debtor. Under Section 9(3), along with the application, the statutory requirement is to furnish a copy of the invoice or demand notice, an affidavit to the effect that there is no notice given by the corporate debtor relating to a dispute of the unpaid

Company Appeal (AT) (Insolvency) No. 632 of 2020

Page 16 of 20 operational debt and a copy of the certificate from the financial institution maintaining accounts of the operational creditor confirming that there is no payment of an unpaid operational debt by the corporate debtor. Apart from this information, the other information required under Form 5 is also to be given. Once this is done, the adjudicating authority may either admit the application or reject it. If the application made under sub-section (2) is incomplete, the adjudicating authority, under the proviso to sub- section 5, may give a notice to the applicant to rectify defects within 7 days of the receipt of the notice from the adjudicating authority to make the application complete. Once this is done, and the adjudicating authority finds that either there is no repayment of the unpaid operational debt after the invoice (Section 9(5)(i)(b)) or the invoice or notice of payment to the corporate debtor has been delivered by the operational creditor (Section 9(5)(i)(c)), or that no notice of dispute has been received by the operational creditor from the corporate debtor or that there is no record of such dispute in the information utility (Section 9(5)(i)(d)), or that there is no disciplinary proceeding pending against any resolution professional proposed by the operational creditor (Section 9(5)(i)(e)), it shall admit the application within 14 days of the receipt of the application, after which the corporate insolvency resolution process gets triggered. On the other hand, the adjudicating authority shall, within 14 days of the receipt of an application by the operational creditor, reject such application if the application is incomplete and has not been completed within the period of 7 days granted by the proviso (Section 9(5)(ii)(a)). It may also reject the application where there has been repayment of the operational debt (Section 9(5)(ii)(b)), or the creditor has not delivered the invoice

Company Appeal (AT) (Insolvency) No. 632 of 2020

Page 17 of 20 or notice for payment to the corporate debtor (Section 9(5)(ii)(c)). It may also reject the application if the notice of dispute has been received by the operational creditor or there is a record of dispute in the information utility (Section 9(5)(ii)(d)). Section 9(5)(ii)(d) refers to the notice of an existing dispute that has so been received, as it must be read with Section 8(2)(a). Also, if any disciplinary proceeding is pending against any proposed resolution professional, the application may be rejected (Section 9(5)(ii)(e)). Para 25 - The adjudicating authority, when examining an application under Section 9 of the Act will have to determine:

(i) Whether there is an "operational debt" as defined exceeding Rs.1 lakh? (See Section 4 of the Act)

(ii) Whether the documentary evidence furnished with the application shows that the aforesaid debt is due and payable and has not yet been paid? and

(iii) Whether there is existence of a dispute between the parties or the record of the pendency of a suit or arbitration proceeding filed before the receipt of the demand notice of the unpaid operational debt in relation to such dispute?

If any one of the aforesaid conditions is lacking, the application would have to be rejected. Apart from the above, the adjudicating authority must follow the mandate of Section 9, as outlined above, and in particular the mandate of Section 9(5) of the Act, and admit or reject the application, as the case may be, depending upon the factors mentioned in Section 9(5) of the Act.

14. On going through the submissions made by the parties and keeping in mind

the provisions of law laid down in the Code and the Hon'ble Apex Court

Company Appeal (AT) (Insolvency) No. 632 of 2020

Page 18 of 20 Judgment which has made the provisions of applicability of the Code amply clear

as far as initiation of proceedings by Operational Creditor against the Corporate

Debtor is concerned, we are very much clear that the following facts are proved

beyond doubt which has been complied with in accordance with the Hon'ble Apex

Court Judgments and provisions of the Code. The debt became "due" from July

2018, the question is whether it became "payable" by the Corporate Debtor under

the law, the answer is in "negative" because there were quality & other issues

raised by the Corporate Debtor. The Operational Creditor has issued a Demand

Notice dated 18.11.2019 received on 06.12.2019 by the Corporate Debtor and

within the stipulated period, the Corporate Debtor vide its letter dated

09.12.2019 has replied and proved beyond doubt that there is an existence of

dispute particular the cracks in the projects sites, reduced quality of goods

supplied, short supply of concrete multiple snags in windows and doors etc &

also raising issue to initiate arbitration proceedings for excess sum of over

Rs.9.51 Crore paid to the Appellant etc. This meets the criteria of genuine dispute

raised within stipulated period. Accordingly, under Section 9(5)(ii)(d) Application

needs to be rejected. The provision of the Code cannot be invoked for recovery of

outstanding amount as well as it cannot be misused to drop the curtain on a

healthy organization. The Objective of the Code is to consolidate and amend the

laws relating to reorganization and Insolvency Resolution of Corporate Persons.

Using the platform of the Code, threatening the vendor to release even disputed

amount is not fair and equitable.

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15. Hence in the facts and circumstances, we do not find any merit in the

appeal and the Adjudicating Authority has rightly rejected the Application under

Section 9 of the Code. The Appeal deserves to be dismissed and hence dismissed.

No order as to costs.

[Justice Bansi Lal Bhat] Acting Chairperson

[Justice Anant Bijay Singh] Member (Judicial)

[Dr. Ashok Kumar Mishra] Member (Technical)

15th February, 2021

New Delhi

Raushan.K

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