Arvind Gulsia vs Om Sai Boxes & Anr

[Arising out of the Order dated August 23, 2023, passed by the 'Adjudicating Authority' (National Company Law Tribunal, Chandigarh Bench) in CP (IB) No. 226/CHD/PB/2020]

IN THE MATTER OF: Mr. Arvind Gulsia Suspended Director of M/s C & A Farm Fresh Pvt. Ltd. S/o Mr. SP Gulsia Aged about 58 years R/o House No. 1329, Sector 34C Chandigarh - 160022 Contact No. 9878733555 Email: arvindgulsia65@gmail.com ...Appellant

Versus

1. Om Sai Boxes Plot No. W-167 MIDC, Pawane Village Navi Mumbai - 400705 Contact No. 8369393139/9221093942 Email: omsaiboxes@yahoo.in ...Respondent No.1

2. C & A Farm Fresh Pvt. Ltd. Through Mr. Paresh Mehta, IRP IBBI//IPA-003/IP-N00099/2017-2018/11008 No. 13 B, Nirmal Society, Pandurang Wadi, Dombivli (East), Mumbai City, Maharashtra - 421201 Email : pareshmehta5959@gmail.com ...Respondent No.2

Present: For Appellant : Mr. Manish Jain, Advocate

For Respondent : Mr. Devul Dighe, Advocate

ORDER

(Hybrid Mode)

[Per: Arun Baroka, Member (Technical)]

The present Appeal is filed challenging Order dated 23rd August 2023

passed by the Adjudicating Authority, Chandigarh Bench ("NCLT") by and under which C & A Farm Fresh Private Limited ("Corporate Debtor/CD") was

admitted to CIRP process under Section 9, Petition bearing CP (IB) No.

226/CHD/2020 of the IBC for debt and default of Rs. 20,66,028.76/- (rupees

twenty lakhs, sixty-six thousand and twenty-eight and seventy-six paise

only), which is above the threshold limit of Rs. 1 lakh being applicable

threshold at the time of filing of Petition on 17.02.2020.

Submissions made by the Appellant- Suspended Management:

2. The Impugned Order should be set aside because OC's Form-5 was

incomplete and defective, warranting the dismissal of the Application under

Section 9. The Impugned Order should be set aside under Section 9(5)(b) of the

IBC, which mandates rejection of incomplete applications. OC falsely affirmed

in an affidavit that it did not receive a Reply to the Demand Notice.

3. The Demand Notice dated 15.01.2020 was posted on 22.01.2020 and

received by the CD on 28.01.2020, as confirmed by the postal receipts and

tracking report. The CD sent its Reply dated 07.02.2020 via speed post on

08.02.2020 to the same address from which the Demand Notice was sent. The

Reply was returned from two of the three addresses with the note "left." The

envelopes sent to the remaining addresses, including that of the OC's counsel,

Mr. Vijay Shinde's, are presumed delivered, though tracking reports are

unavailable on the postal department's website. Although the Notice was posted

on 22.01.2020 and delivered on 28.01.2020, the Section 9 Application was

prepared on 07.02.2020, before the 10-day statutory period expired. The

Petition was filed with the Tribunal on 17.02.2020 and re-filed on 03.03.2020.

Company Appeal (AT) (Insolvency) No. 41 of 2024 2 of 18 The above contentions show that the CD sent a Reply to the Demand Notice

within the 10-day statutory period and raised a dispute over the claimed

amount. No demand was made by the OC prior to this, so there was no

opportunity to dispute it earlier. The Appellant maintains that no amount was

due, but the OC has concealed this fact by filing false affidavits. The OC has

not acknowledged the dispute raised by the CD in the Application or affidavits,

instead filing false affidavits and misstating facts. The Appellant has clearly

disputed the debt, which is not due, making the Petition liable for dismissal.

The Notice was properly replied to, and the OC has made false statements

under oath.

4. Since the response was sent to the correct address, the Order violates

Section 9(5)(b) and should be annulled by this Tribunal. The CD had properly

replied to the Demand Notice, with postal receipts submitted as evidence. The

tracking reports were unavailable due to the peak of the COVID-19 pandemic.

Despite this, the Authority made an adverse finding against the Corporate

Debtor without addressing this issue appropriately.

