Belgotex India Pvt. Ltd vs Puneet India Pvt. Ltd

IN THE MATTER OF: BELGOTEX INDIA PRIVATE LIMITED CIN: U17120DL2015FTC286701 REGISTERED OFFICE AT: U-22, GROUND FLOOR, GREEN PARK EXTENSION, NEW DELHI-110016 CORPORATE OFFICE AT: 1, UNIT NO. 152, JMD MEGAPOLIC, SOHNA ROAD, SECTOR - 48, GURUGRAM, HARYANA-122018 EMAIL: PANKAJ.TALREJA@BELGOTEX.CO.ZA ...Appellant

Versus

PUNEET INDIA PRIVATE LIMITED REGISTERED OFFICE AT: 23, YASHWANT PLACE, CHANAKYAPURI NEW DELHI-110021 EMAIL:PUNEETINDIA@PUNEET- INDIA.COM ..Respondent

Present: For Appellant : Mr. Sumesh Dhawan, Ms. Vatsala Kak, Mr. Sagar Thakkar & Ms. Khyati Khemka, Advocates. For : Mr. Manorjun Sharma, Advocate for Intervener Respondent Ms. Shweta & Mr. Najreena Sheikh, Advocate for R-2. JUDGMENT

(Hybrid Mode)

[Per: Justice Mohd. Faiz Alam Khan, Member (Judicial)]

1. The instant appeal has been preferred on behalf of the appellant-

Belgotex India Pvt. Ltd. (Appellant) Under Section 61 of the Insolvency and

Bankruptcy Code, 2016 ('Code') assailing the order dated 17.05.2024,

(impugned order) passed by Ld. Adjudicating Authority, New Delhi whereby

the petition filed by the appellant being CP (IB) No. 236 of 2021 under

Section 9 of the Code has been dismissed.

2. The brief facts necessary for the disposal of the instant appeal are that

the operational creditor is engaged in the business of floor coverings such as

nylon and polypropylene modular carpet tiles and planks, carpet rolls etc.

and in order to run its business effectively, the operational creditor appoints

dealers and distributors.

3. It is reflected that the Corporate Debtor (CD) and Appellant entered

into a dealership/distribution agreement dated 15.10.2019, whereby the

CD/Respondent was appointed as the authorised dealer/distributor of the

operational creditor on an exclusive basis for Delhi-NCR Region for a period

of three years. As per the terms of the agreement the CD was required to

clear the invoices drawn by the Operational Creditor as per the credit period

as mentioned in the purchase order. However, it was specifically provided in

the agreement that in no case the credit period shall exceed 40 days from

the date of dispatch of goods made from Indian Warehouse and in case of

dispatch of goods being made post import of the products from outside India

which shall not exceed 90 days from the date of bill of lading (BOL).

Company Appeal (AT) (Ins) No. 1445 of 2024 2 of 15

4. It is further reflected that the CD issued several purchase orders to

the operational creditor and also made requisites payment against the goods

purchased by it.

5. The case of the operational creditor is that several invoices were raised

by it for the payment of the amount pertaining to the goods supplied to the

CD and out of the total outstanding amount of Rs. 2,41,30,811/- the CD

has only made a payment of Rs. 95,71,865/- and thus a sum of Rs.

1,45,58,946/- remains due and payable by the CD/Respondent to the

Operational Creditor/Appellant.

6. It is further the case of the appellant that in view of the outstanding

liability towards the operational creditor the CD issued 4 cheques to

operational creditor however all these cheques were dishonoured as there

was in sufficient funds in the bank account of the CD and in this regard

operational creditor issued demand notice under Section 138 of the

Negotiable Instruments Act, 1881 to the CD on 30.04.2020 and 05.05.2020.

7. It is also the case of the appellant that as the payment was not made

by the CD a notice under Section 8 of the Code was served on the CD on

08.05.2020 however despite duly served the CD neither replied the notice

nor has repaid the debt and consequently, a petition under Section 9 of the

Code was filed by the appellant before the Ld. Adjudicating Authority which

has been dismissed by passing the impugned order.

