Innovators Cleantech Private Limited vs Pasari Multi Projects Private Limited

Company Appeal (AT) (Insolvency) No. 115 of 2024 [Arising out of the Impugned Order dated 28.08.2023 passed by the Adjudicating Authority, National Company Law Tribunal, Kolkata Bench, Court-II in CP (IB) No. 1058/KB/2019] In the matter of: Innovators Cleantech Private Limited (Formerly known as Innovators Cleantech Private Limited) [CIN U74999MH2013PTC241458,], having its registered office at: 204, Bldg No. B-65, Jaydeep Chs Ltd. Sector No. 1 Shanti Nagar Mira Road - East, Thane- 401107; Through its authorised representative ...Appellant Versus Pasari Multi Projects Private Limited [CIN U51909WB1993PTC058525] having its registered office at: 35, Ballygunj Park, Kolkata - 700019. .... Respondent Present: For Appellant : Mr. Anuj Bhandari, Advocate.

For Respondent : Mr. Abhijeet Sinha, Sr. Advocate with Mr. Ashok Kumar Jain and Mr. Amit Kasera, Advocates.

JUDGMENT

(Hybrid Mode)

Per: Barun Mitra, Member (Technical)

The present appeal filed under Section 61 of Insolvency and Bankruptcy

Code 2016 ('IBC' in short) by the Appellant arises out of the Order dated

28.08.2023 (hereinafter referred to as 'Impugned Order') passed by the

Adjudicating Authority (National Company Law Tribunal, Kolkata Bench, Court-

II) in CP (IB) No. 1058/KB/2019. By the impugned order, the Adjudicating

Authority has rejected Section 9 application. Aggrieved by the impugned order,

the present appeal has been preferred by the Appellant.

2. The relevant facts which required to be notice for deciding the present

matter before us are as follows:-

 The Operational Creditor-Innovators Facade Solutions Private Limited

was engaged by the Corporate Debtor-Pasari Multi projects Private Limited

to provide design-built services in building construction for a project-

Biowonder which was a commercial-cum-Hotel project. A Letter of Intent

('LoI' in short) was issued on 09.07.2015 for Rs.10.68 crore by the

Corporate Debtor to the Operational Creditor for this project.

 The Project was commenced by the Operational Creditor on 09.07.2015

and the first Running Account Bill ('RAB' in short) was raised on

15.03.2016. Corporate Debtor failed to discharge payment for RAB-19 of

Rs. 4.68 crores raised by the Operational Creditor despite reminders.

 Since the Corporate Debtor failed to make payments, the Operational

Creditor issued a demand notice in Form-3 for an amount of Rs. 4.91 crore

including interest. This first demand notice was issued on 12.02.2019. The

Operational Creditor withdrew this first demand notice due to certain

alleged clerical error made by them in the computation.

 The Corporate Debtor terminated the contract with the Operational

Creditor on 14.02.2019 and also filed a Civil Suit No. 371 of 2019 on

16.04.2019 against the Operational Creditor.

 After withdrawal of the first demand notice, the Appellant thereafter

issued another demand notice dated 25.04.2019. This second demand

notice according to the Corporate Debtor was a revised demand notice for

an amount of Rs.4.75 crores after adjusting certain payments received by

Page 2 of 15 Company Appeal (AT) (Insolvency) No. 115 of 2024 the Operational Creditor. There was thus a reduction in the claimed

amount from the original demand notice.

 The Corporate Debtor replied to the second demand notice dated

25.04.2019 disputing the amount payable to the Operational Creditor. The

notice of dispute was dated 03.05.2019.

 The Operational Creditor filed the Section 9 application under IBC on

20.07.2019.

 The Adjudicating Authority after considering the matter dismissed the

Section 9 application on the ground of pre-existing dispute.

3. Making his submissions, Shri Anuj Bhandari, Ld. Counsel for the

Appellant submitted that the Corporate Debtor had issued a Work Order for Rs.