5. The Application is time-barred and should have been dismissed. OC's

Petition, citing defaults on 26.10.2016 and 30.12.2016, was filed on

17.02.2020, well beyond the limitation period. Therefore, it should have been

dismissed on this ground alone. OC maliciously added a third default date in

its Section 9 Application, while only two dates (26.10.2016 and 31.12.2016)

were mentioned in the Demand Notice. This was a deliberate attempt to bring

the Application within the limitation period.

Company Appeal (AT) (Insolvency) No. 41 of 2024 3 of 18

6. The bank statement cannot be considered valid as it doesn't identify the

account holder, lacks bank authentication, and has no certificate confirming

its authenticity. Therefore, it should not have been relied upon by the

Adjudicating Authority, making Form-5 defective.

7. OC, being an unregistered partnership firm, was not eligible to file an

Application before the Adjudicating Authority under Section 69 of the

Partnership Act, 1932.

8. The calculation of the alleged debt and interest is fabricated and should

not have been relied upon. The invoices, supposedly due from 29.06.2016 to

30.11.2016, incorrectly include GST at 18%, which was introduced only on

01.07.2017.

9. The OC initially supplied boxes that met the required specifications and

quality, for which the CD made payments. However, the quality of the boxes

later declined, causing damage to the packed fruits and resulting in financial

loss to the CD. The CD repeatedly raised concerns about the inferior quality of

boxes with the Company. In 2016, Arvind Gulsia, the Appellant's Managing

Director, visited the OC's Mumbai office several times to address the issue.

Other representatives of the CD also followed up regularly. During these

discussions, the OC admitted to the poor quality of the boxes, apologised, and

promised to improve future supplies. To avoid legal issues and based on their

long relationship, the OC and CD mutually agreed to a deferred payment

schedule for the remaining balance, starting from May 2018 to September

Company Appeal (AT) (Insolvency) No. 41 of 2024 4 of 18 2019, with payments to be made without interest. From 03.05.2018 to

27.02.2019, the CD paid the OC Rs 11,69,948/- (rupees eleven lakhs, sixty-

nine thousand, nine hundred and forty eight only) in cash. This amount, which

the OC claims is still due, is reflected in the CD's books for FY 2018-2019.

However, despite receiving this payment, the OC issued a Notice under Section

8 of the IBC, claiming an amount that is not due and has already been paid.

Thus CD claims to have paid the amount due to OC as per an Agreement for

deferred payments from May 2018 to 31.03.2019, without interest, and this

payment has been made by the Corporate Debtor.

10. The Application dated 15.02.2020 was initially filed on 17.02.2020 and

re-filed on 03.04.2020. Even if the affidavits were replaced after being found

defective (dated 28.02.2020 and 03.04.2020), the Respondent did not amend

the statements regarding the Reply to the Demand Notice or the raised dispute

to ensure the Application was filed and admitted.

11. The Demand Notice lacks an authority letter showing on whose behalf it

was issued to the Corporate Debtor. The Petition is signed by Manoj Rajendra

Singh, who claims authority from a letter dated 07.02.2020. However, the

partnership deed dated 03.12.2015 does not grant him authority to initiate IBC

proceedings. Therefore, the Petition is defective and should be dismissed.

Submissions made by the OC-Om Sai Boxes-Respondent No. 1:

12. OC-Respondent No. 1/ Om Sai Boxes denies all these and contends that

the Appellant, Mr. Arvind Gulsia, Suspended Director of the CD, has filed the

Appeal on several grounds, each of which is devoid of any merit. With respect

Company Appeal (AT) (Insolvency) No. 41 of 2024 5 of 18 to multiples dates of default and inconsistency between dates of default

mentioned in Demand Notice and Form-5 Petition it is claimed that there were

total 13 invoices raised which were in default for an amount aggregating to Rs

11,69,999/- (rupees eleven lakhs, sixty-nine thousand, nine hundred and

ninety-nine only) being principal amount of debt. First of those 13 invoices was

invoice dated 26.09.2016 for amount of Rs 1,12,360/- (rupees one lakh, twelve

thousand, three hundred and sixty only), which, after credit period of 30 days,

became due and payable and, thus, default occurred on 26.10.2016. Last of

13 invoices is invoice dated 30.11.2016 for an amount of Rs 74,495/- (rupees

seventy-four thousand, four hundred and ninety-five only), which became due

and, consequentially, default occurred on 30.12.2016. The Demand Notice at

Page No. 76 of Appeal Memo at Column 1 and 2 as well as the Form-5 Petition

at Page No. 68 refers to the same dates of default with respect to first and last