8. Ld. Counsel for the appellant submits that the Ld. Adjudicating

Authority has passed the impugned order without appreciating the facts,

and record and contention of the appellant were not discussed in right

perspective and Section 9 petition filed by the appellant has been dismissed

Company Appeal (AT) (Ins) No. 1445 of 2024 3 of 15 on the ground that an amount of Rs. 53,86,399/- with regard to various

invoices falls under the exclusion period of Section 10A of the Code and also

that there are pre-existing dispute existing between the parties and further

there is inconsistency in the amount of debt as stated in the notice under

Section 8 of the Code and the amount shown in Part -IV of the petition.

9. It is further submitted that so far as the finding of the Ld.

Adjudicating Authority with regard to the part of the default amount barred

by Section 10 A of the Code is concerned the same has been arrived by

adding a 90 day credit period to each invoice while this approach is

manifestly erroneous and contrary to clause 14(f) of the distribution

agreement (executed between the parties on 15.10.2019), which clearly

stipulates that the credit period shall not exceed 40 days in case of goods

dispatched from Indian Warehouse and 90 days in case of dispatch from

outside India, International Warehouse.

10. Ld. Counsel for the appellant has relied on the following table (part of

the written submissions filed by the appellant) in order to show that the

various invoices pertaining to which the credit period was 40 days has been

wrongly shown as the period of 90 days and that the chart prepared by the

Ld. Adjudicating Authority in para no. 16 of the impugned order is not

correct.

S. Date of Payment Invoice Date of Amount Pendi No. Invoice Due Date Amount Paymen Paid ng (+40 days) (in Rupees) t (in Amou Rupees) nt (in Rupe es) 1) 28.11.2019 07.01.2020 22,13,220/- 08.09.20 3,56,605/- 18,56, 615/- @ pg. 122 20 Company Appeal (AT) (Ins) No. 1445 of 2024 4 of 15 2) 10.12.2019 19.01.2020 1,18,998/- - - 1,18,998/- 3) 17.12.2019 26.01.2020 17,12,706/- 31.12.20 3,93,015/- 13,19,691/- @ pg.123 20 4) 21.12.2019 30.01.2020 58,53,408/- - - 58,53,408/- @ pg. 124 5) 26.12.2019 04.02.2020 12,28,517/- - - 12,28,517/- @ pg. 125 6) 26.12.2019 04.02.2020 9,82,912/- - - 9,82,912/- @ pg. 126 7) 30.12.2019 08.02.2020 5,953/- - - 5,953/- @ pg. 127 Total 1,21,15,71 7,49,620/- 1,13,66,094 4/- /-

11. While drawing our attention towards the table prepared by the Ld.

Adjudicating Authority at para 16 of the impugned order it is further

submitted that only two invoices which have been shown at Serial no. 10

and 11 of the table of date 02.01.2020 and 20.03.2020 amounting to Rs.

1,434,921/- and Rs. 1,734,096/-, respectively were having a credit time of

90 days and therefore only these two invoices were falling under the period

excluded vide Section 10A of the Code and if this amount is deducted from

the cumulative amount of all the invoices the balance amount of the rest of

the invoices would come to Rs. 12,115,714/-. Therefore, the Ld.

Adjudicating Authority has completely miscalculated the amount.

12. It is vehemently submitted that conclusions of the Ld. Adjudicating

Authority with regard to the pre-existing dispute are also not correct as the

impugned order holds that there exists a pre-existing dispute between the

parties arising out of the tripartite agreement dated 27.04.2020 which is not

tenable either factually or legally. Elaborating further it is submitted that

invoices forming the subject matter of petition were raised between

November, 2019 and March 2020 the default date pleaded in the petition is

Company Appeal (AT) (Ins) No. 1445 of 2024 5 of 15 21.03.2020 and the tripartite agreement was executed on 27.04.2020, thus,

the tripartite agreement was executed on a day when the default had already

occurred and therefore this agreement does not form the basis of the

operational debt claimed in the petition. Moreover, this agreement would

tantamount to be an acknowledgment of the in 'debtness' of the

CD/Respondent to pay Rs. 16,171,305/- to the appellant.

