Impex Services India Private Limited vs Dba Enterprises Llp

[Arising out of Order dated 15th January, 2018 passed by the Adjudicating Authority (National Company Law Tribunal), New Delhi Bench in Company Petition No. (IB)480 (ND)/2017]

IN THE MATTER OF:

M/s Impex Services India Private Limited Flat No.402, Pragati House, 4th Floor, 47-48, Nehru Place, New Delhi. ...Appellant

Vs

M/s DBA Enterprises LLP Having their registered office at: K-336, Sarita Vihar, New Delhi - 110076. ....Respondent

Present: For Appellant: Mr. K. V. Balakrishnan, Advocate.

For Respondent: Mr. Sumit Shukla and Mr. Sushil, Advocates.

BANSI LAL BHAT, J.

This appeal has been preferred by Appellant - 'Impex Services India

Private Limited' (Operational Creditor) against impugned order dated 15th

January, 2018 passed by the Adjudicating Authority (National Company

Law Tribunal), New Delhi Bench, in Company Petition No. (IB)480

(ND)/2017.

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2. By the impugned order, the Adjudicating Authority rejected the

Appellant's application for triggering the Corporate Insolvency Resolution

Process filed by it under Section 9 of the Insolvency and Bankruptcy Code,

2016 (in short 'I&B Code') on the ground that disputes existed between the

Appellant/Operational Creditor and the Respondent/Corporate Debtor in

regard to deficiency in services even prior to the issuance of demand notice

under Section 8(1) of the I&B Code by the Operational Creditor.

3. The issue raised in this appeal is that the agreement dated

01.10.2015 between Appellant - 'M/s Impex Services India Pvt. Ltd.' and

'M/s SSMP Industries Ltd.' does not relate to any transactions made

between the Appellant and 'M/s DBA Enterprises LLP.' (Corporate Debtor)

and the Adjudicating Authority erred in coming to the conclusion that there

was 'an existence of dispute' between the Appellant/Operational Creditor

and the Respondent/ Corporate Debtor.

4. The facts germane to the disposal of instant appeal may briefly be

noticed. The case set up by the Appellant/ Operational Creditor before the

Adjudicating Authority was that the Appellant/Operational Creditor,

engaged in the business of Freight Forwarding, rendered services to the

Respondent/Corporate Debtor for a period spanning about two years.

However, from November, 2016 the Respondent/ Corporate Debtor defaulted

in remitting the amounts under some invoices, though, the Appellant/

Operational Creditor discharged its part of the work to the satisfaction of

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Respondent/ Corporate Debtor, who did not find any fault with the quality

of services rendered. It is the further case of Appellant/ Operational

Creditor that the Respondent/ Corporate Debtor, in terms of its email dated

19.04.2017, admitted the amount due to the Appellant/ Operational

Creditor as Rs.14,15,923.65/- which is perfectly in tune with the Ledger

Account maintained by the Appellant/ Operational Creditor. The Appellant/

Operational Creditor claimed that since the Respondent/ Corporate Debtor

failed to clear the liability, it was constrained to issue demand notice in

terms of Section 8 (1) of I&B Code, which came to be duly served on the

Respondent/ Corporate Debtor. Appellant/ Operational Creditor claimed

that it was only after issuance of such notice that the Respondent/

Corporate Debtor issued notice of dispute proposing arbitration in the

matter.

5. Respondent/ Corporate Debtor in its reply filed before the

Adjudicating Authority raised the issue of pre-existing dispute stating that

the Appellant/ Operational Creditor was providing services to the sister

concern of the Respondent/ Corporate Debtor viz. 'M/s SSMP Industries

Ltd.' under an agreement executed on 01.10.2015. It was stated that

though there was no formal agreement between the parties to the

application u/s 9, the Respondent/ Corporate Debtor being the sister

concern of 'M/s SSMP Industries Ltd.' was also provided with the services

on similar terms. It was further stated that the management of 'M/s SSMP

Industries Ltd.' and the Corporate Debtor- 'DBA Enterprises LLP' was

Company Appeal (AT) (Insolvency) No. 85 of 2018 -4-

common and the bills were discharged from the accounts of either

Company. It was further stated that the Registered Office of both

Companies had common address and liability of one was discharged by the

other. It was further stated that both Companies were entitled to duty

drawbacks/ benefits from the Director General of Foreign Trade. The

documentation had to be done by the Freight Forwarding Agent, who was

obliged to fill in the format in regard to uploading of shipping bills on the

DGFT website correctly. It was further stated that due to negligence on the

part of Appellant/ Operational Creditor in filling in the documents online

correctly benefits under the duty drawbacks and the Vishwas Krishi Upaj

Yojana (VKUY) were withheld causing financial loss to the Respondent/

Corporate Debtor to the tune of Rs.1,43,507/- under duty drawback and

Rs.4,26,277/- under VKUY, respectively. It was further stated that

Respondent/ Corporate Debtor had been making a demand for

compensation/ reimbursement for the negligence in service. It is further

stated that in terms of e-mails dated 19.04.2016 and 22.04.2016 the

Appellant/ Operational Creditor admitted its negligence but subsequently

denied any responsibility. It was stated that correspondence in this regard

had started on 18.04.2016 and e-mail dated 19.04.2016 could not be

construed as an acknowledgement of debt by the Respondent/ Corporate

Debtor.