of the 13 invoices raised. The details of due and default date of each of the 13

invoices was annexed to the Petition as well as Demand Notice in a tabular

chart which is at Page No. 161 of the Appeal Memo. The third date of default

mentioned on Page No. 68 in the Form-5 Petition is 18.02.2017, which is

mentioned since it is relevant for computation of period of limitation as there

was running account between parties and last payment of Rs 1,34,892/-

(rupees one lakh, thirty-four thousand, eight hundred and ninety-two only)

was made by the CD on 17.02.2017 and, hence, as specified therein, the date

was referred to for the purposes of computing period of limitation of 3 years

from 18.02.2017 as such payment extends limitation under Sections 18 and

19 of Limitation Act, 1963. With respect to the issue that whether the Petition

Company Appeal (AT) (Insolvency) No. 41 of 2024 6 of 18 was filed within limitation or not since, last part payment was made by CD on

17.02.2017 which is not disputed by the CD, the period of limitation once

again stood extended for 3 years from 18.02.2017 as per Section 12(1) of the

Limitation Act read with Rule 3 of NCLT Rules which provides that in

computing limitation period, the day from which such period is to be reckoned

stands excluded. Hence, period of 3 years would expire on 17.02.2020 and

present Petition admitted filed on 17.02.2020 was well within the period of

limitation. Even without prejudice, for the sake of argument, even if limitation

is reckoned as contended by the Appellant from 17.02.2017 itself, then period

of 3 years would expire on 16.02.2020, which was a Sunday and the Tribunal

and its registry were. Even otherwise, as per Section 4 of the Limitation Act,

read with Rule 3 of NCLT Rules, the Petition could be filed on the next working

day, that is, 17.02.2017 when it was actually filed, hence the Petition is within

limitation without prejudice to the fact that in the ledger statement of CD at

Page 158 of Appeal Memo, CD itself has acknowledged principal amount of

debt payable on 01.04.2018.

13. With respect to pre-existing dispute the Appellant has not relied upon a

single document/letter to establish the fact that prior to the issuance of

Demand Notice dated 15.01.2020, a pre-existing dispute existed. The Reply of

the CD to Section 9 Petition starting from Page No. 146 of Appeal read with

findings of the NCLT in Para 11 of Page No. 47 of Appeal establishes the fact

that there was nothing placed on record by CD to establish a pre-existing

dispute. It was only after service of Demand Notice and filing of Petition by

Company Appeal (AT) (Insolvency) No. 41 of 2024 7 of 18 Respondent No. 1 did CD aver to dispute. It is settled law that CD must raise

dispute prior to issuance of Demand Notice.

14. Further, on the one hand, the Appellant contends a pre-existing dispute,

while, on the other hand, assumes an entirely contradictory position that the

entire debt amount is paid by way of cash in instalments during the period of

03.05.2018 to 27.02.2019 and passes bogus entries of cash payments in its

ledger annexed from Page No. 158 to 160 of Appeal Memo while acknowledging

debt payable by the CD for principal debt amount of Rs 11,69,948/- (rupees

eleven lakhs, sixty-nine thousand, nine hundred and forty-eight only) as on

01.04.2018. The said cash payments are entirely denied and disputed by

Respondent No. 1 without prejudice to the fact that no iota of evidence is

produced to demonstrate the same including any cash receipts. Hence, the CD

has admitted the entire factum of transaction and principal amount in default

of Rs 11,69,948/- (rupees eleven lakhs, sixty-nine thousand, nine hundred and

forty-eight only) as on 01.04.2018 without prejudice to the fact that supplies

made in each invoice were backed by delivery challans and are acknowledged

by the CD.

