Excel Infra Logistics Pvt. Ltd vs Karnani Solvex Pvt. Ltd

(Arising out of Order dated 1ST October, 2019 in CP No.110/9/JPR/2019) passed by National Company Law Tribunal, Jaipur)

IN THE MATTER OF: Before NCLT Before NCLAT

Excel Infra Logistics Pvt Ltd S-1, 2nd Floor, Madhuban Tower, Plot No.283, Ward 12-B, Gandhidham (Kutch) Gujarat State 340201 Applicant Appellant

Vs

Karnani Solvex Pvt Ltd S-8 Mahesh Colony, Tonk Phatak, Jaipur, Rajasthan Respondent Respondent

Ms.Ranu Purohit, Advocate for appellant.

Mr. Dinesh Mohan Sinha and Mr. Prince Mohan Sinha, Advocates/PCS for Respondent.

JUDGEMENT

(12th June, 2020)

Mr. Balvinder Singh, Member (Technical)

The Appellant -'Excel Infralogistics Private Limited' (Operational

Creditor) filed an application under Section 9 of the Insolvency and

Bankruptcy Code, 2016 ("I&B Code") for short) against "Karnani Solvex

Private Ltd" (Corporate Debtor). The Adjudicating Authority (National

Company Law Tribunal, Jaipur Bench, Jaipur) by impugned order dated 1st

October, 2019 after discussing the case on merit, rejected the application on

the ground that the claim of the Appellant falls within the ambit of 'Existence

of Dispute'.

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2. The Operational Creditor is engaged in the business of transportation,

clearing and storage work. The Operational Creditor has carried out

transportation clearing and storage work for the Corporate Debtor and has

raised several invoices against the Corporate Debtor. The invoices are payable

within 15 days from the date of issue of the invoices, after which the Corporate

Debtor would be liable to pay interest @ 18% per annum on the outstanding

dues. The Operational Creditor submitted that it had sent several reminders

through email and made numerous personal visits regarding pending bills

and invoices but all went in vain. Therefore, the operational creditor issued

demand notice under Section 8 of the I&B Code dated 20.03.2019 on the

Corporate Debtor, which was duly received by the Corporate Debtor through

post on 27.03.2019. The Applicant submitted that the Corporate Debtor has

neither replied to the Demand Notice nor raised any dispute of the unpaid

operational debt. Therefore, the appellant filed application under Section 9 of

the I&B Code, 2016. The total amount claimed by the appellant as mentioned

in Part IV is a sum of Rs.37,51,623/- alaongwith interest @18% per annum

amounting to Rs.8,77,731/-as an outstanding amount which is due and

payable by Corporate Debtor.

3. The Respondent admitted the fact that appellant and respondent were

in a commercial contract and appellant has provided the services related to

storage, transportation and delivery of cargo but has denied the amount of

debt claimed by the appellant .

4. The Respondent stated that on 10.02.2018 a report titled as "Godown

wise Stock report" was communicated to the respondent by appellant that

Company Appeal (AT)(Insolvency) No.1233 of 2019 3

only 84.500 GMT of balance cargo belonging to respondent is left in godown

(Paradise GO-5) and out of that stock only 8-10 MTS is physical as 75 MTS of

cargo is lost due to moisture and other operations.

5. Respondent stated that one more report titled as "Godown Wise Stock

Report" of Godown "Paradise GO-5" was also communicated to Respondent

on 10.02.2018 by which it was informed that in godown "Paradise Go-6" the

total balances cargo is 100.760 MTs.

6. Respondent stated that as per calculation presented to the respondent

by appellant verbally, out of 100.760 tons of cargo of Godown "Paradise Go-

06" 78.170 tons of cargo was delivered to one of the customers of respondent

and only apaprox 22 tons of cargo left in godown. The final calculation as per

respondent remained as 22 tones of "Paradise GO-6" with 8 tones of "Paradise

Go-05 makes as total of 30 tons of cargo.

7. Respondent stated that suspecting some sort of deceit and mischief on

the part of appellant, Respondent searched its previous records and found

out that four cargo trucks which were disappeared in 2013 carrying 115 MT

of cargo in total, were intentionally never marked as received by appellant.

8. Respondent stated that the amount of Rs.3751623/- excluding interest

raised by appellant is not admitted. Respondent stated that bills amounting

to Rs.2918599/- were duly raised for the services rendered, however, the

same are liable to be adjusted against the claims of the respondent which

amounts to Rs.4017321/- which makes the appellant liable to pay

Rs.1098722/- to the Respondent. Respondent raised invoice dated 31.3.2019

Company Appeal (AT)(Insolvency) No.1233 of 2019 4

(Page 73 of reply) upon appellant for Rs.40,17,321/- for 225.060 MT.

Respondent also stated that earlier he sent an mail dated 20.11.2018 (Page

71 of reply) to appellant to clear the amount.