13. It is also submitted that even after receipt of the demand notice dated

08.05.2020 (under Section 8 of the Code), no dispute of any kind was raised

and to the contrary the Respondent made some payments aggregating to Rs.

1,693,015/- which would also be deemed as acknowledgment of the liability

of the CD and the CD further vide its email dated 27.05.2020 and

04.06.2020 specifically acknowledged its liability towards the appellant, as it

sought time to clear the dues.

14. It is submitted that reliance of the Ld. Adjudicating Authority on an

email dated 06.04.2021 in order to assume a pre-existing dispute between

the parties is without any basis as the same is of the date after the demand

notice was issued by the appellant (08.05.2020) and therefore there was no

pre-existing dispute as assumed by the Ld. Adjudicating Authority.

15. It is further submitted that in fact there is no inconsistency in the

amount shown in the demand notice dated 08.05.2020 and Part IV of the

petition. Elaborating further it is submitted that in the demand notice

amount of Rs. 16,171,305/- has been claimed but after the issuance of

notice the Respondent has made part-payments to the tune of Rs.

1,693,015.17/- in the month of June to December, 2020 and these

payments were adjusted in the Section 9 petition and consequently the

Company Appeal (AT) (Ins) No. 1445 of 2024 6 of 15 principal outstanding amount was recalculated to Rs. 14,558,946/- and the

amount became Rs. 18,630,116/- by adding contractual interest as

provided in clause 16 of the distribution agreement. Therefore, the

mismatch in the amount mentioned in demand notice and Part -IV of the

petition is on account of the payment made by the Respondents after

issuance of Section 8 notice and this mismatch may not be sufficient to

reject the application of the appellant. Reliance in this regard is laid on

Rajendra Bhai Panchal vs. M/s Jay Manak Steels and Anr., CA (AT)

(Ins) No. 592 of 2020 decided on 20.10.2020.

16. Ld. Counsel for the Respondent though even after sufficient time

provided did not file any written submissions however in oral submissions it

is submitted that there is no illegality in the impugned judgment as it has

been correctly held by the Ld. Adjudicating Authority that part of the debt

was barred by Section 10 A of the Code and due to this the remaining debt

could not reach the threshold limit and thus the application has been rightly

rejected.

17. It is further submitted that the demand notice allegedly given by the

appellant under Section 8 of the Code is illegal and there is also mismatch

in the amount mentioned in the notice given under Section 8 of the Code

and the amount mentioned in the application given under Section 9 of the

Code.

18. It is further submitted that there was prior dispute between the

parties with regard to the debt in question and pertaining to which an

agreement dated 27.04.2020 was also executed between Belgotex Floor

Coverings Ltd., Belgotex India Pvt. Ltd. (appellant) and Puneet India Pvt. Ltd.

Company Appeal (AT) (Ins) No. 1445 of 2024 7 of 15 (CD) which was pertaining to a joint venture project to install flooring with

an Ernst and Young in India Ltd. and the dispute emerged between the

parties was also communicated through an email written by the CD dated

06.04.2021 which has been rightly relied on by Ld. Adjudicating Authority.

19. It is further submitted that there is no illegality in the impugned

judgment pertaining to the amount of the invoices barred by Section 10A of

the Code and the submissions which has been advanced by the appellant

are per se illegal and therefore the appeal preferred by the appellant is liable

to be dismissed.

20. We have heard Ld. Counsel for the parties and have perused the

record.

