Deepak Modi vs Shalfeyo Industries Private Limited ...

Bankruptcy Code, 2016 (hereinafter referred to as 'Code') has been

preferred against an order dated 16.08.2022 passed by the

Adjudicating Authority, National Company Law Tribunal, Jaipur

Bench, Jaipur (hereinafter referred to as Adjudicating Authority).

By the said order the Learned Adjudicating Authority has admitted

an application filed under Section 9 of the Code by Operational

Creditor who is Respondent No.2 in the present appeal. In sum

and substance by the impugned order after admitting application

filed under Section 9 of the code, Corporate Insolvency Resolution

Process (CIRP) was initiated against Respondent No.1 (Corporate

Debtor).

Company Appeal (AT)(Ins) No.1019 of 2022 3

2. The appellant is the suspended director and shareholder of

Respondent No.1 (Corporate Debtor) namely M/s Shalfeyo

Industries Private Ltd which was earlier M/s Adelante Exim India

Private Ltd. The Respondent No.2, 'Operational Creditor'

approached the Adjudicating Authority by filing an application

under Section 9 of the Code read with Rule 6 of the Insolvency and

Bankruptcy (Application to Adjudicating Authority) Rules, 2016.

The said case was registered as CP No.(IB)-79/9/JPR/2020. After

filing of the case notices were issued by the Adjudicating Authority

and thereafter the Corporate Debtor appeared and filed its

response.

3. The applicant, Operational Creditor, alleged in the

application that Corporate Debtor had placed purchase orders for

supply of granite stone and six invoices were raised for total

amount of Rs. 14,78,420/- (Rupees Fourteen lakhs seventy eight

thousand four hundred twenty only). The details of invoices, post

dated cheques (PDC) alongwith the payment as well as

presentation/dishonour of cheques can be examined on the basis

of following tabulation:-

Sr. Invoice No. Invoice Date Bill Amount Date of Date of

No. PDC dishonour

Company Appeal (AT)(Ins) No.1019 of 2022 4

1 PI/01/19-20 21.09.2019 Rs.82,793/- - -

2 PI/03/19-20 27.09.2019 Rs.39,333/- - -

3 PI/04/19-20 13.10.2019 Rs.3,51,553/- 14.12.2019 19.12.2019

4 PI/07/19-20 25.10.2019 Rs.1,98,733/- 25.12.2019 04.01.2020

5 PI/10/19-20 16.11.2019 Rs.2,77,160/- 16.01.2020 18.01.2020

6 PI/12/19-20 05.12.2019 Rs.5,28,668/- 04.02.2020 25.02.2020

Total Rs.14,78,420/-

4. However, out of aforesaid claims some payments were made

but non-payment of operational dues to an amount of

Rs.11,95,447/- (Rupees Eleven lakhs ninety five thousand four

hundred forty seven only) was existing on the date of the filing of

the application. The Corporate Debtor entered appearance before

the Adjudicating Authority and filed its reply and primarily raised

a plea that there was pre-existing dispute between the parties. It

was asserted that one M/s SGB Infra Ltd had allotted work to

Corporate Debtor to complete the flooring work with the specified

quality of material at Jaipur International Airport. The said work

order was issued with certain terms and conditions particularly to

supply the granite slabs supposed to be in the range of 16 mm to

18 mm. A plea was taken that instead of supply by the Operational

Creditor of granite slabs in the range of 16 mm to 18 mm, granite

slabs supplied were of 15 mm to 15.5 mm thickness and this was Company Appeal (AT)(Ins) No.1019 of 2022 5

the reason subsequently SGB Infra Ltd vide its letter dated

16.12.2019 asked the Corporate Debtor for removal of the flooring

on account of aforesaid differences. Besides raising disputes,

certain objections were also raised in respect of proposed IRP

Namely Mr. Vikas Rajwarsi. However, since before the

Adjudicating Authority the said proposed IRP by filing an IA had

shown his difficulty to proceed and as such the said issue had

become infructuous. The Corporate Debtor in its reply had stated

as follows:-

"b. In pursuance to the above work order, the Corporate

Debtor vide work orders dated 04.10.2019 and

18.10.2019 placed an order for granite slabs with the

Applicant. At the first round of inspection by SBL Infra

Limited on 15.12.2019, there was deficiency found in

the goods in the material quality and it was observed

that the granite was of 15 mm to 15.5 mm whereas as

per the specification of work orders, it was supposed to

be of range of 16 mm to 18 mm. Thereafter, SGB Infra

Ltd vide letter dated 16.12.2019 requested removal of

the flooring on account of aforementioned difference.

