Jitendra Impex Pvt. Ltd vs Compack Enterprises Pvt. Ltd

(Arising out of order dated 23-08-2019 in Company Application (IB)-183/ND /2019 passed by National Company Law Tribunal, New Delhi, Bench- II)

IN THE MATTER OF:

M/s Jitendra Impex Private Limited A Company incorporated and registered under the provisions of the Companies Act, 1956 having its Reg. Office at 908/102, Maharaja Agrasen Market, Chawri Bazar, Delhi-110006. Through its Authorized Signatory/Director Mr. Vishal Jain.

...Appellant (Operational Creditor) Versus

Compack Enterprise India Private Limited A Company incorporated and registered under the provisions of the Companies Act, 1956 having its Reg. Office at B-71, GT Karnal Road Industrial Area, New Delhi- 110033. Through its Authorized Signatory ...Respondent (Corporate Debtor) For Appellant: Mr. Arihant Jain, Mr. Siddhart Gupta, Mr. Srijal Sinha, Mr. Krishnendu Dutta, Mr. Shashwat Tripathi and Mr. Shubhankar Sen, Advocates For Respondent: Mr. Rajesh Banati and Mr. Ashish Sareen, Advocates.

JUDGMENT

(10th August, 2020) Justice A.B. Singh, The Appeal has been filed against the order dated 23rd August, 2019

passed by the Ld. Adjudicating Authority, National Company Law Tribunal,

New Delhi, Bench-II, whereby the petition under Section 9 of the Insolvency 2

and Bankruptcy Code, 2016 filed by Appellant was dismissed by Ld.

Adjudicating Authority holding that the Applicant due to its inconsistent

conduct has been unable to establish that the amount being claimed by it was

owed by the Respondent and that the Respondent has defaulted in the

payment.

2. Facts of the case is as under:-

i) The Appellant is a Company incorporated and registered under the

provisions of the Companies Act, 1956 is an inter-alia engaged in the business

of wholesale trading/distributorship of paper and paper board for various

paper mills such as Khanna Paper Mills Ltd., Century Textiles & Industries

Ltd., Sidarth Papers Ltd., etc. around Delhi and Northern India.

ii) That the Appellant has been dealing with the Respondent since the

financial year 2013-14 on a regular basis and has been supplying paper and

paper board to the Respondent based on written/verbal orders received from

the Respondent from time to time.

iii) Since the Respondent was regularly transacting with the Appellant, the

Appellant as concession and as a matter of trust, was supplying goods to the

Respondent on a credit of 30 (Thirty) days.

iv) The Appellant was maintaining a running Account in respect of

business dealings with the Respondent and against which random payments

had been made by the Respondent from time to time.

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v) The amounts thus, randomly paid by the Respondent were settled

against the outstanding invoices by the Appellant as per FIFO (first in first

out) rule.

vi) That till November 2017, the Respondent was making random

intermittent payments, which were sufficiently setting off the total

outstanding invoice amounts as per FIFO rule, however, starting from mid-

November, the Respondent started making miniscule, irregular and

disproportionate payments to the Appellant against total outstanding invoice

amounts.

vii) That the Appellant states that in the Financial Year 2017-2018, the

Appellant had made total sale of Rs. 7,89,06,382/- (Rupees Seven Crore

Eighty-Nine Lakh Six Thousand Three Hundred and Eighty-Two only) to the

Respondent and after factoring into all the payments received from the

Respondent, the total outstanding amount due and payable to the Appellant

as on 31.03.2018 / 01.04.2018 was Rs. 2,39,80,892/- (Rupees two Crore

Thirty-Nine Lakh Eighty Thousand Eight Hundred and Ninety-Two only)

which is reflected in the Statement of Accounts of the Respondent, maintained

by the Appellant for the Financial Year 2017-2018.

viii) That the Appellant further states that the period from 01.04.2018 till

28.12.2018 (financial year 2018-2019) the Appellant had made a total sale of

Rs. 2,03,52,062/- (Rupees Two Crore Three Lakh Fifty-Two Thousand Sixty-

Two only) to the Respondent. As against the said sum of Rs. 2,03,52,062/-

i.e. total sale value, the Respondent before the Ld. Adjudicating Authority had

Company Appeal (AT) (Insolvency) No. 1083 of 2019 4

admitted a sum of Rs. 1,97,75,383/- and disputed the balance sum of Rs.

5,76,679/-.

3. That the Respondent has filed the Reply before the Ld. Adjudicating

Authority on 15.02.2019 and also Reply filed before this Appellate Tribunal

have taken stand that the Appellant has been manipulating the bills as well

as the accounts statement with the intention to show the alleged outstanding

amount against the Respondent, it further states that as under.