21. It is reflected that by passing the impugned judgment the application

of the appellant filed under Section 9 of the Code has been dismissed by the

Ld. Adjudicating Authority on the grounds (i) that default date of various

invoices filed by the applicant/appellant is falling within the period

highlighted under Section 10A of the Code (ii) a pre-existing dispute was

existing between the parties with regard to the material supplied to Ernst

and Young in India Ltd. and also that (iii) a tripartite agreement dated

27.04.2020 was executed between the appellant, CD and Belgotex Floor

Coverings Ltd. pertaining to the same debt before issuance of notice by the

appellant under Section 8 of the Code and also on account of the fact that

Principal amount of debt in the demand notice dated 08.05.2020 and the

Principal amount of debt as shown in application under Section 9 of the

Code are different.

Company Appeal (AT) (Ins) No. 1445 of 2024 8 of 15

22. We recall that the appellant/operational creditor is engaged in the

business of trading floor coverings and having its operation in various

countries and it appoints dealers and distributors on exclusive and non-

exclusive basis. The CD and the appellant/operational creditor entered into

an agreement dated 15.10.2019, whereby the CD was appointed as the

authorised dealer/distributor of the operational creditor on an exclusive

basis in Delhi-NCR Region for three years and as per the terms of the

agreement the CD was required to clear the invoices of the operational

creditor within the credit period as mentioned in the purchase order, not

exceeding 40 days from the date of dispatch of goods made from Indian

warehouse and within 90 days in case of dispatch of goods being made post

import of the products from outside India.

23. The case of the appellant is that several invoices were raised by the

appellant and out of the total outstanding amount of Rs. 24,130,811/- the

CD has made a payment of only Rs. 9,571,865/-, thus a sum of Rs.

14,558,946/- remained due and payable by the CD to the appellant.

24. It is also the case of the appellant that in view of the outstanding

liabilities towards the operational creditor the CD also issued 4 cheques to

operational creditors however all these cheques were dishonoured and in

this regard the appellant issued legal notice under Section 138 of the

Negotiable Instrument Act, 1881 to the CD on 30.04.2020 and 05.05.2020

and thereafter on 08.05.2020, the notice under Section 8 of the Code was

given to the CD and despite being served no reply was given to the CD with

regard to this notice and thereafter the application under Section 9 has been

Company Appeal (AT) (Ins) No. 1445 of 2024 9 of 15 filed which has been dismissed by the Ld. Adjudicating Authority in the

manner stated herein before.

25. The first submission of Ld. Counsel for the appellant is that despite

there being a specific provision in the agreement dated 15.10.2019,

executed between the parties with regard to the credit period of 40 days and

90 days in case of goods supplied from Indian warehouse and goods

supplied after being imported from Internationals warehouse, the Ld.

Adjudicating Authority has counted 90 days for ascertaining default in order

to hold that the default period has fallen within the period provided under

Section 10A of the Code.

26. Ld. Counsel for the appellant has drawn our attention to various

invoices placed at Page no. 122, 123, 124, 125, 126 and 127 of the appeal

paper book in order to show that the amount with regard to these invoices

was due after 40 days and has been wrongly held by the Ld. Adjudicating

Authority as due after 90 days.

27. We have perused para no. 16 of the impugned judgment and have

found that the Ld. Adjudicating Authority has taken the date of default as

90th day from the date mentioned in the invoices. While as per the invoices

available on record the invoice dated 28.11.2019 (pg. 122), dated

10.12.2019, 17.12.2019 (pg. 123) 21.12.2019 (pg. 124), invoice dated

26.12.2019 (pg. 125), invoice dated 26.12.2019 (pg. 126) and invoice dated

30.12.2019 (pg. 127) totalling invoice amount Rs. 12,115,714/- were

pertaining to the 40 days' period and out of these invoices Rs. 749,620/-

have been paid thus the total amount of Rs. 11,366,094/- had remained to

be paid by the CD to the appellant.