Company Appeal (AT)(Ins) No.1019 of 2022 6

c. The Corporate Debtor duly communicated to aforesaid

issues to the Operational Creditor and parallelly wrote

to his banker to stop payment of cheques issued to the

Applicant. However, the applicant unloaded the further

material at the site despite clear instructions of return

back given to his lorry drivers and the personnel but they

refrained to take back the same. It is also pertinent to

mention that even the staff of the Applicant himself had

clearly given in writing that they are unloading the

material as per instructions and directions of his boss.

d. The Corporate Debtor has further submitted that

Annexure-E of the Application annexed to show the

receipt of quality check of goods, is actually not the

receipts of quality checks rather the pages from the

diaries of guard/custodian who maintains the details of

loading and unloading stock. Further the applicant has

only annexed pages running from 51 to 53 only and

conveniently suppressed page No.54 and 55 of the said

diary which contains the details of the deficient goods

and the statement of lorry driver who mentions that the

product is 14.5-15 mm and all these goods will be

Company Appeal (AT)(Ins) No.1019 of 2022 7

changed. Further it is submitted that the applicant has

also suppressed the reply dated 07.01.2020 to its

statutory notices issued under the Negotiable

Instruments Act, 1881 wherein the issue of the quality of

goods were raised categorically.

5. After filing of the reply by the Corporate Debtor the

Operational creditor also filed a detailed rejoinder. The

Operational Creditor further raised an issue that in reply the

Corporate Debtor had brought on record certain forged documents

and as such an application under section 340 of Cr PC 1973 was

also preferred. In rejoinder, as has been noticed by the

Adjudicating Authority, following stand was taken by the

Operational Creditor:-

"The Applicant has submitted that the Corporate Debtor

has forged and fabricated the diary pages which have

been annexed with the Reply. The aforesaid act

amounts to perjury for which a separate application has

been referred by the Application under Section 340 of the

Code of Criminal Procedure, 1973. It has been submitted

that the document at page 48 of the Reply is forged and

fabricated document as the noting which has been

Company Appeal (AT)(Ins) No.1019 of 2022 8

mentioned by the Corporate Debtor in the para has been

written by it subsequent to the signatures of Mr. Ratul

Singhal and Mr. Ravinder, only to fabricate the said

document. The entire material mentioned at Pg No.55 of

the diary was unloaded and accepted by the Corporate

Debtor without any demur. The alleged remark has been

made only to save the Corporate Debtor from making the

payment to the Operational Creditor and to create a

camouflage of the dispute between the parties.'

6. The Adjudicating Authority minutely examined the issue and

discussed the same in detail in following manner:-

"10.The main issue present before us is regarding the

amount due by the Corporate Debtor to the Operational

Creditor. The undisputed fact in the matter is that the

Applicant had supplied the goods and raised as many

as six invoices the details of which have been mentioned

para IV of the application. The payment against invoice

dated 21.09.2019 and 27.09.2019 amounting to Rs.

82,973/- and Rs. 39,333/- respectively are not a matter

of dispute as the Applicant itself has stated that the

amount of these invoices has duly been paid with

Company Appeal (AT)(Ins) No.1019 of 2022 9

respect to the invoices dated 13.10.2019 an amount of

Rs. 1,90.886/- (3,51,553 i.e. the bill amount (-) 1,60,667

i.e. the balance amount apportioned towards the third

bill). Hence, the total amount of debt defaulted from the

4 invoices is Rs. 11,95,447/-. It is seen from the records

produced before us that the 4 post-dated cheques dated

14.12.2019, 25.12.2019, 16.01.2020 & 04.02.2020

were all presented in the bank for clearance but for the

cheque dated 14.12.2019, 25.12.2019 & 04.02.2020 the

payment was stopped by the drawer. Whereas for the

cheque dated 16.01.2020, the cheque was returned with

the endorsement of funds insufficient. The said goods

were admittedly delivered to the Corporate Debtor.