4. Further that in this connection reference is made to letter dated

13.09.2018 wherein the Appellant mentioned 166 bills amounting to Rs.

3,52,07,252.62/- and requested the Respondent to issue certificate that the

Respondent has neither purchased these goods nor claimed CENVAT of Rs.

19,63,390.19/- against these 166 bills.

5. On enquiry the Applicant admitted that these 166 bills of Khanna Paper

Mills Ltd. were raised at the request of the Applicant and without the

knowledge of the Respondent.

6. The Respondent objected to the same but the Appellant informed that

in future this would not be repeated. Thereafter, the Respondent vide letter

dated 14.09.2018 replied to the said letter dated 13.09.2018.

7. That the Respondent submitted that the Appellant has not filed their

statement of accounts from the financial year 2013-14, 2014-15, 2015-16 and

2016-17 but has only filed alleged statement of accounts for the year 2017-

18 and 2018-19 the Appellant filed statement of accounts stating from the

Company Appeal (AT) (Insolvency) No. 1083 of 2019 5

Financial Year 2013-14, the same would disentitle the Application under

Section 9 of the 'IBC', has been made out.

8. That the Respondent submitted that the Appellant completely

concealed the fact that the Appellant also issued credit notes in the financial

years 2013-14,2014-15, 2015-16, 2016-17and 2017-18 to the Respondent

towards special quantity discount on the basis of letters dated 28.12.2013

and 16.04.2016. Therefore, it does not lie in mouth of the Applicant to say

that there is no agreement between the Appellant and the Respondent where

the Appellant agreed to grant the Respondent special quantity discount.

9. The Ld. Adjudicating Authority after hearing the parties passed the

following order as under:-

..........

"5. After a perusal of the pleadings and the accounts filed by the parties it is concluded that both the parties have consistently approbated and reprobated throughout the proceedings. While the Applicant in its pleadings and in the accounts filed has shown that a balance of Rs. 1,64,98,604/- was due from the Respondent to the Applicant at the end of FY 2016-2017, the Applicant in a letter dated 25.08.2017 addressed to the accountants of the Respondent has stated that the balance receivable from the Respondent as on 31.03.2017 was Rs. 72,71,010. The Respondent on the other hand, in the e-mail dated 17.05.2018 has admitted that as on 30.04.2018 the amount due from the Respondent to the Applicant was Rs. 2,34,10,945/- but the ledger filed by the Respondent shows that as on 30.04.2018 the balance payable by Respondent to the Applicant was Rs. 92,33,736/-. The opportunity given by

Company Appeal (AT) (Insolvency) No. 1083 of 2019 6

the Tribunal to the parties to reconcile their accounts has also not lead to any fruitful results.

6. The Applicant due to its inconsistent conduct has been unable to establish that the amount being claimed by it was owed by the Respondent and that the Respondent has defaulted in the payment of the claimed amount. Thus, this application is dismissed with no costs.''

..........

10. Learned counsel for the Appellant in Memo of Appeal filed under Section

61 of the 'IBC' and also the Written Argument filed on their behalf on

04.03.2020 referred to e-mail dated 08.10.2016 page 473 Vol.- III, this e-mail

sent to the Respondent in statement of account till 30.09.2016 and the

Respondent on the same dated vide e-mail responded stating 'Ok' thereby

confirming the closing balance till 30.09.2016. Pertinently, the same e-mail

dated 08.10.2016 was sent by the Respondent from the e-mail ID being

compackindia@gmail.com. This e-mail ID is also the registered as the official

e-mail ID of the Respondent with the Ministry of Corporate Affairs. The

Respondent has not denied sending this e-mail nor has the Respondent denied

the aforesaid e-mail ID as its e-mail ID.

11. Learned counsel for the Appellant submits that the e-mail dated

20.01.2018 at page 685 Vol.- IV of the Appeal Paper Book, the Appellant sent

statement of account for the period 01.11.2017 to 31.12.2017 to the

Respondent, requesting the Respondent to indicate whether any correction in

the statement has been found by them, but no response was received.

Company Appeal (AT) (Insolvency) No. 1083 of 2019 7

12. Learned counsel for the Appellant also referred to e-mail dated

12.05.2018 at page 482 Vol.- III and ledger statement at page 483-497 Vol.-

III sent by the Appellant whereby confirmation of balance sum of Rs.

2,34,10,945/- outstanding as on 30.04.2018 from the Respondent after

attaching the ledger/statement of accounts for the period commencing from

01.04.2017 to 30.04.2018 which states the Opening Balance as on

01.04.2017 as Rs. 1,64,98,604/-.