15. The Appellant has made baseless claims and grounds for challenging

the Impugned Order, questioning genuineness of the invoices trying to mislead

that GST is levied on invoices raised during period of 29.06.2016 to

30.11.2016, while GST regime was introduced on 01.07.2017 as stated in Page

No. 29 of Appeal Memo. The same is an entirely false statement being made

and an attempt to mislead this Hon'ble Appellate Tribunal is evident from bare

Company Appeal (AT) (Insolvency) No. 41 of 2024 8 of 18 perusal of invoices from Page No. 84 to 107 of Appeal Memo wherein VAT,

CENVAT is levied and not GST. The CD itself has acknowledged the receipt of

goods under the said invoices. GST is claimed while filing Form-5 Petition in

the year 2020 when GST regime was implemented and GST Act provided on

levy of it on interest charged on the delayed payments as evident from

computation of default annexed at Page 161 of Appeal Memo. Even otherwise,

the principal amount as well as interest amount in default levied as per terms

of invoice being an amount of Rs 11,69,999/- (rupees eleven lakhs, sixty-nine

thousand, nine hundred and ninety-nine only) and Rs 8,96,029.76/- (rupees

eight lakhs, ninety-six thousand and twenty-nine and seventy-six paise only)

are more than the threshold limit of Rs. 1 lakh.

16. The Appellant has raised ground to challenge maintainability of the

Section 9 Petition and Impugned Order on the basis that OC-Respondent No.

1/ Om Sai Boxes, being unregistered partnership firm, is not entitled to

maintain Petition considering bar under Section 69(2) of the Indian

Partnership Act, 1932. Respondent No. 1 submits that said issue is already

settled by this Hon'ble Appellate Tribunal in the case of Rourkela Steel

Syndicate vs Metistech Fabricators Private Limited in Company Appeal

(AT) (Ins) No. 924 of 2022 vide order dated 06.02.2023 annexed at Page No.

34 to the Reply of Respondent No. 1 that bar under Section 69(2) of the Indian

Partnership Act applies only to suits and not to Application for Initiation of

Insolvency Process which are not suits relying on the decision of the Hon'ble

Company Appeal (AT) (Insolvency) No. 41 of 2024 9 of 18 Supreme Court in the case of Gaurav Hargovindbhai Dave vs Asset

Reconstruction Company (India) Limited and Anr [2019] 13 SCR 224.

17. Hence, in view of aforesaid, is it submitted by Respondent No. 1 that the

present Appeal may be dismissed with costs.

Appraisal:

18. Heard Counsels for both sides and perused materials on record. There

are many issues raised by the Appellant, mainly relating to maintainability,

pre-existing dispute and non-maintainability of the Petition. They have been

discussed in the following paragraphs.

19. Firstly, we look into the issue of maintainability on the grounds of

limitation as the Appellant claims that multiples dates of default have been

mentioned and there is inconsistency between dates of default mentioned in

the Demand Notice and Form-5 within Section 9 petition. It is contended by

the Appellant that the Application is barred by the Limitation Act and should

have been dismissed. OC's Petition, which cites defaults on 26.10.2016 and

30.12.2016 and 18.02.2017, was filed on 17.02.2020, well beyond the

applicable limitation period. As such, it should have been dismissed on this

ground alone. OC falsely included a third default in its Section 9 Application,

despite only two dates (26.10.2016 and 31.12.2016) being referenced in the

Demand Notice. This was a deliberate attempt to bring the Application within

the limitation period.

20. Regarding the multiple dates of default and the inconsistency between

the dates mentioned in the Demand Notice and Form-5 Petition, it is noted from

Company Appeal (AT) (Insolvency) No. 41 of 2024 10 of 18 the materials on record that a total of 13 invoices, aggregating to a principal

debt amount of ₹11,69,999/- (rupees eleven lakhs, sixty-nine thousand, nine

hundred and ninety-nine only) were raised and defaulted upon. The first

invoice, dated 26.09.2016, was for ₹1,12,360/- (rupees one lakh, twelve

thousand, three hundred and sixty only). After the 30-day credit period, the

payment became due, and default occurred on 26.10.2016. The last invoice,

dated 30.11.2016, was for ₹74,495/- (rupees seventy-four thousand, four

hundred and ninety-five only) and became due on 30.12.2016. The Demand

Notice (Page 76 of the Appeal Memo) and Form-5 Petition (Page 68) both

reference these same default dates for the first and last invoices. Additionally,

