Apurva Prasad vs Sanghvi Movers Ltd & Anr

[Arising out of order dated 23.05.2022 passed by the Adjudicating Authority, National Company Law Tribunal, Allahabad Bench, Prayagraj in CP(IB) No. 05/ALD/2020)]

IN THE MATTER OF: Apurva Prasad Erstwhile Director of Corporate Debtor, Anindya Infratech Pvt. Ltd. 38C/28, A.N.Jha Marg, George Town, Allahabad, Uttar Pradesh - 211002. ...Appellant

Versus

1. Sanghvi Movers Ltd. The Operational Creditor Sy.No. 92, Tathawade Taluka Mushi, Pune, Maharasthra. ...Respondent No. 1

2. Anindya Infratech Pvt. Ltd., The Corporate Debtor, Through Interim Resolution Professional, 38C/28, Hamilton Road, George Town, Allahabad Uttar Pradesh - 211002. ...Respondent No. 2

Present: For Appellant : Mr. Devvrat, Mr. Anup Kumar, Mr. Gaurav Singh, Advocates. For Respondents : Mr. Shikhil Suri, Komal Gupta, Madhu Suri, Ms. Jyoti Suri, Ms. Nikita Thapar, Ms. Mahima Aggarwal, Advocates for R-1.

Company Appeal(AT) (Insolvency) No. 648 of 2022

1 JUDGMENT

[Per: Barun Mitra, Member (Technical)]

The present appeal, filed under Section 61 of the Insolvency and

Bankruptcy Code, 2016 ('IBC' in short) by the Appellant arises out of order dated

23.05.2022 (hereinafter referred to as 'Impugned Order') passed by the

Adjudicating Authority (National Company Law Tribunal, Allahabad Bench,

Prayagraj) in C.P.(IB) No. 05/ALD/2020. By the Impugned Order, the

Adjudicating Authority admitted the Section 9 application under IBC filed by the

Operational Creditor and initiated Corporate Insolvency Resolution Process

('CIRP' in short) against the Corporate Debtor with immediate effect. Aggrieved

by this impugned order, the present appeal has been preferred by the Corporate

Debtor.

2. The brief facts of the case which are necessary to be noted for deciding the

appeal are as follows: -

 Sanghvi Movers Ltd., Operational Creditor and Respondent No. 1 in the

present case entered into an agreement with Anindya Infratech Pvt Ltd,

the Corporate Debtor for supply of cranes on hire basis for construction

of concrete structures of Indian Railway pursuant to which two Work

Orders were issued.

Company Appeal(AT) (Insolvency) No. 648 of 2022

2  The First Work Order was dated 17.10.2015 for which invoices were raised

by Operational Creditor between the April, 2016 and June, 2016. This

Work Order was completed by the Operational Creditor and all the invoices

were cleared by the Corporate Debtor. Thus, admittedly, by both the

Operational Creditor and the Corporate Debtor, all liabilities towards Work

Order dated 17.10.2015 stood discharged. There is no dispute between the

Operational Creditor and Corporate Debtor regarding this Work Order.

 The Second Work Order at pages 80-85 of the Appeal Paper Book ('APB'

in short) was entered on 01.10.2016 between the two parties alongwith

mobilisation advance of Rs. 5 lakhs only paid by the Corporate Debtor in

terms of clause B (9) of the Work Order. Another important feature of the

Work Order as per Clause-14 of General Terms and Conditions was that

any delay in payment beyond 30 days, however not exceeding 60 days,

was to attract interest @ 18% p.a. for the delayed period beyond 60 days

from the date of submission of invoice.

 The first Demand Notice was issued by Operational Creditor/Respondent

No. 1 on 04.07.2018 followed by a second Demand Notice on 21.01.2019

claiming unpaid operational debt of principal sum amounting Rs 19.95

lakhs and Rs 11.53 lakhs respectively alongwith interest. The erstwhile

Company Appeal(AT) (Insolvency) No. 648 of 2022

3 Director of Corporate Debtor/Appellant has denied receipt of both the

Demand Notices.