10,68,79,250/- to the Appellant. The Appellant raised bills RAB 01 to RAB-18

against which the Corporate Debtor paid Rs. 5,51,56,183/- to the Appellant. The

Appellant thereafter raised RAB-19 for Rs. 4,91,72,294/- which was not paid by

the Respondent. The Appellant therefore issued Demand Notice dated

12.02.2019 for Rs. 4,91,72,294/- which was purportedly despatched by the

Appellant on 12.02.2019 by Speed-Post. Realising that one of the payments

made by the Corporate Debtor had not been factorised while computing the due

demand, the Appellant issued a revised Demand Notice for Rs. 4,75,70,047/- on

25.04.2019 after reducing the amount which had not been factorised earlier. As

the Corporate Debtor did not make the due payment, the Appellant filed the

Section 9 application which however the Adjudicating Authority erroneously

dismissed on the ground of pre-existing dispute that the Corporate Debtor had

filed a civil suit against the Appellant on 16.04.2019. This civil suit could not be

Page 3 of 15 Company Appeal (AT) (Insolvency) No. 115 of 2024 treated as pre-existing dispute since it was filed after the first demand notice was

issued on 12.02.2019 and the second demand notice was a continuation of the

first demand notice.

4. It was vehemently contended that the Adjudicating Authority had failed to

appreciate the fact that the Operational Creditor had issued the first demand

notice on 12.02.2019 which demand notice was issued before the filing of the

civil suit. The Adjudicating Authority also failed to consider that the Corporate

Debtor had even replied to the first demand notice. The first demand notice

therefore clearly pre-dated the filing of the title suit on 16.04.2019. Admittedly

the first demand notice had to be revised due to a clerical error but it was

strenuously contended that merely because the first Demand Notice had to be

revised for bonafide reasons, it cannot be overlooked that the Civil Suit had been

filed after the receipt of the first demand notice by the Corporate Debtor and

hence did not qualify to be a pre-existing dispute. It was also emphatically

asserted that for any dispute to be treated as a pre-existing dispute under

Section 8(2)(a) of IBC, the dispute has to arise prior to the receipt of demand

notice by the Corporate Debtor. The Civil Suit in the instant case therefore

cannot be considered as a pre-existing dispute and hence the impugned order

was contrary to the ratio of the Hon'ble Supreme Court in Mobilox Innovations

Pvt. Ltd. vs. Kirusa Software Pvt. Ltd (2018) 1 SCC 353 in that dispute has

to be raised prior to issue of Section 8 demand notice.

5. It was also stressed that there were no other actual or real disputes

between the parties. This is evident from the fact that RABs 1 to 18 raised by

the Operational Creditor were cleared by the Corporate Debtor without raising

Page 4 of 15 Company Appeal (AT) (Insolvency) No. 115 of 2024 any dispute or demur. The emails referred to by the Corporate Debtor to buttress

their argument of pre-existing disputes are frivolous disputes and a spurious

defence to stave off the Section 9 application. It is also the contention of the

Appellant that the Corporate Debtor had terminated the contract with the

Operational Creditor on 14.02.2019 which termination was subsequent to the

issue of first demand notice on 12.02.2019 and hence not a pre-existing dispute.

It has been contended that the Corporate Debtor filed the Civil Suit well after

receipt of first demand notice as an afterthought.

6. While admitting that the demand notice was amended after filing of the

Civil Suit, it was contended by the Appellant that the amended demand notice

would relate back to the date of original demand notice. Amendment of the

demand notice on account of clerical error and subsequent issue of a corrected

demand notice cannot be viewed as a fresh demand notice. Since the second

demand notice for all legal purposes was a continuation of the first demand

notice, the Civil Suit cannot be treated as a pre-existing dispute as it had been

filed after the receipt of the first demand notice by the Corporate Debtor. The

Adjudicating Authority had therefore wrongly non-suited the Operational

Creditor on the ground that the Civil Suit was filed before the second demand

notice. In support of their contention that an amended demand notice would

relate back to the date of original demand notice, reliance was placed on the

judgment of this Tribunal in the matter of Dinesh Gupta vs. Hajura Singh

Bhim Singh & Anr. in CA (AT) (Ins) No. 99 of 2018 wherein it was held that

even after withdrawal of first Section 9 application on technical grounds and

subsequent issue of fresh demand notice, the application under Section 9

Page 5 of 15 Company Appeal (AT) (Insolvency) No. 115 of 2024 remains maintainable. It was submitted that the present case was fit to be

remanded back to the Adjudicating Authority to adjudicate the matter on merits

since the Corporate Debtor has filed voluminous documents which were not part

of the record of the Adjudicating Authority.

