Knk Ship Management vs Thirani Industries Limited

KNK Ship Management ...Appellant

Versus

Thrani Industries Ltd. ...Respondent

Present: For Appellant : Mr. Saket Sikri, Mr. Gautam Khanzanchi, Mr. Rohit Pardeshi, Mr. Ajay Pal Kullar, Ms. Suruchi Jaiswal & Ms. Aditi Kukreja, Advocates. For Respondent : Mr. Karan Luthra & Mr. Rohan Dua, Advocates. JUDGMENT

Per: Justice Rakesh Kumar Jain:

This appeal is filed by the Operational Creditor, being aggrieved

against the order dated 24.09.2024, passed by the NCLT, New Delhi, by

which CP (IB) No. 540/ND/2022 filed by the Appellant under Section 9 of the

Insolvency and Bankruptcy Code, 2016 ('Code') against Thrani Industries Ltd.

(CD) for the resolution of its debt of Rs. 2,25,87,068/-, has been dismissed.

2. Brief facts of this case are that the Appellant/OC is a marine

consultant and agent functioning at the Mumbai Port and provides its

services, was appointed as the Marine Manager, Consultant and Agent by

the CD on 31.03.2017 to manage its two vessels, namely, Instanbul and

Istanbul 2 (TBN Neverland and Sea Yah) (referred to collectively as

'Vessels').

2

3. The Appellant has allegedly provided crew manning and management

services to the CD in the financial year 2018-19 and raised cumulative

invoice amounting to Rs. 2,36,24,281/- out of which it received an amount

of Rs. 1,64,15,810/-. Thus, a sum of Rs. 72,08,471/- remained unpaid in

respect of financial year 2018-19.

4. It is also the case of the Appellant that it provided the same services

to the CD in the financial year 2019-20 and raised invoices of Rs.

1,38,20,997/- from 02.04.2019 to 14.03.2020 but no amount was paid.

5. The Appellant also provided the same services to the CD in the year

2021-22 and raised invoices of Rs. 15,57,600/- from 01.04.2021 to

31.03.2022 but the said amount was also not paid, therefore, the Appellant

has alleged that there is a default of Rs. 72,08,471 for the financial year

2018-19, Rs. 1,38,20,997/- for the financial year 2019-20 and Rs. 15,57,600

for the financial year 2021-22, total amounting to Rs. 2,25,87,068/-.

6. Since, the CD did not pay the aforesaid debt, therefore, the Appellant,

in order to initiate CIRP proceedings served demand notice under Section

8 of the Code on 02.05.2022 under Rule 5 of the Insolvency and Bankruptcy

(Application to Adjudicating Authority) Rules, 2016 (for short 'Rules') in

which an amount of Rs. 2,25,87,068/- was claimed.

7. It is alleged that notice was sent on the registered email address of

the respondent i.e. mthirani@gmail.com and also sent it by speed post upon

the address of the Respondent i.e. E-2/203, Bhatia Trade Centre,

Alaknanda, New Delhi 110019 on which past invoices were sent and were

duly received and paid. However, the demand notice through speed post 3

was returned with the endorsement "addressee left without instructions".

The Appellant again sent demand notice on 07.05.2022 on the registered

address of the CD obtained from the companies' master data available on

the website of the Ministry of Corporate Affairs i.e. E-2/203, Bharti Trade

Centre, Alaknanda Shopping Complex, New Delhi - 110019 but it was also

returned with the endorsement that "receiver shifted from given address".

8. It is alleged that the Appellant also obtained certificate under Section

9(3)(c) of the Code from Bank of Baroda and Kotak Mahindra Bank where

it maintained its account in which it has been stated that no payments

were received from the CD after 31.03.2019.

9. Thereafter, the Appellant filed the application under Section 9 of the

Code on 09.06.2022.

10. Notice in the application was issued. The Appellant served copy of

the petition on the registered email as well as registered address through

speed post and registered courier but the same were returned with the

instructions "addressee left without instructions" and receiver shifted from

given address'.

11. The Tribunal, in its order dated 02.09.2022 and 10.10.2022, observed

that the Respondent is not interested in contesting the application,

therefore, it was proceeded against ex-parte and thereafter, arguments were

heard and order was reserved but on 15.03.2023 the Respondent filed an

I.A No. 1510 of 2023 for setting aside the order dated 02.09.2022 and

10.10.2022 on the ground that notices were sent on the wrong address 4

though the Appellant had served it both on the email address as well as on

the postal address.