the details of the due and default dates for all 13 invoices were annexed to the

Petition and the Demand Notice in a tabular chart found at Page 161 of the

Appeal Memo. The third date of default mentioned on Page 68 of the Form-5

Petition is 18.02.2017. This date is significant for the computation of the

limitation period, as there was a running account between the parties, and the

CD made a last payment of ₹1,34,892/- (rupees one lakh, thirty-four thousand,

eight hundred and ninety-two only) on 17.02.2017. Under Sections 18 and 19

of the Limitation Act, 1963, this payment extended the limitation period by 3

years from 18.02.2017. On the question whether the Petition was filed within

the limitation period, it is pertinent to note that the last part payment made by

the CD on 17.02.2017 is undisputed. Accordingly, the limitation period was

extended for 3 years from 18.02.2017, expiring on 17.02.2020. The Petition

was admitted and filed on 17.02.2020, making it well within the limitation

period.

Company Appeal (AT) (Insolvency) No. 41 of 2024 11 of 18

21. Even assuming, without prejudice, that the limitation period is reckoned

from 17.02.2017 (the date of the last payment), the 3-year period would expire

on 16.02.2020, which was a Sunday and a non-working day for the Tribunal

and its registry. As per Section 41 of the Limitation Act, read with Rule 32 of the

NCLT Rules, the Petition could be validly filed on the next working day, i.e.,

17.02.2020, which is when it was indeed filed. Hence, the Petition is still within

the limitation period.

22. Further, it is noted that the ledger statement of the CD, annexed at Page

158 of the Appeal Memo, acknowledges the principal debt amount as payable

as of 01.04.2018. This acknowledgment also reinforces the validity of the

Petition's filing within the limitation period. Therefore, on the grounds of

limitation the arguments of the Appellant cannot be accepted. The Adjudicating

Authority has rightly concluded that:

"The other issue for consideration is whether this application is filed within limitation. A demand notice issued dated 15.01.2020 in Form 3 attached as (Annexure l) was duly served on the corporate debtor. However, the period of limitation would begin from the date of default i.e. 17.02.2017 i.e. date on which last payment was made by the corporate debtor. This application was filed vide Diary No. 1271 on 17.02.2020 and was refiled on 03.03.2020 vide Diary

1 Section 4. Expiry of prescribed period when court is closed:

Where the prescribed period for any suit, appeal or application expires on a day when the court is closed, the suit, appeal or application may be instituted, preferred or made on the day when the court re-opens.

Explanation.-A court shall be deemed to be closed on any day within the meaning of this section if during any part of its normal working hours it remains closed on that day.

2 3. Computation of time period.- Where a period is prescribed by the Act and these rules or under any other law or is fixed by the Appellate Tribunal for doing any act, in computing the time, the day from which the said period is to be reckoned shall be excluded, and if the last day expires on a day when the office of the Appellate Tribunal is closed, that day and any succeeding day on which the Appellate Tribunal remains closed shall also be excluded Company Appeal (AT) (Insolvency) No. 41 of 2024 12 of 18 No.1733. Therefore, this Adjudicating Authority finds that this application is filed within limitation"

Appellant's grounds on limitation cannot be therefore accepted and the

application is very much maintainable on this ground.

23. On the issue of whether the Demand Notice in Form-3 dated

15.01.2020 was properly served or not, the AA has concluded that:

"The demand notice delivered to the corporate debtor vide registered post as the postal receipt and tracking reports are attached at Annexure-l of the petition. The corporate debtor did not reply to the demand notice till date. Therefore, a demand notice was duly served."

24. CD claims that the OC falsely asserted in its affidavit that it did not

receive a Reply to the Demand Notice. The CD claims that it duly responded

to the Demand Notice, with supporting postal receipts provided as evidence.

The tracking reports were unavailable due to the operational challenges

during the COVID-19 pandemic. It is claimed that CD replied to the Demand

Notice within the statutory period and raised a legitimate dispute regarding

the claimed amount. Consequently, the Order violates Section 9(5) of the

Insolvency and Bankruptcy Code (IBC), as the application is incomplete and

OC has not received the reply to the demand notice and for that reason should

be set aside by this Tribunal. Adjudicating Authority has concluded that:

"...