7. Refuting the contentions raised by the Appellant, it was submitted by Shri

Abhijeet Sinha, Ld. Senior Counsel for the Respondent-Corporate Debtor that

the present appeal petition is misconceived. The Adjudicating Authority had

rightly held that the Section 9 application was not maintainable since there were

pre-existing disputes between the parties. The Title Suit No. 371 of 2019 which

had been filed by the Corporate Debtor on 16.04.2019 was prior to the issue of

the demand notice of 25.04.2019 which clearly demonstrates pre-existing

disputes. Besides the civil suit, there were several other disputes between the

two parties which had its origin prior to the second demand notice of 25.04.2019

basis which the Section 9 application had been filed. Elucidating further it was

submitted that the LoI dated 09.07.2015 clearly provided that the duration of

the project was 12 months and had to be completed in 7 months from the date

of acceptance of the LoI. However, the Operational Creditor had delayed in

performing their part of the obligations in a timely manner in terms of the LoI.

On the modalities of payment, it was submitted that both parties had agreed to

a procedure by which running bills were to be raised by the Operational Creditor

by way of proforma invoices and that after due certification by the Corporate

Debtor of the proforma invoices and the works done, payments used to be made

in respect of said bills. It was pointed out that there were disputes regarding

these bills as the Operational Creditor raised inflated bills and therefore the

Page 6 of 15 Company Appeal (AT) (Insolvency) No. 115 of 2024 amounts would require to be reduced by the Corporate Debtor after performance

certification. It is also the case of the Corporate Debtor that the Operational

Creditor had delayed the project and abandoned the work in breach of contract.

The Corporate Debtor also submitted that there were several disputes between

parties as is evident from a series of emails exchanged between the two parties

regarding measurement, quality, quantity and delay in work. It was pointed out

that inspite of disputes regarding measurement, quality, quantity and delay

cause by the Operational Creditor, the Corporate Debtor had continued to make

payments of RA Bills so that the work progress did not get delayed. It is also the

contention of the Corporate Debtor that the Section 9 application was filed by

the Operational Creditor with the sole object of recovery of dues on account of

alleged damages and compensation which in fact are not payable and cannot

constitute to be the basis of a Section 9 application.

8. We have duly considered the arguments advanced by the Learned Counsel

for both the parties and perused the records carefully.

9. The short point for consideration is whether there was any genuine pre-

existing dispute surrounding the debt claimed by the Operational Creditor to be

due and payable to them by the Corporate Debtor.

10. Before we return our analysis and findings on the tenability of the

impugned order passed by the Adjudicating Authority, it may be useful to have

a look at the relevant statutory framework of IBC. Section 8 of the IBC requires

the Operational Creditor, on occurrence of a default by the Corporate Debtor, to

deliver a Demand Notice in respect of the outstanding Operational Debt. Section

8(2) lays down that the Corporate Debtor within a period of 10 days of the receipt

Page 7 of 15 Company Appeal (AT) (Insolvency) No. 115 of 2024 of the Demand Notice would have to bring to the notice of the Operational

Creditor, the existence of dispute, if any. From a plain reading of the above

provision, it is clear that the existence of dispute and its communication to the

Operational Creditor is therefore statutorily provided for in Section 8.

11. It is however the case of the Appellant that they had issued two demand

notices under Section 8 of IBC. The first demand notice was withdrawn as it was

admittedly erroneous and subsequently a revised demand notice was issued on

25.04.2019 in continuum of the first demand notice. It is therefore their case

that since the pre-existing dispute has been predicated on a civil suit dated

16.04.2019 which was instituted after the issue of the first demand notice, the

civil suit did not qualify to be treated as pre-existing dispute.