12. On 17.03.2023, the I.A No. 1510 of 2023 was allowed subject to

1,50,000/- as cost and time was granted to Respondent to file reply which

was ultimately filed on 27.03.2023.

13. In the reply filed by the Respondent, it was alleged that there is a

pre-existing dispute between the parties. The Appellant was appointed as a

marine manager, consultant and agent for assisting and managing the

purchase, inspection and import of two vessels. It referred to clause 9 of

the appointment letter dated 31.03.2017 in which it was provided that

"certification and documentation of passenger ferry with

statute/administration, and Govt of India Officers, State Govt. Offices,

related to any permission for the ferry namely Navy, Coast Guard, Food and

Drug, Pollution Board, Excise, Customs, police, BMC etc. etc. through Capt.

Naresh Kalra or KNK Ship Management or appointed Sub-Agent by NK in

India"

14. It is also alleged that the Respondent had paid an ad-hoc amount

of Rs. 15,00,000/- to the Appellant which was to be adjusted against the

future invoices. It is further alleged that the Respondent paid Rs.

1,64,15,870/- pertaining to 22 invoices raised between 2017-18 by the

Appellant. It is further alleged that thereafter the Respondent came to know

that services rendered by the OC were deficient. There was delay in the

performance of the works by the Appellant because of which the operation

of the two vessels was delayed. The Architects engaged by the CD also 5

sent emails to the CD with a copy to the OC bringing to its notice that the

works were behind schedule and the OC had to devote sufficient manpower

to ensure timely completion of works. It is also alleged that the vessels were

to be used for commercial purposes i.e. as restaurants and delay in

completion of the works led to the loss of revenue to the CD which is

directly resulted because of deficient and poor services rendered by the

Appellant/OC. It is further alleged that the vessels were seized by the

Customs Authorities and are lying seized since 25.11.2020.

15. In the rejoinder, the Appellant has alleged that notice under Rule

5(2)(a) was served on the registered address of the Respondent provided

on the website of the MCA and has referred to a decision of this Court in

the case of Abhinandan Jain Vs. Tanaya Enterprises Pvt. Ltd, 2021 SCC

OnLIne NCLAT 102 to contend that the registered address mentioned in

the MCA website can be relied upon. It is also alleged that demand notice

was also delivered through email and speed post. The Respondent, if

allegedly left the address, was supposed to upload the fresh address on the

MCA website. It is further submitted that Respondent has referred to two

emails dated 21.09.2018 and 29.09.2018 which were pertaining to some

plumbing work as pre-existing dispute which was corrected and both vessels

were made operational and inaugurated as per schedule on 17.11.2018 by

the Union Minister for shipping. It is also submitted that till 13.03.2020

parties were organized and hosted on the vessels. It is submitted that the

restaurant manager vide email dated 05.03.2020 had sent the operational

schedule regarding the vessels to the OC for the period from 07.03.2020

to 13.03.2020. It is also submitted that the CD had never raised any 6

dispute regarding the imposition of penalty / custom duty by way of a

notice, suit or arbitration rather it is submitted that the CD itself appointed

M/s Sunrich Logistics Pvt. Ltd. (Sunrich) vide appointment letter dated

02.01.2018 as the customs clearing and forwarding agent for the necessary

documentation at the customs/ port for import of the vessels on its behalf.

He has also referred to the statement of Shri Kamlesh Patel and Shri

Shreekanth Ramakrishnan, reproduced in the customs order, which shows

that Sunrich had filled the bill of entry, wherein the classification of the

vessels was done. It is further submitted that Respondent has already filed

appeal against the order of customs which is pending before the Customs,

Excise and Service Tax Appellate Tribunal, therefore, the liability of the

Appellant has not been crystalized.

16. The Tribunal on the basis of the pleadings before it framed two

questions i.e. whether the demand notice issued by the OC in Form - 3 is

valid and whether there was any discernible pre-existing dispute

surrounding the debt.

17. In respect of notice, the Tribunal has observed that if the demand

notice is issued in form 3 then copy of invoice is not mandatory but if the

claim is based on the invoices then the demand notice has to be served

in form 4, in this regard, reliance has been placed by the Tribunal in the

case of Neeraj Jain Vs. Cloudwalker Streaming Technologies Pvt. Ltd., CA

(AT) (Ins) No. 1354 of 2019.

18. In so far as the issue of pre-existing dispute is concerned, the

Tribunal has referred to two emails dated 29.09.2018 and 08.10.2018 on 7

the basis of which it has been held that there was deficiency in the

performance and breach of contractual obligations, therefore, there is a

pre-existing dispute.