9. Respondent stated that there is existence of dispute and the

Adjudicating Authority has not erred in delivering its judgement.

10. From bare perusal of the impugned order dated 1st October, 2019, it

will be evident that the Adjudicating Authority have noticed that 75 MTs cargo

is lost due to the moisture and remaining 30GMT cargo in rejected condition

is still under the possession of appellant, which appears to be a disputed

matter, came to the conclusion and hold that the claim amount raised by the

appellant is a disputed claim.

11. In an application under Section 9, it is always open to the 'Corporate

Debtor' to point out pre-existence of dispute. It is to be shown that the dispute

was raised prior to the issuance of demand notice under Section 8(1).

12. In "Mobilox Innovations Pvt Ltd Vs Kirusa Software (P) Limited -

2017 1 SCC Online SC 353", the Hon'ble Supreme Court held that the

'existence of the dispute' and/or the suit or arbitration proceeding must be

pre-existing - i.e. it must exist before the receipt of the demand notice or

invoice, as the case may be. In the said case, the Hon'ble Supreme Court held

as to what are the facts to be examined by the Adjudicating Authority while

examining an application under Section 9, which are - whether there is an

operational debt as defined exceeding Rs.1 lakhs; whether the documentary

evidence furnished with the application shows that the aforesaid debt is due

Company Appeal (AT)(Insolvency) No.1233 of 2019 5

and payable and has not yet been paid; 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 demand notice of the unpaid operational

debt in relation to such dispute. The Hon'ble Supreme Court held that if any

one of the above conditions is lacking, the application would have to be

rejected.

13. From the aforesaid decision, it is clear that the existence of dispute

must be pre-existing i.e. it must exist before the receipt of the demand notice

or invoice. If it comes to the notice of the Adjudicating Authority that the

'operational debt' is exceeding Rs.1 lakh and the application shows that the

aforesaid debt is due and payable and has not been paid, in such case, in

absence of any 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' the application under Section

9 cannot be rejected and is required to be admitted.

14. In the present case, it is not in dispute that there was a running account

maintained for the transactions between the parties. The appellant was

providing Godown Wise Stock Report to the Respondent (Page 19 and 20 of

Reply). The appellant, while intimating Godown Wise Stock Report on

10.02.2018 (Page 19 of Reply) intimated the Respondent that "out of the

above stock physical balance in Godown No.5 will be about 8-10. Loss

will be around 75 tones due to moisture and other operations.". Appellant

also intimated the Respondent vide email dated 28.11.2018 (Page 96 of

appeal) to arrange to lift balance cargo approx 30 mts lying in rejected

Company Appeal (AT)(Insolvency) No.1233 of 2019 6

condition with appellant and the appellant demanded his payment. This

clearly shows that the appellant have fairly conveyed to the Respondent that

the loss will be around 75 tones due to moisture and other operations and 30

tons lying in rejected condition. We have gone through the email exchanged

between the parties. The Respondent vide email dated 20.11.2018 (Page 71)

informed the appellant first you have to give our cargo of 225 MT then

automatically will clear your payment. The Corporate Debtor raised the

invoice of Rs.40,17,321/- on the appellant towards 225 MT of Mustard De

Oiled Cake (DO) on 31.3.2019 (Page 73 of Reply). The appellant has provided

Godown Wise Stock Report to the respondent regularly and the Respondent

has never raised the dispute. When the appellant has demanded his payment

then the respondent raised the dispute of 2013. The Respondent showed no

evidence to prove that the respondent raised the dispute when the appellant

intimated him that loss will be around 75 tones due to moisture and other

operation and 30 tons lying in rejected condition. The Respondent should

have taken prompt action to lift or dispose of the material and should have

raised the dispute with the appellant. No such action has been taken by the

Respondent. Thus the Respondent has not been able to prove that there was

any pre-existing dispute. Even NCLT in its order observed that the dispute

raised by the Corporate Debtor in respect of 115 MTs cargo is time barred by

Law of Limitation. The Respondent seems to have accepted the said order as

he not filed any appeal against the said order.

15. From the record as we find that the Respondent has defaulted to pay

more than Rs.1 lakh and in absence of any pre-existing dispute, and the

Company Appeal (AT)(Insolvency) No.1233 of 2019 7

record being complete, we hold that the application under section 9 preferred

by the Appellant was fit to be admitted.

16. For the reasons aforesaid we set aside the impugned judgement dated

1st October, 2019 and remit the case to the Adjudicating Authority for

admitting the application under Section 9 after notice to the 'Corporate

Debtor' to enable the 'Corporate Debtor' to settle the matter prior to

admission.

The appeal is allowed with aforesaid observations and directions. No

costs.

(Justice Jarat Kumar Jain) Member (Judicial)

(Mr. Balvinder Singh) Member (Technical)

(Dr. Ashok Kumar Mishra) Member (Technical) New Delhi

Bm

Company Appeal (AT)(Insolvency) No.1233 of 2019