12. Per contra, it is the contention of the Respondent that the first demand

notice cannot be treated as a demand notice under Section 8 of the IBC since

this demand notice was abandoned as withdrawn before sending the second

Demand Notice on 25.04.2019 which was followed by filing of an application

under Section 9 of IBC on 20.07.2019. Thus, the Section 9 application was filed

by the Appellant basis the fresh demand notice dated 25.04.2019. Seen from the

date of issue of the fresh second demand notice, it was contended by the

Respondent that the institution of civil suit on 16.04.2019 clearly preceded the

fresh second demand notice of 25.04.2019. It was also contended that the

Corporate Debtor had already terminated the contract on 14.02.2019 which date

also predated the fresh second demand notice of 25.04.2019. Hence it was

asserted the Adjudicating Authority had rightly concluded that the Section 9

application was not maintainable in view of pre-existing disputes.

Page 8 of 15 Company Appeal (AT) (Insolvency) No. 115 of 2024

13. Given this backdrop of rival submissions, it will be useful to find out how

the Adjudicating Authority had considered the facts at hand to infer whether the

disputes were pre-existing. The basis for holding the disputes raised by the

Corporate Debtor to be pre-existing by the Adjudicating Authority was that the

civil suit was filed prior to the second demand notice and that this second

demand notice was a fresh demand notice which cannot be held to be in

continuation of the first demand notice. The relevant excerpts of the impugned

order are as reproduced below:

"12. It is discernible that a demand notice was sent on 12 February, 2019 [Annexure - H at page 114 of the Petition], which said as under;

And the date from which o Debt fell due from 15.2.2017 such debt fell due o Last payment received on 22.9.2017 o Last Invoice raised on 10.12.2018

Amount claimed to be in Default Amount as on 15th default and the date on February, 2017 is Rs 4,91,72,294/- which the default occurred (Rupees Four Crore Ninety-one Lakh Seventy Two thousand Two hundred ninety Four only

13. The fresh demand notice dated 25.04.2019 [Annexure - I at pages 123- 124 of the Petition] reads;

"IFSPL had issued a demand notice (Form no.3) dated 12.02.2019 to PMPPL. However, due to an inadvertent error the amount claimed therein was not correctly stated. Hence, after correcting the error, we hereby issue the present fresh demand notice."

(Emphasis supplied) And the date from which such o Debt fell due from 05.01.2018 debt fell due o Last payment received on 26.12.2017 o Last Invoice raised on 10.12.2018 Page 9 of 15 Company Appeal (AT) (Insolvency) No. 115 of 2024 Amount claimed to be in Rs 4,75,70,047/- (Rupees Four default Crore Seventy Five Lakh Seventy Thousand and Forty Seven only)

14. The intention of the Operational Creditor is quite clear that it intended to issue a fresh demand notice with modified particulars and the fresh notice (dated 25 April, 2019) was not intended to be in continuation of the previous one, i.e. 12 February, 2019. Hence, previous erroneous notice dated 12 February, 2019 should be ignored and the fresh notice u/s 8 dated 25 April, 2019 should be taken into account, and it is evident that before it could be served the civil suit already stood filed on 06 April, 2019."

14. Coming to our analysis and findings, it is an undisputed fact that the

Operational Creditor had initially sent a Demand Notice on 12.02.2019 to the

Corporate Debtor. This demand notice was purportedly despatched by the

Appellant by speed post on the same date. When we look at the material placed

on record, it is clear that the first Demand Notice was however received by the

Corporate Debtor only on 16.02.2019 as evident from the Tracking Report placed

at page 118 of Appeal Paper Book ('APB' in short). More significantly, the first

demand notice was admittedly withdrawn by the Operational Creditor on

grounds of typographical error in that they had failed to take into account certain

payments already received by them from the Corporate Debtor.