10. The first issue for consideration is whether the demand notice in Form-3 dated 15.01.2020 was properly served. The demand notice delivered to the corporate debtor vide registered post as the postal receipt and tracking reports are attached at Annexure-

Company Appeal (AT) (Insolvency) No. 41 of 2024 13 of 18 I of the petition. The corporate debtor did not reply to the demand notice till date. Therefore, a demand notice was duly served."

We do not find any infirmity in the conclusion of the Adjudicating Authority

on this hyper-technical ground raised by the Appellant.

25. Now we go onto examine the contention of the Appellant that the

Section 9 Petition and the Impugned Order are not maintainable on the

grounds that OC-Respondent No. 1, being an unregistered partnership firm,

is barred from maintaining the Petition under Section 69(2)3 of the Indian

Partnership Act. OC-Respondent No. 1 has relied upon this Hon'ble Appellate

Tribunal's judgment in the case of Rourkela Steel Syndicate vs. Metistech

Fabricators Private Limited [Company Appeal (AT) (Ins) No. 924 of 2022],

vide order dated 06.02.2023. In the said judgment, this Hon'ble Tribunal held

that the bar under Section 69(2) of the Indian Partnership Act applies

exclusively to suits and does not extend to applications for initiating the

Insolvency Process under the IBC. The relevant extracts judgment are as

follows:

"...

5. We have considered the submissions of the Counsel of the parties and perused the records. The IBC provides for filing of the Application under Sections 7 & 9 and it is now settled position of law that for limitation for filing Application under Sections 7,9 & 10 are Article

3 Section 69. Effect of non-registration.

(1) No suit to enforce a right arising from a contract or conferred by this Act shall be institutes in any Court by or on behalf of any person suing as a partner in a firm against the firm or any person alleged to be or to have been a partner in the firm unless the firm is registered and the person suing is or has been shown in the Register of Firms as a partner in the firm.

(2) No suit to enforce a right arising from a contract shall be instituted in any Court by or on behalf of a firm against any third party unless the firm is registered and the persons suing are or have been shown in the Register of Firms as partners in the firm.

Company Appeal (AT) (Insolvency) No. 41 of 2024 14 of 18 137 of the Limitation Act, 1963 which is attracted. Article 137 of the Limitation Act provides for filing of Application, where no period of limitation is provided. Learned Counsel for the Appellant relied on a judgment of the Hon'ble Supreme Court- (2019) 10 SCC 572 titled "Gaurav Hargovindbhai Dave Vs. Asset Reconstruction Company (India) Limited and Anr.' where Hon'ble Supreme Court had occasion to consider the provision of Limitation Act, 1963 as well as Application under Section 7 of IBC. In paragraph-6 of the Judgment, following have been laid down:

"...

6. Having heard the learned counsel for both sides, what is apparent is that Article 62 is out of the way on the ground that it would only apply to suits. The present case being 'an application' which is filed under Section 7, would fall only within the residuary Article 137. As rightly pointed out by the learned counsel appearing on behalf of the appellant, time, therefore, begins to run on 21-7-2011, as a result of which the application filed under Section 7 would clearly be time-barred. So far as Mr Banerjee's reliance on para 11 of B.K. Educational Services (P) Ltd., suffice it to say that the Report of the Insolvency Law Committee itself stated that the intent of the Code could not have been to give a new lease of life to debts which are already time- barred."

6. An application under Section 9 of IBC cannot be said to be a suit and analogy of Hon'ble Supreme Court judgment in Hargovindbhai Dave's case, supra, is fully applicable to the application filed under Section 9 IBC also. Further, also it is well settled by the judgment of the Hon'ble Supreme Court in B.K. Educational Services (P) Ltd. v. Parag Gupta and Associates, (2019) 11 SCC 633 that provision of Section 5 Limitation Act are also fully applicable in Section 7 & 9 IBC applications. Section 5 Limitation Act is not applicable in a suit which is also a clear indication that Application under Section 7 & 9 are not a suit.

7. The Judgments of Hon'ble Supreme Court relied by the Adjudicating Authority regarding bar of Section 69(2) is not attracted in the present case since the application under Section 9 cannot be treated as suit.