6. On consideration of documents relied upon by the parties, the learned

Adjudicating Authority was of the view that disputes existed inter-se the

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parties even prior to issuance of Demand Notice under Section 8 of I&B

Code with respect to deficiency in services rendered. Resultantly, petition

under Section 9 of I&B Code was rejected.

7. Learned counsel for the Appellant/ Operational Creditor submits that

the Adjudicating Authority was bound to admit the petition as the invoices

in question were raised by the Appellant/ Operational Creditor in regard to

services rendered to the Respondent/ Corporate Debtor, which had not

denied the delivery of consignments at the places mentioned by the

Respondent. It is further submitted that no discrepancy has been intimated

by the Respondent to the Appellant within the period stipulated in the

invoices. It is further submitted that the Respondent has admitted the dues

as reflected in e-mail dated 19.04.2017. It is further submitted that the

dispute raised by the Respondent was in regard to the invoices raised by the

Appellant on 'M/s SSMP Industries Ltd.' which is a company incorporated

under the Companies Act, while the claim of the Appellant is in regard to

'M/s DBA Enterprises LLP' which is a limited liability partnership firm. It is

submitted that dispute raised by Respondent/ Corporate Debtor is not in

regard to the invoices raised by the Appellant on 'M/s DBA Enterprises LLP'.

Thus, the Adjudicating Authority committed grave error in rejecting the

Appellants petition under Section 9 of the I&B Code.

8. Per Contra it is contended on behalf of Respondent/ Corporate Debtor

that the Respondent suffered financial loss on account of denial of export

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incentives due to negligence on the part of Appellant. When brought to its

notice, the Appellant failed to resolve the issues. It is further submitted that

it was after wait of 16 months that the Respondent/ its sister concern raised

the debit note dated 31.08.2017 to recover the losses as per agreed terms.

However, the Appellant disputed the entire claim which had been previously

admitted forcing the Respondent to invite the Appellant for conciliation. It is

further submitted that so long as the Appellant was getting the business it

continued to work with the Respondent and its sister concern treating them

as a common account. It is further contended that the Appellant

suppressed the factum of existence of unresolved dispute between the

Appellant and the Respondent before the Adjudicating Authority, which

demonstrated malafides on its part.

9. Heard learned counsel for the parties' and perused the record. The

requisite conditions necessary to trigger the Corporate Insolvency Resolution

Process under Section 9 of the I&B Code by an Operational Creditor are:

(i) occurrence of a default;

(ii) delivery of a demand notice of an unpaid operational debt;

(iii) non-receipt of payment by the Operational Creditor from the

Corporate Debtor within the period of 10 days of receipt of the

demand notice or receipt of reply from the Corporate Debtor not

indicating existence of a pre-existing dispute or repayment of the

unpaid operational debt.

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If the aforesaid conditions exist, the Operational Creditor may file an

application under Section 9(2) of the I&B Code in the prescribed manner

alongwith the requisite fee. A copy of the invoice demanding payment or

demand notice delivered by the Operational Creditor to the Corporate Debtor

has to be furnished with the application. This is clearly borne out by

conjoint reading of Section 8 and 9 (1) of the I&B Code. The Hon'ble Apex

Court while dealing with this aspect in "Macquarie Bank Limited Vs

Shilpi Cable Technologies Ltd." in Civil Appeals No. 15135, 15481 and

15447 of 2017 decided on 15th December, 2017held that the

requirement of an application filed under Section 9(2) of the I&B Code being

accompanied by an invoice/ demand notice is a mandatory condition

precedent to the filing of the application.