13. Learned counsel for the Appellant referred to e-mail dated 17.05.2018

at page 498 Vol.- III, the Respondent neither objected to above said Opening

Balance sums and Closing Balance sums nor objected to the statement of

accounts/ledger for the period 01.04.2017 to 30.04.2018. On the contrary, in

the said e-mail, the Respondent even confirmed an outstanding sum of Rs.

2,34,10,945/- as on 30.04.2018 qua the Appellant which sum apparently

included the above said sum of above said Closing Balance sum for the FY

2017-2018 i.e. Rs. 2,39,80,892/-.

14. Learned counsel for the Appellant further referred to statement of

account for FY 2018-19 at page 470-472 Vol.- III and Statutory notice dated

28.12.2018 at page 500-507 Vol.- III. A total sale of Rs. 2,03,52,062/- was

admittedly made by the Appellant to the Respondent and a sum of Rs.

2,59,80,892/- was paid by the Respondent and a sum of Rs. 2,06,119/- was

deducted on account of return of rejected goods, leaving the operational debt

as the outstanding amount. In the aforesaid background, the statutory notice

dated 28.12.2018 was issued by the Appellant.

Company Appeal (AT) (Insolvency) No. 1083 of 2019 8

15. Learned counsel for the Appellant also referred to Reply to Demand

Notice at page 508-524 Vol.- III. The Respondent sent a reply to the statutory

notice dated 11.01.2019, which the Respondent without indicating any pre-

existing dispute and as an afterthought, without specifically pointing out, set

up certain forged and fabricated credit notes purported to be issued by the

Appellant. Significantly, the Respondent admitted that a sum of Rs.

22,56,833/- is due and payable to the Appellant.

16. The learned counsel for the Appellant during the course of argument

and in his written submission have stated that the Ld. Adjudicating Authority

clearly erred in not appreciating that the Appellant's case that the Operational

Debt is due and payable is completely consistent with the statement of

accounts filed by the Appellant which were never disputed / objected by the

Respondent prior to receipt of statutory demand notice. On the contrary, the

ledger accounts up to 30.09.2016 and 30.04.2018 have been confirmed by the

Respondent vide its e-mail dated 08.10.2016 and 17.05.2018 (Ref: Para-7.9-

7.10 Appeal- Vol-I). A Table reflecting the computation of the Operational Debt

prepared on the basis of said confirmed statement of accounts and admitted

sale made in the FY-2018-2019 and payment made by the Respondent till 28-

12-2018 is as under:-

S.No. Particulars Amount Admission by the Respondent/Undisputed documents

(a) Closing Balance (+) Rs. 2,39,80,892/- Pg-493-vol-III entry for the FY 2017- against 27.03.2018 2018 (as on r/w Pg-498-Vol-III 31.03.2018)

Company Appeal (AT) (Insolvency) No. 1083 of 2019 9

Note- confirmation in email dated 17.05.2018 @ pg-498-Vol-III of Rs.

2,34,10,945/- is as on 30.04.2018

(b) Sales and (+) Rs. 2,03,52,062/- Para-7.6-Pg-13-, Vol-I purchase for the regard with Para 8, Pg. FY 2018-2019 537-541,Vol-III of Appeal

(C) Admitted payment (-) Rs. 2,59,80,892/- Para-9-10-Pg-563 & 564, made by the Vol-IV Of Appeal Corporate Debtor

(d) Sales Credit given (-) Rs. 2,06,119/- Para 7.10 (VI), Pg. 16-17 by the Operational Vol-I of Appeal [87,325 + 66,105 Creditor in the FY +52,869/-] 2018-2019

Total payable (a) +(b) - (c) -(d) Rs. 1,81,45,943/- (Operational Debt)

17. The learned counsel for the Appellant submitted by referring to the

paragraph 5 of the impugned order whereby the Ld. Adjudicating Authority

have recorded a finding that the Respondent in their e-mail dated 17.05.2018

has admitted that as on 30.04.2018 the amount due from the Respondent to

the Appellant was Rs. 2,34,10,945/-.

18. Learned counsel for the Appellant referring to the judgment passed by

the Hon'ble Supreme Court in Macquarie Bank Limited Vs. Shilpi Cable

Technologies Limited (2018 Vol.- II SCC 674) held as under:-

"24. Even otherwise, the important condition precedent is an occurrence of a default, which can be proved, as has been stated hereinabove, by means of other documentary evidence. Take for example the case of an earlier letter written

Company Appeal (AT) (Insolvency) No. 1083 of 2019 10

by the corporate debtor to the operational creditor confirming that a particular operational debt is due and payable. This piece of evidence would be sufficient to demonstrate that such debt is due and that default has taken place, as may have been admitted by the corporate debtor."

19. Learned counsel for the Appellant further relying in the aforesaid

judgment submitted that the Ld. Adjudicating Authority failed to appreciate

that there was no occasion for establishing the existence of the entire

Operational Debt nor was it necessary to submit the proof of claims of the

Operational Debt.