 As the operational debt remained unpaid inspite of the Demand Notice,

the Operational Creditor/Respondent No. 1 filed a Section 9 petition on

18.11.2019 before the Adjudicating Authority claiming a sum of Rs 19.95

lakhs from the Corporate Debtor consisting of principal sum of Rs 11.53

lakhs and interest of Rs. 5.85 lakhs at the rate of 24% per annum.

 The Adjudicating Authority vide impugned order dated 23.05.2022 came

to the conclusion that there being an outstanding operational debt of more

than the threshold limit of Rupees one lakh due from the Corporate Debtor

at the time of filing the Section 9 petition and the Corporate Debtor having

defaulted in making payment of the debt due and further in the absence

of any pre-existing dispute relating to the said debt, admitted the Section

9 application filed by Respondent No. 1 and ordered initiation of CIRP.

 Aggrieved by the above order of the Adjudicating Authority, the erstwhile

Director of the Corporate Debtor/Appellant has preferred this Appeal

praying for setting aside the impugned order.

Company Appeal(AT) (Insolvency) No. 648 of 2022

4

3. The Learned Counsel for the Appellant advanced the argument that

an application under Section 9 of the IBC is not maintainable since there

are no dues or any unpaid amount remaining to be paid by the Corporate

Debtor. Against the total claim of Rs. 73,74,504/- made by the Operational

Creditor in the Second Work Order, the Learned Counsel for the Appellant

vehemently contended that the total claim was actually only Rs.

58,73,996/- against which Rs. 60,86,376/- was already paid and hence

no due was outstanding. In support of his contention, it was stated that

the discrepancy between the claim made by the Operational Creditor and

the payments done by the Corporate Debtor has arisen owing to the fact

that three invoices of the previous work order had been erroneously

included with eight invoices relating to the Second Work Order at a time

when the previous work order stood closed fully by way of full and final

payment. It was asserted by the Learned Counsel for the Appellant that

the Respondent No. 1 had already admitted that all invoices of the First

Work Order had already been cleared and there were no outstanding dues

and yet he combined three previous invoices and misled the Adjudicating

Authority. It was added that after making the last payment of Rs 8 lakhs

on 04.08.2018, there was no balance remaining to be paid to the

Respondent No. 1.

Company Appeal(AT) (Insolvency) No. 648 of 2022

5

4. In addition it was pointed out that Clause 14 of the Work Order

agreement entitled the Operational Creditor to stop the crane services, if

outstanding invoices were not cleared within 90 days from the date of

invoice, but the fact that he continued to provide service and did not stop

operation shows that there was no dispute with regard to unpaid dues. It

is also submitted that the cranes supplied by the Operational Creditor

were defective and outdated being 40 years old and that on these

objections being raised by the Corporate Debtor, replacement of cranes

was assured by the Operational Creditor.

5. It has also been submitted by the Appellant that the Demand Notice

under Section 8 of the IBC in terms of Rule 5 of the Insolvency &

Bankruptcy (Application to Adjudicating Authority) Rules, 2016 mandate

that the same must be served at the registered office by hand or by

registered post or Speed Post with acknowledgement due or by electronic

mail service. However, there is no acknowledgement of the receipt of the

same by the Corporate Debtor as no attempt was made to effect proper

service of the said Demand Notice.

6. Refuting the above submissions, the Learned Counsel for the

Respondent No. 1 stated that the operational debt is relatable to the

invoices raised against work order of 01.10.2016 for a gross amount of Rs

Company Appeal(AT) (Insolvency) No. 648 of 2022

6 58.74 lakhs against which the Appellant had only paid Rs. 10 lakhs and

Rs. 15 lakhs on 27.04.2017 and 28.04.2017 respectively bringing down

the outstanding amount to Rs. 33.74 lakhs. Repeated reminders were sent

to the Appellant to clear the outstanding dues and to reconcile

discrepancies if any and the Appellant on his own admitted on 10.04.2018

that there is a net outstanding amount of Rs. 33.74 lakhs. Thereafter, the

Corporate Debtor again released payments of Rs. 8 lakhs and Rs. 5 lakhs

on 24.05.2018 and 28.05.2018 respectively bringing down the

outstanding amount to Rs. 19.95 lakhs. It has been further added that the

mobilisation advance of Rs 5 lakhs had been received in terms of the

contract and has nothing to do with the unpaid operational debt.