15. Given this factual backdrop that the demand notice of 12.02.2019 under

Section 8 of the IBC was withdrawn, we now proceed to analyse whether the

second demand notice of 25.04.2019 can be held to be in continuation of the

first demand notice or a fresh notice. We find that that the second demand notice

itself mentions of being a "fresh notice". The second demand notice also nowhere

mentions that it was a continuation of the first demand notice. In such

circumstances, there is force in the contention of the Corporate Debtor that the

Page 10 of 15 Company Appeal (AT) (Insolvency) No. 115 of 2024 first demand notice having been withdrawn stood abandoned. When we look at

the ground cited by the Appellant behind the revision of the first demand notice,

it was claimed to have been actuated by clerical/typographical errors. However,

the ground of clerical error lacks credence as we find that there were substantial

changes in the second demand notice from the first demand notice with regard

to amounts of default, date of default, date on which last payments was received

etc. The Adjudicating Authority in paragraphs 12 and 13 of the impugned order

has belaboured in outlining the modified particulars which has already been

extracted at para 13 above. The second demand notice was clearly a novated

demand notice with particulars of debt and default and date of default being at

variance from the first demand notice. Hence the Adjudicating Authority did not

commit any infirmity in adjudicating on the pre-existence of disputes from the

perspective of the date of the issue of the fresh second demand notice. We would

also like to add here that the reliance placed by the Appellant on the Dinesh

Singh judgement supra does not come to the help of the Appellant since in that

case the first Section 8 notice had been issued by the Advocate and therefore

replaced by a demand notice issued by the Operational Creditor. Thus in that

case the second demand notice was issued on purely technical grounds without

modification of particulars unlike in the present facts of the case.

16. This brings us to the aspect of whether the civil suit qualified as a pre-

existing dispute. It is also a well settled proposition of law that for a pre-existing

dispute to be a ground to nullify an application under Section 9, the dispute

raised must be truly existing at the time of filing a reply to notice of demand as

contemplated by Section 8(2) of IBC or at the time of filing the Section 9

Page 11 of 15 Company Appeal (AT) (Insolvency) No. 115 of 2024 application. In the present case, the pre-existing dispute has been predicated on

civil suit dated 16.04.2019. This civil suit was also highlighted in the Notice of

dispute of the Corporate Debtor in response to the second demand notice. We

have no doubts in our mind therefore that the civil suit had been filed prior to

the issue of second Section 8 Demand Notice on 25.04.2019 and was a pre-

existing dispute and therefore there is no infirmity committed by the

Adjudicating Authority in treating the civil suit to be a pre-existing dispute.

17. Apart from the civil suit as a ground for pre-existing dispute, we notice

that the Corporate Debtor had also terminated the contract with the Operational

Creditor on 14.02.2019 which date preceded the second demand notice and for

that reason even predated receipt of the first demand notice by the Corporate

Debtor. The Corporate Debtor also adverted attention to a series of emails

exchanged between the two parties which substantiates the evidence of disputes

between them. At page 74 of Reply Affidavit, an email has been placed on record

stating that the Appellant wanted the relocation of the rainwater pipe from its

original position which was objected to by the Corporate Debtor as it tantamount

to compromising with the design, quality and specification from the terms of the

LOI in order besides causing delay of the project. At pages 76-77 of the Reply

Affidavit, an email dated 12.06.2017 can be seen which highlights several

disputes raised between the parties including issues related to the measurement

of the facade work, claim of excess bill quantities beyond the scope of certified

drawings made by the Appellant and the existence of pending work. At page 79

of the Reply Affidavit, an email dated 17.07.2017 from the Corporate Debtor

records the stoppage of work by the Appellant with respect to panel installation

Page 12 of 15 Company Appeal (AT) (Insolvency) No. 115 of 2024 and demand for advance payment prior to completion of the work which was

contrary to the terms of the LoI. At page 80 of the Reply Affidavit, an email dated

01.08.2017 has been placed on record which alleges the Appellant's failure to

supply the required materials. At page 81 of the Reply Affidavit, an email dated

17.08.2017 brings to light the loss caused to the Respondent due to the

Appellant's continued non-supply of materials, despite the Respondent having

made full payment for the same. At page 84 of the Reply Affidavit, an email dated