Company Appeal (AT) (Ins) No. 1445 of 2024 10 of 15

28. We also notice that Ld. Adjudicating Authority in the impugned

judgment for the purpose of holding that some of the invoices falls within

the period provided under Section 10A of the Code as produced a table

which we are also producing the same as under:

A perusal of the above table would reveal that out of 10 invoices referred to

in the table relied on by appellant, only 5 invoices have been held to be

falling under the period as provided under Section 10A of the Code. We have

very carefully perused these 5 invoices which according to the Ld.

Adjudicating Authority are falling under the period provided under Section

10A of the Code and have found that these invoices are of date 26.12.2019,

26.12.2019, 30.12.2019, 02.01.2020 and 20.03.2020 amounting to Rs.

53,86,399/- and out of these 5 invoices three invoices of date 26.12.2019 of

Rs. 12,28,517/-, date 26.12.2019 of Rs. 9,82,912/- and date 30.12.2019 of

Rs. 5,953/- are pertaining to the goods supplied from the Indian Warehouse

and therefore having regard to the clause 14 (f) of the Supply agreement the

credit period of 40 days would apply to these invoices which according to us

have been wrongly applied as 90 days by the Ld. Adjudicating Authority and

Company Appeal (AT) (Ins) No. 1445 of 2024 11 of 15 if a credit period of 40 days is applied to these invoices, none of them would

fall under the period provided under Section 10A of the Code and if the

cumulative amount of these invoices (Rs. 12,28,517/-+ Rs. 9,82,912/- + Rs.

5,953/- =Rs. 2,217,382/-) is added to the amount of 5 invoices Rs.

1,06,65,958/- (placed at serial no. 1 to 5 of the table) found falling beyond

the period of 10A the net figure would arrive (Rs. 1,06,65,908/-+ Rs.

2,217,382/- =Rs. 1,28,83,290/-) at Rs. 1,28,83,290/- which would be above

the threshold limit of one crore. Thus, in our considered opinion a patent

illegality has been committed by the Ld. Adjudicating Authority in

computing the date of default so far as the above invoices are concerned as

well in computation of the amount falling under the period as provided

under Section 10A of the Code.

29. It is also reflected that only two invoices of date 02.01.2020 (pg. 128)

and 20.03.2020 (pg. 131) of date 02.01.2020 and 20.03.2020 amounting to

Rs. 1,434,921/- and Rs. 1,734,096/- were falling under the period provided

under Section 10A of the Code.

30. Thus in our considered opinion, the Ld. Adjudicating Authority has

committed a mistake in treating the default date pertaining to all the

invoices after 90 days while the facts are contrary to the conclusions drawn

by the Ld. Adjudicating Authority. It is also to be recalled that even after the

two invoices of the amount of Rs. 3,169,017/- appears to be barred by the

period provided under Section 10A of the Code the remaining amount

appears to be above threshold and therefore the application moved by the

applicant under Section 9 of the Code could not be dismissed on this

ground.

Company Appeal (AT) (Ins) No. 1445 of 2024 12 of 15

31. So far as the ground of pre-existing dispute is concerned it appears to

be an admitted fact that no reply to the demand notice dated 08.05.2020

given by the appellant under Section 8 of the Code, was given by the CD and

as per the time period provided in the invoices mentioned herein before the

default has already occurred in the month of February, 2020 while the

tripartite agreement was executed between the parties on 27.04.2020. A

perusal of this agreement would conspicuously reveal that by entering into

this agreement provision has been made for the payment of the dues by the

Belgotex Floor Coverings Proprietary Ltd. to Belgotex India Pvt. Ltd. on

behalf of Puneet India Pvt. Ltd. pertaining to certain commission which was

owed by Belgotex South Africa to Puneet India Pvt. Ltd. and by executing

this agreement the obligation of paying this commission has been granted in

favour of the Belgotex India Pvt. Ltd. and thus the commission which was

required to be received by the Puneet India Pvt. Ltd. from Belgotex Floor

Coverings Proprietary Ltd. was now to be paid by the Belgotex Floor

Coverings Prorietary Ltd. to Belgotex India Pvt. Ltd.