7. As the above amount of Rs. 19.95 lakhs remained due for a

protracted period, it was pointed out that the Respondent No. 1 was

constrained to issue a demand notice. The first Demand Notice was issued

by Operational Creditor on 04.07.2018 which led to another payment of

Rs. 8 lakhs made by the Corporate Debtor on 04.08.2018 bringing down

the unpaid operational debt to Rs. 11.53 lakhs. Thereafter, a second

Demand Notice was sent on 21.01.2019 claiming the unpaid operational

debt but no further payments followed. The Learned Counsel for the

Respondent No. 1 also stated that inspite of the two demand notices having

been served upon the Corporate Debtor, there was no reply to the said

Company Appeal(AT) (Insolvency) No. 648 of 2022

7 notices and that the amount outstanding is Rs. 11.54 lakhs and interest

amount of Rs. 5.85 lakhs calculated at the rate of 24% per annum grossing

Rs. 19,95,817/-.

8. On the issue raised by the Corporate Debtor that the Operational

Creditor had provided some defective cranes, it has been submitted that

no communication regarding defective cranes was received from the

Corporate Debtor and that they had submitted fitness certificates in

respect of the cranes. Further it was denied that demand notices were

not served upon the Appellant and submitted that they had provided

evidence of postal receipt alongwith track consignment of Demand Notice

before the Adjudicating Authority.

9. We have duly considered the detailed arguments and submissions

advanced by the Learned Counsel for both the parties and perused the

records carefully.

10. The short point for our consideration is whether payment to the

Operational Creditor/Respondent No. 1 as per Second Work Order was

due from the Corporate Debtor giving rise to an operational debt, and if

so, whether a default has been committed by the Corporate

Debtor/Appellant in respect of payment of such operational debt having

Company Appeal(AT) (Insolvency) No. 648 of 2022

8 already become due and payable and whether the said operational debt

exceeds an amount of Rs. 1 lakh and is an undisputed debt. This

examination would be in line with the test which has been laid down by

the Hon'ble Supreme Court in Mobilox Innovations Pvt. Ltd. Vs. Kirusa

Software Private Limited (2018) 1 SCC 353 (hereinafter referred to as

'Mobilox') for the Adjudicating Authority while examining an application

under Section 9, the relevant excerpts of which are as follows:-

"34. Therefore, 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?

Company Appeal(AT) (Insolvency) No. 648 of 2022

9 If any 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."

11. Let us now see whether the test laid down by Mobilox judgment supra of

operational debt exceeding Rs. 1 lakh having become due and payable but not

yet paid is applicable in the present case. From material on record as at page

148-149 of Appeal Paper Book ('APB' in short), we note that a communication

was sent by the Operational Creditor/Respondent No. 1 to the Corporate Debtor

on 06.04.2017 indicating that a sum of Rs. 32.87 lakhs was outstanding in their

books of account from the Corporate Debtor. The letter also sought their

confirmation on the said figure by 20.04.2017 for carrying out further

reconciliation in case of any discrepancy. This was followed by another reminder

email dated 07.04.2017 (as at page 150 of APB). We however do not find any

material on record to show that the Corporate Debtor raised any objection with

the Operational Creditor on the aforesaid outstanding amount or sought any

clarification thereto.

Company Appeal(AT) (Insolvency) No. 648 of 2022

10

12. Instead we find that there is clear admission made by the Corporate

Debtor/Appellant on 10.04.2018 of a net outstanding amount of Rs.33.74 lakhs

only as payable on it's part to the Operational Creditor (as at page 137 of APB).

The said letter also concedes that against the gross outstanding amount of Rs.

58.74 lakhs, only Rs. 25 lakhs had been paid in two separate instalments till

then.