20. Learned counsel for the Appellant further relying on the Judgment of

the Hon'ble Supreme Court in the Case of Mobilox Innovations Private Limited

Vs. Kirusa Software Private Limited, reported in 2018 Vol.- I SCC 353 para 34

wherein the Hon'ble Supreme Court held as follows :-

"34 Therefore, the adjudicating authority, when examining an application under Section 9 of the Act will have to determine:

i) Whether there is an "Operational Debt" as defined exceeding Rs. 1 lakh? (See Section 4 of the Act)

ii) Whether the documentary evidence furnished with the application shows that the aforesaid debt is due and payable and has not yet been paid? and

iii) 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 the demand notice of the unpaid operational debt in relation to such dispute?

Company Appeal (AT) (Insolvency) No. 1083 of 2019 11

If any one of the aforesaid conditions is lacking, the application would have to be rejected. Apart from the above, the adjudicating authority must follow the mandate of Section9, as outlined above, and in particular the mandate of Section 9(5) of the Act, and admit or reject the application, as the case may be, depending upon the factors mentioned in Section 9(5) of the Act.

21. It was further submitted that in view of the finding recorded by Ld.

Adjudicating Authority in para 4 of the impugned order have taken note of the

fact that Operational Debt of Rs. 22,56,833/- due and payable to the Appellant

by Respondent. That the Respondent has made a categorical statement

admitting aforesaid due and handed over the cheque before the Tribunal

which the Appellant has refused to accept the cheque. In view of the clear

finding that the Ld. Adjudicating Authority dismissing the said application

contrary to the law laid down by the Hon'ble Supreme Court.

22. On the other hand, learned counsel for the Respondent in his written

submissions and also during the course of argument admitted the fact that

after the receipt of the notice issued under Section 8 of the 'IBC' pointed that

the outstanding amount is only Rs. 22,56,833/- and the Respondent is ready

and willing to pay and the Appellant is instead of receiving Rs. 22,56,833/- is

taking advantage only this fact has been recorded by the Ld. Adjudicating

Authority.

FINDINGS

23. After hearing the parties and perusal of the record that in view of finding

recorded by the Ld. Adjudicating Authority in para 4 of the impugned order

Company Appeal (AT) (Insolvency) No. 1083 of 2019 12

categorically statement made by the Respondent that only Rs. 22,56,833/-

was due to be paid to the Appellant and he has also handed over the cheque

but Appellant has refused to accept the said cheque.

i) Admittedly, the 'Operational Debt' is exceeding Rs. 1 lakh.

ii) The Appellant sent notice under Section 8 of the IBC to the Respondent

and the Respondent have accepted and was not disputed the amount.

iii) The Appellant have also produced documentary evidence in the support

of operational debt before the Ld. Adjudicating Authority and this Appellate

Tribunal.

iv) In view of the aforesaid, admitted fact, we are of the considered view

that the Ld. Adjudicating Authority committed error of record and not

considered the judgment of the Hon'ble Supreme Court in Mobilox Innovations

Private Limited Vs. Kirusa Software Private Limited, reported in 2018 Vol.- I

SCC 353 wherein Hon'ble Supreme Court laid down the law regarding powers

of Adjudicating Authority passing the order of under Section 9 of the IBC.

v). The Ld. Adjudicating Authority failed to appreciate the documents

placed on record along with Application under Section 9 of the 'IBC'.

vi). 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 record

being complete, we hold that the Application under Section 9 preferred by the

Appellant was fit to be admitted.

Company Appeal (AT) (Insolvency) No. 1083 of 2019 13

ORDER

24. For the aforesaid reasons, impugned order dated 23.08.2019 passed in

Company Application (IB)-183/ND /2019 is hereby set aside and remit the

case to the Ld. Adjudicating Authority for admitting the application under

Section 9 of the 'IBC' after Notice to both the parties and further to enable the

'Corporate Debtor' to settle the matter prior to the admission.

i) The Appeal is allowed with aforesaid observations and directions. No

costs. Parties are hereby directed to appear before the Ld.

Adjudicating Authority on 15th September, 2020.

ii) Let the Registry to communicate the Judgment to the Ld.

Adjudicating Authority (National Company Law Tribunal, New Delhi,

Bench-II).

iii) Copy of the Judgment be provided to the party concern as per Rule.

iv) Copy of the Judgment will be up-loaded in the Website of this

Appellate Tribunal.

[Justice A.I.S. Cheema] Member (Judicial)

[Justice A.B. Singh] Member (Judicial)

[Kanthi Narahari] Member (Technical)

NEW DELHI RN/

Company Appeal (AT) (Insolvency) No. 1083 of 2019