19. Counsel for the Appellant has submitted that the Appellant had

attached all the invoices with the demand notice issued in form 3, therefore,

there is complete compliance of Rule 5 of the Rules. It is submitted that the

Tribunal has erred in relying upon the case of Neeraj Jain (Supra) in which

the demand notice was sent without invoices. Counsel for the Appellant has

further argued that the finding recorded by the Tribunal that there is pre-

existing dispute between the parties is also bad because it has relied upon

selective emails dated 29.09.2018 and 08.10.2018, which have also been

referred in the impugned order, to hold that there was deficiency of service

on the part of the Appellant. It is submitted that the Tribunal has failed to

note that the Appellant, vide emails dated 29.09.2018 and 21.09.2018, had

clearly informed the Respondent that the plumbing work had already been

initiated and that the delay was due to improper allocation of work to the

fabrication team, therefore, the delay was at the end of the Respondent and

not the Appellant. It is further submitted that Respondent wanted to open

the restaurant in the vessels by 10.11.2018 which was inaugurated on

17.11.2018 and were in use till 13.03.2020. It is also submitted that even

Respondent made the payment to the Appellant till 30.03.2019, no notice

for termination of the agency or notice raising a dispute was ever issued

by the Respondent to the Appellant prior to the petition filed by the

Appellant. It is further submitted that the Respondent had availed the

services of the Appellant even after the alleged deficiency because on 8

15.02.2019, the Appellant secured licenses for the vessels to operate in the

MbPT harbour without a pilot, on 18.01.2020, the Appellant

communicated with MbPT on behalf of the Respondent regarding vessels

operations and on 05.03.2020 the restaurant manager emailed the

Appellant about the operational schedule for vessels (07.03.2020 to

13.03.2020) indicating ongoing operations and events. It is also submitted

that the issue of seizure of vessels by the customs authorities is not

concerning the Appellant because the CD had categorically engaged another

company M/s Sunrich as its clearing and forwarding agents for

documentation at customs/ port for importation of the vessels in question.

The same is also evident from the seizure memo dated 25.11.2020. It is also

submitted that the customs dispute is not an inter se dispute between

the Appellant and Respondent rather it is a dispute between the

Respondent and the Commissioner of Custom Mumbai over the classification

of the vessels. It is submitted that no dispute with the Appellant has ever

been raised by the Respondent in the form of notice, suit, arbitration etc.

and even no liability has been crystallized by the Custom because of an

appeal against custom order is pending. It is submitted that for considering

that there is pre-existing dispute, it should be existing prior to the receipt

of the demand notice as has been held in the case of Mobilox Innvations

Pvt. Ltd. Vs. Kirusa Software Pvt. Ltd., (2018) 1 SCC 353 that the dispute

or suit or arbitration proceedings must be pre-existing before the receipt of

the demand notice as the case may be. It is further submitted that this

Court in the case of G.T. Polymers Vs. Keshava Medi Devices Pvt. Ltd., 9

2020 SCC OnLine NCLAT 1046 has held that any civil suit filed after the

receipt of demand notice will not be considered as a pre-existing dispute.

20. On the other hand, Counsel appearing on behalf of the Respondent

has submitted that both vessels were brought to India from Instanbul, Turkey

and the customs clearance was done by the Appellant but because of

deficiency in the services and breach of obligations under the appointment

letter, vessels were seized by the office of the Commissioner of Customs.

The Respondent received a notice on 09.02.2021 alleging evasion of

customs duty amounting to Rs. 9,03,76,156/- on the import of the vessels

and the Commissioner of Customs passed an order of demand of Rs. 9.03

Cr. It is submitted that because of the aforesaid issues, there is a breach

of contract which is clearly a pre-existing dispute. It is submitted that the

Appellant has erroneously contended that the customs clearance was done

by the customs broker and that this dispute is not notified to it. It is further

submitted that the demand notice dated 02.05.2022 is in form 3 of the Rules.

It is alleged that in the demand notice issued on the basis of invoice then it

has to be in Form 4. It is submitted that operational debt has been claimed

on the basis of invoices for which a notice under form 3 is not issued but in

form 4 and reliance has been placed in the case of Neeraj Jain (Supra).

21. We have heard Counsel for the parties and perused the record with

their able assistance.