10. While dealing with triggering of Corporate Insolvency Resolution

Process at the instance of an Operational Creditor in "Mobilox Innovations

Private Limited V/s. Kirusa Software Private Limited", Civil Appeal

No.9405 of 2017 decided on 21.09.2017, the Hon'ble Apex Court held:-

"It is clear, therefore, that once the operational creditor has

filed an application, which is otherwise complete, the

adjudicating authority must reject the application Under

Section 9(5)(2)(d) if notice of dispute has been received by the

operational creditor or there is a record of dispute in the

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information utility. It is clear that such notice must bring to

the notice of the operational creditor the "existence" of a

dispute or the fact that a suit or arbitration proceeding

relating to a dispute is pending or the fact that a suit or

arbitration proceeding relating to a dispute is pending

between the parties. Therefore, all that the adjudicating

authority is to see at this stage is whether there is a

plausible contention which requires further investigation and

that the "dispute" is not a patently feeble legal argument or

an assertion of fact unsupported by evidence. It is important

to separate the grain from the chaff and to reject a spurious

defence which is mere bluster. However, in doing so, the

Court does not at this stage examine the merits of the dispute

except to the extent indicated above. So long as a dispute

truly exists in fact and is not spurious, hypothetical or

illusory, the adjudicating authority has to reject the

application."

11. Adverting to the facts of the instant case, be it seen that the

Appellant/ Operational Creditor as also the Respondent/Corporate Debtor

have relied upon agreement executed on 01.10.2015 inter-se the Appellant/

Operational Creditor and 'M/s SSMP Industries Pvt. Ltd.' which happens to

be sister concern of Respondent/ Corporate Debtor - 'M/s DBA Enterprises'.

Parties also rely on common e-mails. It emerges from record that the

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Respondent/ Corporate Debtor 'M/s DBA Enterprises' was provided services

on terms and conditions similar to those governing relationship between

'M/s SSMP Industries Pvt. Ltd.' and the Operational Creditor. It is not in

controversy that Corporate Debtor - 'M/s DBA Enterprises' and 'M/s SSMP

Industries Pvt. Ltd.' shared a common address and common management.

The bills raised qua either of them were discharged from accounts of one or

the other irrespective of the fact that only one of them was a 'Corporate

Entity'. The conclusion about the transactions of the two entities being

interrelated is deducible from the fact that the e-mails relied upon by the

parties are addressed to the sister company of the Respondent/Corporate

Debtor. This is besides the fact that the agreement dated 01.10.2015 too

was executed between the Appellant/ Operational Creditor and 'M/s SSMP

Industries Pvt. Ltd.'. Same conclusion can be drawn from the debit notes

dated 31.08.2017 forming Annexure F-1 at page 28-29 of the reply filed by

Respondent/ Corporate Debtor. This conclusion is further reinforced from

the email dated 19.04.2017 from the Appellant/Operational Creditor.

Admittedly, there was no separate agreement executed between the

Appellant/ Operational Creditor and the Respondent/Corporate Debtor qua

the shipment of the Respondent Company. It emerges that non-receipt of

export incentives by the Respondent/Corporate Debtor in terms of

agreement dated 01.10.2015 governing there inter-se relations in respect of

both entities and errors in the shipping bills of the Appellant/Operational

Creditor led to a dispute in regard to performance of services which was

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raised by 'M/s SSMP Pvt. Ltd.' in terms of its e-mail dated 18.04.2016

forming Annexure-B at page 126 of the appeal. The Appellant/ Operational

Creditor appears to have assured the Respondent that corrective action will

be taken. It is manifestly clear that the dispute in regard to deficiency of

service was raised as early as 18.04.2016. Respondent/ Corporate Debtor

claimed to have suffered pecuniary loss in an amount of Rs.5,69,734/-.

Admittedly, demand notice in terms of Section 8(1) of I&B Code was issued

by the Appellant/ Operational Creditor on 04.09.2017 demanding payment.

However, the Respondent/ Corporate Debtor issued letter dated 01.09.2017

asking the Appellant/ Operational Creditor to resolve the dispute by way of

conciliation proceedings under Arbitration Act. Thus, there is no escape

from the conclusion that the Respondent/Corporate Debtor had raised

dispute much prior to the issuance of demand notice by Appellant/

Operational Creditor under Section 8(1) of I&B Code. The mere fact that the

Respondent/ Corporate Debtor had sent its ledger account via. e-mail dated

19.04.2017 in regard to principal amount of dues of the

Appellant/Operational Creditor as per the closing balance mentioned in the

statement would not in any manner dilute the factum of a pre-existing

dispute when the demand notice in terms of Section 8(1) of I&B Code was

issued by the Appellant/Operational Creditor.

12. On consideration of the material on record, we are of the considered

opinion that the Respondent/ Corporate Debtor has been able to

demonstrate that a pre-existing dispute in regard to deficiency of service was

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in existence when the demand notice under Section 8(1) of I&B Code was

issued by the Appellant/ Operational Creditor. The Adjudicating Authority

did not err in noticing the same. There being no infirmity in the impugned

order and the appeal being devoid of merit, we dismiss the appeal. There

shall be no orders as to costs.

[Justice S. J. Mukhopadhaya] Chairperson

[Justice Bansi Lal Bhat] Member (Judicial) NEW DELHI 19th July, 2018

AM

Company Appeal (AT) (Insolvency) No. 85 of 2018