11. It is seen from Annexure E-5 of the application that

the goods were duly supplied to the Corporate Debtor.

The Corporate Debtor has raised the point that there was

an existence of a dispute to the quality of goods that was

supplied by the Operational Creditor. The Corporate

Debtor has submitted that the material provided by the

Applicant was not as per the specified purchase order

i.e. the granite was of 15 mm to 15.5 mm whereas as per

Company Appeal (AT)(Ins) No.1019 of 2022 10

the specification of work orders it was supposed to be a

range of 16 mm to 18 mm. The Corporate Debtor has

submitted that the inspection report dated 16.12.2019

whereby it was directed to remove the flooring which is

in city side porch area at on cost.

12. The Corporate Debtor has annexed a series of emails

exchanged between the parties as Annexure I of the

application. The Corporate Debtor vide mail dated

16.12.2019 has informed the Operational Creditor

regarding the low quality of material and further

informed that the management has decided to stop all

payment on immediate basis. In reply to the said email

the Applicant herein stated that the material was

dispatched as per the specifications laid down in the

purchase order and further there was no prior intimation

regarding the non-desirable quality of the material. In

the said reply, it was also stated that all the material

has been consumed without any complain with respect

to the quality. Thereafter, another mail was referred to

by the Corporate Debtor whereby it has been stated that

the Corporate Debtor had rejected the complete truck

Company Appeal (AT)(Ins) No.1019 of 2022 11

load on 15.12.2019. In the said email only the

Operational Creditor was requested to replace the

material within 5 days or accept the debit note.

13. It is seen that only after this inspection report was

given to the Corporate Debtor the Corporate Debtor

stopped payment of the post-dated cheques dated

14.12.2019, 25.12.2019 & 04.02.2020. It appears that

it is only after the inspection report was given to the

Corporate Debtor, the Corporate Debtor mailed the

Operational Creditor regarding the quality of goods.

There is no document on record which can show that the

issue regarding the quality of goods was raised before

the said date. These goods have been consumed by the

Corporate Debtor in the project undertaken as mentioned

above. Further, in the mail annexed at page 46 of the

application the Corporate Debtor has stated that all the

goods supplied were destroyed in front of the

Operational Creditor representative Mr. Sher Singh.

Thereafter, the demand notice dated 27.12.2019 in

compliance with Section 8 of the Code was issued. The

said notice was replied to vide letter dated 07.01.2020.

Company Appeal (AT)(Ins) No.1019 of 2022 12

In the said reply the Corporate Debtor has stated that

the goods were jointly inspected by the parties.

14. Hence, in our view, there was no dispute raised at

the time of delivery of goods when the inspection was

required to be carried out. It is only after the Inspection

Report was provided to the Corporate Debtor, that the

Corporate Debtor raised issues regarding the quality of

goods delivered. There exists a clear debt as the

Corporate Debtor has consumed the goods and

therefore, is under an obligation to pay the Operational

Creditor with respect to the goods consumed. It is evident

from the reasons stated hereabove that Corporate Debtor

has clearly defaulted in payment of debt due to the

Operational Creditor.

16. Therefore, in the present matter at hand, there is a

clear debt, repayment of which has been defaulted by

the Corporate Debtor and there appears to be no pre-

existing dispute between the parties. Any allusion to

such dispute appears to be confirmed.

Company Appeal (AT)(Ins) No.1019 of 2022 13

17. Under sub-section (4) of Section 9 of the Code, the

Operational Creditor may propose the name of a

Resolution Professional to be appointed as Interim

Resolution Professional (IRP) but it is not obliged to do

so. In the instant case, the Operational Creditor had

proposed an IRP although the proposed IRP has

withdrawn its consent before this Tribunal. Hence, this

bench can appoint the RP from the pool of RPs

empanelled with the IBBI.