13.10.2017 cites multiple issues concerning the Appellant, including delays in

the performance of the project, the introduction of new commercial conditions

beyond the agreed terms of the work order, and the overall non-completion of

the work. At page 89 of the Reply Affidavit, a communication dated 17.02.2018

records the challenges by the Respondent of the Appellant's demand for

escalation charges. Further, between 05.03.2018 and 07.03.2018, as recorded

at page 90-91 of the Reply Affidavit, there is mention of disputes arising from

intended demobilization of team and machinery by the Appellant due to

unresolved commercial issues. At pages 92-102 of the Reply Affidavit, it is

recorded that between 19.03.2018 and 03.09.2018, there were repeated

amendments to the payment terms, scope of work, and time schedule for project

completion, all necessitated due to persistent delays on the part of the Appellant.

Further, at page 104 of the Reply Affidavit, a communication dated 26.10.2018

documents the Respondent's objection to the Appellant's introduction of new

financial terms, which were in direct contravention of the original terms outlined

in the LoI. The tone and tenor of the emails exchanged between the two parties

clearly manifest existence of dispute which antedates Section 8 demand notice.

Page 13 of 15 Company Appeal (AT) (Insolvency) No. 115 of 2024

18. It is well settled that a Section 9 application filed by an Operational

Creditor cannot be sustained in case there is evidence of existence of dispute

and if such disputes have been communicated to the Operational Creditor before

the receipt of Section 8 notice as has happened in the present case. In the

present case, the contract termination notice and civil suit had both preceded

the date of issue of Section 8 demand notice on 25.04.2019. In addition, we

notice that disputes relating to the quality of work; delay in execution of work;

disputes relating to imposition of new commercial condition beyond the scope of

LoI; introduction of new financial terms; claim of excessive bills; losses on

account of delay etc. had also been brought to the knowledge of the Appellant-

Operational Creditor vide a string of emails sent from time to time as already

summarised above. The notice of dispute of 03.05.2019 had also highlighted

breach of contract, delay of project and its abandonment by the Appellant, issue

of inflated bills and that project related disputes had been raised by emails prior

to the Section 8 demand notice. Cumulatively seen, it clearly signifies that a

dispute already existed between the parties which constituted sufficient ground

for rejection of a Section 9 application. In the face of such pre-existing disputes,

the Adjudicating Authority had not committed any error in rejecting the Section

9 application. It is misconstrued on the part of the Appellant to contend that

that the impugned order is contrary to the Mobilox judgement supra.

19. To our minds, the Adjudicating Authority did not commit any error in

returning this finding of pre-existing disputes keeping in mind that IBC bestows

only summary jurisdiction upon the Adjudicating Authority. Once plausibility of

a pre-existing dispute is noticed, it is not required of the Adjudicating Authority

Page 14 of 15 Company Appeal (AT) (Insolvency) No. 115 of 2024 to make further detailed investigation. What has to be looked into is whether the

defence raises a dispute which needs further adjudication by a competent court.

It is well settled that in a Section 9 proceeding, the Adjudicating Authority is not

to enter into final adjudication with regard to existence of dispute between the

parties regarding the operational debt. There was no requirement for the

Adjudicating Authority in the present case to go under the skin of dispute and

therefore the Adjudicating Authority rightly held that the Section 9 application

was not maintainable in the present factual matrix.

20. Considering the overall facts and circumstance of the present case, we are

satisfied that the Adjudicating Authority did not commit any error in rejecting

the Section 9 Application filed by the Appellant. We find no good reasons to

disagree with the findings of the Adjudicating Authority. There is no merit in the

Appeal. Appeal is dismissed. It will remain open to the Appellant to resort to

other remedies that may be available to it under any other law. No order as to

costs.

[Justice Ashok Bhushan] Chairperson

[Barun Mitra] Member (Technical)

Place: New Delhi Date: 09.07.2025 Harleen/Abdul

Page 15 of 15 Company Appeal (AT) (Insolvency) No. 115 of 2024