32. There is nothing on record which may suggest that any payment in

pursuance of this agreement has been made to the appellant and more over

this agreement has been executed between the parties after the default had

already occurred and therefore like the issuance of some cheques by the CD

which have dishonoured the execution of this agreement was only an

attempt to clear the dues and the same by any stretch of imagination may

not be construed as a prior dispute.

33. It is also reflecting that Ld. Adjudicating Authority in order to

substantiate the issue of prior dispute has also relied on an email of date

Company Appeal (AT) (Ins) No. 1445 of 2024 13 of 15 06.04.2021 written by the CD Puneet India Pvt. Ltd. pertaining to cleaning

of carpet and also release of some payment to him for the work order

pertaining to Ernst and Young in India Ltd. We notice that this email has

been written on 06.04.2021, almost 11 months after the issuance of notice

under Section 8 of the Code by the appellant/CD on 08.05.2020 and is

pertaining to the commission of the CD withheld by Ernst and Yong in India

Ltd. Conspicuously this email has been sent after the receipt of notice under

Section 8 of the Code and thus in our considered opinion may not be

relevant for the purpose of substantiating the issue of prior dispute as the

same is pertaining to the distinct transaction and contract and is after

thought.

34. So far as the issue of mismatch of amount as stated in the demand

notice dated 08.05.2020 (Rs. 16,171,305/-) and the outstanding amount

calculated at Rs. 18,630,116/- is concerned it has been clarified by the

appellant that in the demand notice the amount of Rs. 16,171,305/- was

stated however after issuance of this notice the Respondent had made part

payment aggregating to Rs. 1,693,015.17/- in the months of June-

December, 2020 and while filing petition under Section 9 these payments

were adjusted rendering the principal outstanding amount as Rs.

14,558,946/- and as per clause 16 of the agreement dated 15.10.2019 the

up-to-date interest has been added to this amount and the total claim has

arrived as Rs. 18,630,116/-.

35. Ld. Counsel for the appellant has also relied on Rajendra Bhai

Panchal (supra) propounded by a co-ordinate Bench of this Appellate

Tribunal wherein para no. 41 it has been held as under:

Company Appeal (AT) (Ins) No. 1445 of 2024 14 of 15 "41. If there is a mistake in the demand but the creditor is clearly owed the statutory minimum figure or more, the fact that the debt is mis stated may not automatically invalidate the demand as per decision 'Cardiff Preserved Coal & Coke Co.' V. 'Norton 36 LJ Ch 451. Further, the Court will take into account whether any injustice was caused to the 'Debtor' and even a grossly overstated statutory demand may not automatically be set aside as per decision Re a Debtor (No490/SD/1991), (1992) 2 All ER 664 (ChD)".

Thus it is evident that any mismatch in the amount mentioned in the demand notice and petition under Section 9 of the Code may not be sufficient to discard the petition under Section 9 of the Code if the correct amount mentioned in petition under Section 9 of the Code is also above threshold, more so, when the notice given under Section 8 of the Code has not been replied by the CD.

36. Keeping in view all the facts and circumstances of the case and for the reasons mentioned herein before, we are of the considered view that the Ld. Adjudicating Authority has committed manifest illegality in rejecting the application moved by the appellant/applicant under Section 9 of the Code and therefore the impugned judgment may not with stand the test of law and is hereby set aside. Consequently, the appeal is allowed. The matter is remanded back to Ld. Adjudicating Authority to pass an order a fresh after providing an opportunity of being heard to the parties. For this purpose, the CP (IB) No. 236 of 2021 is revived on the board of the Ld. Adjudicating Authority. The parties shall appear before the Ld. Adjudicating Authority on 20.04.2026. There is no order as to costs.

37. Pending IA's if any are also closed.

[Justice Mohd. Faiz Alam Khan] Member (Judicial)

[Naresh Salecha] Member (Technical) New Delhi.

30.03.2026.

sr

Company Appeal (AT) (Ins) No. 1445 of 2024 15 of 15