18. In view of this Mr. Umang Jain, duly registered with

the Insolvency and Bankruptcy Board of India, with

Registration No. IBBI/IPA-001/IP-P01959/2020-

2021/13105 (email:caumangjain @gmail.com: mobile

No.+91 9351846668, is hereby appointed as the IRP.

The IRP is directed to take all such steps as are required

under the statute, inter alia in terms of Sections 15, 17,

18, 19, 20 and 21 of the Code and transact proceedings

with utmost dedication, honesty and strictly in

accordance with the provisions of the Code, and Rules

and Regulation thereunder."

Company Appeal (AT)(Ins) No.1019 of 2022 14

7. The present appeal has been preferred by the Corporate

Debtor against the order of the Adjudicating Authority. While

pressing the appeal, Mr. Abhijeet Sinha, learned counsel for the

appellant had drawn our attention to different pages and

paragraphs of the impugned order particularly page 27a, 27b, 27d,

27j, 27k. He tried to justify that there was admittedly pre-existing

dispute which was required to be noticed by the Adjudicating

Authority but incorrectly appreciated and rejected the plea of the

Corporate Debtor regarding pre-existing dispute. Shri Sinha has

also drawn our attention to purchase order at Page 46, invoice at

page 48. He has specifically drawn our attention to Page 147 of

the Memo of Appeal i.e. an Inspection Report dated 16.12.2019.

By way of referring to aforesaid document Shri Sinha has argued

that long back on 16.12.2019 M/s SGB Infra Ltd after conducting

inspection had directed the Corporate Debtor for removal of granite

flooring because of quality issue. The Corporate Debtor was

informed that the material fitting done by him was found not as

per specification standard. He has also placed reliance on the

judgement of Hon'ble Supreme Court in Rajratan Babulal Agarwal

Vs Solartex India Pvt Ltd & Ors (2023) 1 SCC 115. He submitted

that in view of law settled on the point that in case of establishment

Company Appeal (AT)(Ins) No.1019 of 2022 15

of pre-existing dispute before issuance of notice under Section 8 of

the Code or even before the Adjudicating Authority the correct

approach which was to be adopted by the Adjudicating Authority

was to reject the application filed under Section 9 of the Code by

the Operational Creditor/Respondent No.2.

8. In the present appeal detailed reply has also been filed by the

Respondent No.2/Operational Creditor. It has been categorically

stated in the reply that the Operational Creditor had supplied

material to the Corporate Debtor in respect of which Operational

Creditor also raised six invoices to the tune of Rs.14,78,420/- and

till initiation of CIRP an amount of Rs.11,95,447/- was outstanding

whereas no dispute with regard to quality of goods was raised by

the Corporate Debtor. However, he refused to make payment

resulting in initiation of CIRP against the Corporate Debtor. It is

further case of the Respondent No.2/Operational Creditor that

whatever material were supplied by him were accepted by the

Corporate Debtor without any dispute and this was the reason that

the Corporate Debtor utilised entire granite slabs supplied by the

Operational Creditor and since, it appears that the work was not

executed in appropriate manner SGB Infra Ltd had asked the

Corporate Debtor for removal of floor from the premises of the

Company Appeal (AT)(Ins) No.1019 of 2022 16

Airport Authority, Jaipur. In para 5 of the reply it has been

indicated as if the Corporate Debtor has made some forgery in

record in respect of unloading of the material. We propose to

reproduce para 5 of the reply as follows:-

"5. That the contents of Para No. 7.4 of the Appeal are vehemently denied. It is submitted that the corporate debtor while submitting response to the insolvency application before the Ld. NCLT. Jaipur Bench has submitted forged and fabricated documents being Page No.55 which is a part of an Annexure-3 of the Reply to the Company Petition. A bare perusal of the Page No.55 as annexed alongwith the reply to the company petition gives an impression that material which has been unloaded by the operational creditor in the premises of the corporate debtor has been returned with the remark "2000........ माल 14-1/2-15 mm है । यह पूरा माल बदला जायेगा। पार्टी के कहने से अनलोड िं ग . Whereas the fact of the matter is that the aforesaid remark has been added subsequent to the signature made by Shri Ratul Singhal (Partner of the Operational Creditor) and Mr. Ravindra (Employee of the Corporate Debtor). The said fact can be corroborated from the photograph which was taken by the Operational Creditor from its Mobile after signing the said page and given back to the employee of the corporate debtor. It is submitted that a bare perusal of the said photograph would reveal that no such remark was made at Page No.55 of the diary when the material was unloaded and the said remark has been made only after the filing of the petition in a manner that the space existing between the signature of Mr. Ravinder and description of the material has been used with a malafide intention to create a dispute about the quality of the material supplied to the corporate debtor. When the aforesaid forgery and fabrication came to the notice of the respondent no.2, an application under section 340