13. It is further observed that another reminder missive was issued by

Respondent No. 1 to the Corporate Debtor on 26.02.2018 (as at page 139 of APB)

to clear the outstanding amount of Rs.33.74 lakhs as the said sum had become

overdue for more than nine months. Following this reminder, the Corporate

Debtor again made two tranches of payment amounting Rs.8 lakhs and Rs.5

lakhs on 24.05.2018 and 28.05.2018 respectively bringing down the outstanding

amount to Rs.19.95 lakhs.

14. Thereafter, the Operational Creditor sent the first Demand Notice of

Rs.19.95 lakhs on 04.07.2018 to the Corporate Debtor. The Corporate Debtor

did not send any written response to the Demand Notice but released an amount

of Rs.8 lakhs on 04.08.2018. Yet another Demand Notice was issued in respect

of the unpaid operational debt on 21.01.2019 amounting Rs.11.54 lakhs and

Rs.5.85 lakhs as interest at the amount rate of 24% per annum. On this Demand

Company Appeal(AT) (Insolvency) No. 648 of 2022

11 Notice, the Corporate Debtor chose neither to reply nor make any further

payments.

15. On the issue of non-receipt of the Demand Notice as claimed by the

Appellant, the Adjudicating Authority after taking cognizance of the tracking

consignment information and postal receipt details as submitted by the

Respondent No. 1 to establish delivery of the Demand Notices has rejected the

contention of the Corporate Debtor of non-delivery of Demand Notice. Moreover,

it has also been observed by the Adjudicating Authority in the impugned order

that this fact remained uncontroverted during the hearing. Hence we find no

reasons to disagree with the reasoned finding of the Adjudicating Authority in

this respect.

16. The Adjudicating Authority in the impugned order has noted that the

Corporate Debtor having already admitted vide letter dated 10.04.2018 that an

amount of Rs. 33.74 lakh is due and payable was sufficient in itself for

admission of the Section 9 petition. The Adjudicating Authority was therefore

satisfied in holding that an operational debt was actually in existence and in

arriving at this conclusion has not committed any error.

17. Be that as it may, in the interest of justice, we feel that the tenability of

the defence raised by the Corporate Debtor that there was no outstanding due

also needs to be examined particularly in the light of the undisputed fact that

the dues of the First Work Order was entirely discharged and cleared by the

Company Appeal(AT) (Insolvency) No. 648 of 2022

12 Corporate Debtor. In examining the defence raised by the Corporate

Debtor/Appellant, we have noted that the Learned Counsel for the Appellant has

emphatically contended that Respondent No. 1 had intentionally clubbed

invoices of the closed Work Order of 17.10.2015 with the subsequent Work Order

of 01.10.2016 to inflate the gross outstanding amount and mislead the

Adjudicating Authority. To substantiate this contention, the Learned Counsel for

the Appellant in the short written submissions has referred to the following

tabular chart appearing at page 155 of the APB to show that the balance amount

of Rs. 11.53 lakhs is derived only after adding the three invoices which had

already been honoured by the Appellant :

Invoice Date Invoice No. Balance Amt. 30-Apr-2016 Bill No. 32120-9206 445,133/- 31-May-2016 Bill No. 32667-9206 944,625/- 30-June-2016 Bill No. 3320-9206 110,750/- Work Order 17.10.2015 Total 15,00,508/- 31-Dec-2016 Bill No. 35404-9206 8,81,076/- 31-Jan-2017 Bill No. 35947-9206 9,20,000/- 28-Feb-2017 Bill No. 36311-9206 7,07,694/- 31-Mar-2017 Bill No. 36651-9206 7,78,463/- 30-Apr-2017 Bill No. 37205-9206 6,01,533/- 31-May-2017 Bill No. 37277-9206 9,20,000/- 30-Jun-2017 Bill No. 37603-9206 9,20,000/- 19-Jul-2017 UP/SL/00001-9206 1,45,230/- Work Order 01.10.2016 Total 58,73,996/- Grand Total of Both Work Orders 73,74,504/-

Payments received by Operational Creditor 62,20,687/-

Balance Amount as Derived 11,53,817/-

18. To remove all ambiguities and to have a more judicious approach, we felt

that it would be more prudent to rely on the complete set of accounts in terms

of invoices raised and payments received for both the work orders i.e.17.10.2015

and 01.10.2016 as detailed out at page 181 of APB as reproduced below:

Company Appeal(AT) (Insolvency) No. 648 of 2022

13 Anindya Infratech Private Limited

Invoice No. Date Site Amount 29213 25-Oct-15 Kanpur 570000 30244 14-Nov-15 Kanpur 361733 30245 30-Nov-15 Kanpur 472316 30721 31-Dec-15 Kanpur 944625 31000 31-Jan-16 Kanpur 973690 31414 29-Feb-16 Kanpur 944625 32040 31-Mar-16 Kanpur 871968 32120 30-Apr-16 Kanpur 944625 32667 31-May-16 Kanpur 944625 33260 30-Jun-16 Kanpur 620341 34042 01-Oct-16 Etawah 500000 34655 31-Oct-16 Etawah 601533 35022 30-Nov-16 Etawah 920000 35404 31-Dec-16 Etawah 881076 35947 31-Jan-17 Etawah 920000 36311 28-Feb-17 Etawah 707694 36651 31-Mar-17 Etawah 778463 37205 30-Apr-17 Etawah 601533 37277 31-May-17 Etawah 920000 37603 30-Jun-17 Etawah 920000 1718/UP/SL/00001 19-Jul-17 Etawah 145230 Total 15544077 Less:

TDS 245171

Total Payment Recd. 19/10/2015 1000000 14/11/2015 710000 04/01/2016 663275 17/02/2016 862158 15/03/2016 378125 20/04/2016 885564 24/06/2016 1000000 28/06/2016 500000 22/09/2016 500000 01/10/2016 500000 01/10/2016 509591 12/01/2017 400000 16/01/2017 182376 20/01/2017 904000 27/04/2017 1000000 28/04/2017 1500000 24/05/2018 800000 28/05/2018 500000 04/08/2018 800000 14145089 Net Amt Outstanding 1153817

This chart depicted above clearly spells out the net outstanding amount as Rs

11.53 lakhs as on 04.08.2018 and therefore clearly establishes debt above the Company Appeal(AT) (Insolvency) No. 648 of 2022

14 threshold of Rs. One lakh having become due and payable. Coupled with the

fact that the Corporate Debtor by his own admission on 10.04.2018 has admitted

that there was an outstanding amount payable on its part leads to the conclusion

that there was debt due and payable beyond the threshold of Rs. one lakh on the

part of the Corporate Debtor.

19. This now brings us to the other aspect as to whether there is existence of

dispute between the parties. As regards the dispute of the cranes not being in

good working condition, the Respondent No. 1 has asserted that the cranes were

used without any demur or objections by the Corporate Debtor during the entire

contract period. It has also been contended that the Work Order terms and

conditions did not stipulate any condition relating to the age of crane and neither

any complaints in this regard were lodged by the Corporate Debtor either during

the contract period or prior to issue of Demand Notice. As there is nothing on

record to suggest that the Corporate Debtor/Appellant raised any such dispute

before receipt of invoices or at any period prior to the issue of demand notice,

this cannot be held as a case of pre-existing dispute. There is no exchange of

correspondence raising any dispute prior to issue of demand notice. Thus even

on this test laid down by Mobilox judgment supra we find that there is nothing

credible to substantiate the pre-existence of dispute.

20. From the aforesaid discussion and analysis of facts and circumstances,

we are of the considered opinion that the Corporate Debtor/Appellant has

defaulted in the payment of operational debt, of an amount exceeding Rs one Company Appeal(AT) (Insolvency) No. 648 of 2022

15 lakh, which amount had clearly become due and payable, and further in the

absence of any pre-existing dispute, we find that no error has been committed

by the Adjudicating Authority in admitting the application under Section 9 of

IBC and initiating CIRP. We find no merit in this Appeal. Appeal is dismissed. No

Costs.

[Justice Ashok Bhushan] Chairperson

[Mr. Barun Mitra] Member (Technical) Place: New Delhi

Date: 12.10.2022

Shashi

Company Appeal(AT) (Insolvency) No. 648 of 2022

16