22. The Tribunal has dismissed the application only on two issues, firstly,

that the demand notice issued under Rule 5 of the Rules appending the

invoices should have been in form 4 instead of in form 3 and secondly the 10

Respondent has raised the issue before the notice about the deficiency in

work of the Appellant by two emails dated 29.09.2018 and 08.10.2018. It

has also taken into consideration the issue of seizure of vessels on

25.11.2020 by the customs authorities.

23. There is no dispute raised by the Respondent that it has no liability to

pay to the Appellant the amount raised on the basis of the invoices. The

Appellant has raised invoices pertaining to three financial years i.e. Rs.

72,08,471 for the financial year 2018-19, Rs. 1,38,20,997/- for the financial

year 2019-20 and Rs. 15,57,600 for the financial year 2021-22, total

amounting to Rs. 2,25,87,068/- which has not been paid by the

Respondent.

24. Since, the amount was not paid, therefore, the Appellant decided to

pursue the remedy under the Code and served notice in form 3 prescribed

in Rules. Both forms are provided in Rule 5 of the Rules. Rule 5(1)(a)

prescribes a demand notice in form 3 and Rule 5(1)(b), a copy of the invoice

attached in form 4. Form 3 and 4 are printed performa of the notice. Form

3 is the form of demand notice / invoice demanding payment under the

insolvency and bankruptcy code, 2016 whereas Form 4 is the form of notice

with which invoice demanding payment is to be attached. Form 3 may be

sent as a demand notice or invoice demanding payment whereas Form 4

notice with which invoice demanding payment is to be attached. There is no

dispute that the Appellant has sent notice with invoices. The demand notice

with invoices fulfils the requirements to prove the existence of operational

debt and the amount of default. If the notice sent in form 3, OC has to give 11

particulars of unpaid operational debt whereas in the notice sent on form 4,

the OC has to only attach the invoices on which its claim is based without

giving any further particulars. Both Forms 3 and 4 are reproduced as

under:-

12

25. Repeated demand notice was sent by the Appellant which were tried

to be avoided on the pretext that notices were served on the office address

of the Respondent but endorsement was made by the postal authority that 13

addressee left without instructions" without the CD updating latest address

on the portal of the MCA. The Respondent also practiced the same thing

when the notice under Section 9 was issued but when the Respondent was

proceeded against ex-parte by the order of the Court and order was

reserved then it appeared before the Court by filing an application for

setting aside the ex-parte order.

26. The very fact that the notice contained the invoices and that the

invoices have not been challenged by the Respondent on the ground that

the same are fake and fabricated, it would be totally hyper technical plea to

reject the application of the Appellant on the ground that the notice issued

under Section 8 in form 3 with invoices was a defective notice.

27. In so far as the issue regarding the pre-existing dispute is concerned,

the Tribunal has referred to two emails dated 29.09.2018 and 08.10.2018.

These mails also reproduced again for a quick reference which are as under:- 14

28. But the Tribunal has lost sight of the fact that restaurant in the vessels

were inaugurated after their emails on 17.11.2018 by the Union Minister. It

is also pertinent to mention that till 13.03.2020, parties were organized and

hosted in the vessels. In this regard, the restaurant manager sent email

dated 05.03.2020 regarding operations in the vessels to the Appellant from

the period 07.03.2020 to 13.03.2020. In such circumstances, the said emails

cannot be relied upon.

29. In so far as the dispute raised by the Respondent about the seizure

of the vessels is concerned, the said action has been taken by the customs

authorities on 25.11.2020 much after the inauguration of the restaurant in

the vessels and no dispute was ever raised earlier as there is no evidence 15

brought on record by the Respondent by way of any notice, suit or

arbitration etc. with the Appellant in respect of seizure.

30. Beside this, the Tribunal has not really appreciated that Sunrich was

appointed by the Respondent as its clearing and forwarding agent for

documentation at customs/port for import of the vessels in question for

which the said company was responsible and that the appeal against the

order of confirming the demand raised by the customs department is still

pending and the liability of the Appellant has not been crystalized.

31. Thus, in view of the aforesaid facts and circumstances, we are of the

opinion that the order passed by the Tribunal is patently erroneous and

hence, the appeal is allowed and the impugned order is set aside.

The parties shall bear their own costs.

I.As, if any, pending, are hereby closed.

[Justice Rakesh Kumar Jain] Member (Judicial)

[Justice Mohammad Faiz Alam Khan] Member (Judicial)

[Mr. Naresh Salecha] Member (Technical) New Delhi 11th September, 2025 Sheetal