Company Appeal (AT)(Ins) No.1019 of 2022 17 Cr.PC was filed before the NCLT, Jaipur Bench and the same is pending for adjudication. Copy of the application filed by the respondent no.2 before the NCLT, Jaipur Bench is being enclosed and marked as Annexure R- 2/1."

9. Mr. Amol Vyas, learned counsel for Respondent No.2

submitted that since outstanding debt was not being cleared by the

Corporate Debtor and first postdated cheque for an amount of

Rs.3,51,553/- stood dishonoured on 19.12.2019. The Operational

Creditor issued demand notice under Section 8 of the Code on

27.12.2019. Even after issuance of demand notice three cheques

i.e. an amount of Rs.1,98,073/-, 2,77,160/- and 5,28,668/- stood

dishonoured on 4.1.2020, 18.1.2020 and 25.2.2020 respectively.

Learned counsel for Respondent No.2 has argued that though there

was no plausible pre-existing dispute, the Corporate Debtor with a

view to get the application filed under Section 9 of the code, rejected

has taken as an unsustainable plea that too by forging certain

documents as if there was a dispute. Learned Counsel for

Respondent No.2 has also drawn our attention to a communication

made by Operational Creditor to the Corporate Debtor which was

in reply to mail dated 16.12.2019 sent by the Corporate Debtor

regarding quality of material. He submits that the said reply which

is at running page 74 of the Memo of Appeal itself reflects that the

Company Appeal (AT)(Ins) No.1019 of 2022 18

Corporate Debtor had raised frivolous and concocted story

regarding the quality. We may propose to reproduce the

communication sent on behalf of the Operational Creditor to

Corporate Debtor which is at page 74 as follows:-

Mr. Deepak Medi, Director ADELANTE EXIM INDIA PRIVATE LIMITED G846, ROAD NO. 14. VISHWAKARMA INDUSTRIAL AREA JAIPUR-302013 PHONE NO. 6141-4915096 MOBILE NO. 491- 3166815551 EMAIL ID: INFO@ADELANTEGLOBAL.COM

Subject: REPLY OF YOUR MAIL, RECEIVED DATED 1642.2619 REGARDING QUALITY OF MATERIAL Dear Mr. Deepak,

With respect to your mail received on 16.12.2019 regarding the quality of material supplied by in which you have allegedly raised a frivolous, concocted story regarding the low quality of material in order to save yourself from clutches of nonpayment of our dues. We have dispatched the materials per the specifications specified laid down in the said purchase order issued by you, and after getting approval quality check from your side that the material is as per your desired quality. Also, there is no previous intimation to us from your side that the material is not of desirable quality. Even if the material is not of your desired quality you have consumed all the material supplied and there was no complaint raised by you with respect to quality of the material supplied earlier. It seems that it is nothing but a delay tactic adopted by you to dodge away from your liabilities of payment.

I was your duty to convey the same before consumption of all material but there is no communication/no letter/no email with respect to any complaint with

Company Appeal (AT)(Ins) No.1019 of 2022 19

respect to material So if there was any issue regarding quality of material it was your duty to convey/inform to us on the mom day of supply when each slab quantity was inspected and measured. Hence it is proved beyond any doubt that you are deliberately withholding payment for the reason best known to you before due date of cheque died 13.12.2019 of payment/presenting the cheque to the bank, Hence, contention given by you for quality of material is false and frivolous and it's all a fabricated story presented to withhold my payment