8. We are thus of the view that the Adjudicating Authority has committed error in rejecting Section 7 Application on the ground that it is barred by 69(2) of the Partnership Act. We are thus in view that the order impugned cannot be sustained and deserves to the set aside."

[emphasis supplied]

Company Appeal (AT) (Insolvency) No. 41 of 2024 15 of 18

26. In view of the above, the Appellant's argument challenging the

maintainability of the Petition under Section 69(2) of the Indian Partnership

Act is devoid of merit.

27. Now we delve into the Appellant's claim challenging the genuineness of

the invoices and alleging that GST was improperly levied during the period

from 29.06.2016 to 30.11.2016 as GST could not have been applied as the

GST regime was introduced only on 01.07.2017, as stated on Page 29 of the

Appeal Memo. A plain examination of the invoices from Pages 84 to 107 of the

Appeal Memo clearly shows that VAT and CENVAT were levied during the

stated period, not GST. This directly refutes the Appellant's allegation.

Furthermore, the CD itself acknowledged the receipt of goods under these

invoices, leaving no room for dispute regarding their validity. GST has been

claimed while filing the Form-5 Petition in 2020, a period when the GST

regime was in effect. Under the GST Act, GST is applicable on the interest

charged for delayed payments, as evident from the computation of default

annexed on Page 161 of the Appeal Memo. We, therefore, agree with the

submissions of the OC and the Appellant's assertion is demonstrably false.

Additionally, the principal amount of ₹11,69,999/- (rupees eleven lakhs,

sixty-nine thousand, nine hundred and ninety-nine only) and the interest

amount of ₹8,96,029.76/- (rupees eight lakhs, ninety-six thousand and

twenty-nine and seventy-six paise only) both levied as per the terms of the

invoices--are well above the statutory threshold of ₹1 lakh, existing at that

point of time, required to initiate proceedings.

Company Appeal (AT) (Insolvency) No. 41 of 2024 16 of 18

28. In fact, the real issue before us is whether we could rely on the issue of

dispute raised by the Appellant and whether it is not a moonshine dispute

and whether to treat that as a pre-existing dispute and accept this dispute

for setting aside the Section 9 Order. This issue is delved into by us in

subsequent paragraphs.

29. The Reply of the CD to Section 9 Petition starting from Page No. 146 of

APB read with finding of Ld. NCLT in Para 11 of Page No. 47 of APB has been

gone into. It was claimed by the CD that the quality of boxes was not as per

specifications leading to damage of fruits packed in boxes leading to financial

loss to the respondent. However, there is no material placed on record to show

that the dispute existed between the parties much before the issuance of the

Demand Notice. There is no correspondence between the parties to that effect.

Further only after the service of Demand Notice and filing of Petition by OC,

CD disputed it. Further, on the one hand, the Appellant contends pre-existing

dispute, while on other hand, assumes an entirely contradictory position that

the entire debt amount was paid by way of cash in instalments during the

period of 03.05.2018 to 27.02.2019. Further, the CD claims to have passed

entries of cash payments in its ledger annexed at Page No. 158 to 160 of APB

while acknowledging debt payable by the CD for principal debt amount of Rs

11,69,948/- (rupees eleven lakhs, sixty-nine thousand, nine hundred and

forty-eight only) as on 01.04.2018. These are self-serving accounts of OC.

Except for CD's ledger account, with large number of small value cash entries,

without producing any evidence, including any cash receipts - nothing else

Company Appeal (AT) (Insolvency) No. 41 of 2024 17 of 18 has been placed on record. The assertions of the Appellant cannot be,

therefore, relied upon basis such material record. Hence, it can be safely

concluded that there is no pre-existing dispute regarding the claim in hand.

30. In light of the above-mentioned facts, it is evident that all the

arguments of the Appellant lack merit and are intended to obfuscate the

matter rather than present a genuine basis for challenging the Impugned

Order.

Order:

31. The Appeal is, therefore, dismissed and Section 9 proceedings against

the CD must go on. No orders as to costs.

[Justice Ashok Bhushan] Chairperson

[Arun Baroka] Member (Technical) New Delhi.

January 24, 2025.

pawan

Company Appeal (AT) (Insolvency) No. 41 of 2024 18 of 18