Hence, you are requested to repay the unpaid debt as mentioned in the ledger account enclosed, You have also stopped one of our cheque, despite balance in your account which is very unethical practice of business depicting your deliberate intension withholding our payment. Please note that all advance cheque given against our material bills and interest by your goodself will be deposited in time & if dishonored appropriate action will be taken in due course. Thanks and Regards

For Prime Impex Stones

Akul Singhal

Partner

Contact No.9928092694"

10. Learned counsel for the Respondent No.2 has also drawn our

attention to Page 25 and 26 of its reply to show that even the

Corporate Debtor by making interpolation/forgery had brought a

document before the Adjudicating Authority as if after unloading

it was stated for replacing the materials. By way of drawing our

attention to Page 25 and 26 it was argued that Page 26 was

Company Appeal (AT)(Ins) No.1019 of 2022 20

genuine one in respect of receipt of materials whereas page 25 is

the same document but subsequently interpolation was made as

if the slabs were between 14 ½ and 15 mm. We may not do better

than to reproduce both the documents by scanning as follows:

Company Appeal (AT)(Ins) No.1019 of 2022 21

Company Appeal (AT)(Ins) No.1019 of 2022 22

11. Accordingly it has been argued that after filing of the reply

before the Adjudicating Authority a separate application under

Section 340 of Cr PC was also filed making allegation of bringing

and using forged documents in a court proceeding. In sum and

substance it has been argued that there was no plausible pre-

existing dispute and as such learned Adjudicating Authority has

rightly rejected the plea of Corporate Debtor and initiated CIRP.

12. Mr. Pushpendra Singh Bhadoriya, learned counsel for R1

supports the impugned order.

13. Besides hearing learned counsel for the parties we have

perused the entire material available on record. It is not in

dispute that on the date of filing of application under Section 9 of

the Code by the Operational Creditor there were outstanding debt

amounting to Rs.11,95,447/- (Rupees Eleven lakhs Ninety Five

thousand four hundred forty seven only) against the Corporate

Debtor. Only objection in respect of pre-existing dispute which

was asserted by the Corporate Debtor was thoroughly examined

and satisfied by the Adjudicating Authority. It is true that under

the provisions of Code if Adjudicating Authority is satisfied with

pre existing dispute at the time of entertaining an application filed

under Section 9 of the Code there is no reason to initiate the same

Company Appeal (AT)(Ins) No.1019 of 2022 23

or admit the application. However, law is settled on the point that

there must be pure pre-existing dispute. Meaning thereby that

genuine pre-existing dispute must exist in rejecting an application

Section 9 of the code. In the present case it is reflected from

inspection report of SGB Infra Ltd dated 16.12.2019 which is at

page 147 that the Corporate Debtor was asked by the SGB Infra

Ltd to remove the flooring. This fact is itself enough to draw an

inference that the Corporate Debtor had accepted the delivery of

granite slabs made by the Operational Creditor without raising

any dispute or objection. Otherwise the Corporation Debtor

would have rejected the entire materials at the time of unloading

of the same. However, it is clear that the granite slabs supplied

by the Operational Creditor were utilised by the Corporate Debtor

and had placed the same in the premises of Airport Authority of

Jaipur. There may be plausible reasons for SGB Infra Ltd to ask

the Corporate Debtor to remove the flooring but fact remains that

the Corporate Debtor had accepted the granite slabs supplied by

the Operational Creditor without raising any dispute or objection.

On this score itself we are of the opinion that such plea of the

Corporate Debtor regarding dispute can be termed as moon shine

defence. On this plea there is no reason to accept as if there was

Company Appeal (AT)(Ins) No.1019 of 2022 24

pre-existing dispute in between the Operational Creditor and

Corporate Debtor. Besides this the Operational Creditor before

the Adjudicating Authority has already taken a plea that he has

filed an application under section 340 of Cr PC in respect of

placing and using a document by committing forgery and

interpolation and as such we do not find any ground to interfere

with the impugned order nor we find any defect in the said

impugned order. Accordingly the appeal having no merit is fit to

be rejected and it is dismissed without cost.

(Justice Rakesh Kumar) Member (Judicial)

(Dr. Alok Srivastava) Member (Technical) bm

Company Appeal (AT)(Ins) No.1019 of 2022