Laxyo Energy Limited vs J.U.D. Cements Ltd
- CitationCompany Appeal (AT)(Insolvency) No. 388 of 2023
Ratio decidendi
The rule this decision rests on
Where a corporate debtor, in reply to a demand notice under Section 8 of the Insolvency and Bankruptcy Code, 2016, raises a dispute as to the operational debt that is not a moonshine or spurious defence, a pre-existing dispute exists and an application under Section 9 of the Code is not maintainable for rejection of the claim on that ground; the Adjudicating Authority is entitled to reject the Section 9 application on that basis. A reconciliation of accounts relied upon by the operational creditor does not by itself negate a pre-existing dispute where the corporate debtor, in its reply to the demand notice, denies the reconciliation and asserts contrary claims against the operational creditor supported by its own assertions of breach and damage under the underlying contract.
Written by Miss Lucy from the judgment below, not taken from a headnote.
Judgment
As delivered
IN THE MATTER OF: Laxyo Energy Ltd. ...Appellant
Versus
JUD Cement Ltd. ...Respondent
Present: For Appellant : Mr. Anuj Aggarwal, Mr. Kanishk Rana and Mr. Vikrant Chawla, Advocates For Respondent :
ORDER
12.04.2023: Heard learned Counsel for the parties.
This is an appeal against the order passed by the Adjudicating Authority
(NCLT Guwahati) dated 20.01.2023 by which Section 9 application has been
rejected on the ground of pre-existing dispute. The Appellant was given a Work
Order by Corporate Debtor for providing services. In pursuance of the Work
Order, the Appellant continued to work. Subsequently, the Work Order was
terminated by the Appellant itself. According to the Appellant, certain dues are
still there with the Corporate Debtor for which reconciliation also took place in
June and July, 2021 and when the payment was not made, Notice under
Section 8 IBC was issued on 18.04.2022 and thereafter Section 9 (IBC)
Application was made.
Company Appeal (AT)(Insolvency) No. 388 of 2023 Page 1 of 4
2. Learned Counsel for the Appellant submits that when reconciliation was
done, total amount of Rs. 5,66,49,015/-was found due, there is no occasion for
accepting of any pre-existing dispute and the Adjudicating Authority ought not
to have rejected the application.
3. We have considered the submission of the learned Counsel for the
Appellant and perused the records. The Demand Notice issued by the Appellant
was duly replied by the Corporate Debtor, copy of which Reply has been
brought on record at page 349 of the Appeal Paper Book. The Reply raises a
dispute and it is the Notice of dispute given by the Corporate Debtor. We have
looked into the Notice of dispute in which paragraphs 4,5 & 6 following have
been stated:
...
"4. We further state that the alleged reconciliation of accounts relied upon in the demand notice, are false and baseless without any supportive materials in respect of the entries therein. And further JUD Cements Ltd have never accepted any reconciliation of accounts with Laxyo Energy Limited.
5. We, on the contrary, state that pursuant to the Work Order contract dated 12.10.2020 vide which Laxyo Energy Limited was given the contract of Operation and Management of the cement plant of JUD Cements Limited, had inherently breached vital terms by not yielding to the desired quantity of production of cements as stipulated therein. Further Laxyo Energy Limited in the process of performances of the contractual obligations has caused severe damages to the machineries installed in the cement plant, whereby resulting in huge loss for the JUD Cements Limited and for which we Company Appeal (AT)(Insolvency) No. 388 of 2023 Page 2 of 4 (JUD Cements Limited) is entitled lay a claim against Laxyo Energy Limited for damages and we are positively in the process to do so.
6. And we further state that as per the current status of Ledger statements maintained at the JUD Cement Limited, we have a claim for a sum of Rs. 1,88,26,942.60/- (Rupees One Crore Eighty Eight Lakhs Twenty Six Thousand Nine Hundred Forty Two and Sixty Paisa Only) against Laxyo Energy Limited."
4. The submission of the Appellant is that there was reconciliatry, which
fact has also noted by the Adjudicating Authority in the impugned order, the
reconciliation, prior to the Demand Notice indicates the existence of pre-
existence of dispute between the parties. Furthermore, when Notice under
Section 8 IBC was replied and the claim was disputed in accordance with the
Scheme of IB Code, the Section 9 Application cannot proceed unless it is held
that the defence raised was a moon-shine dispute. The Work Order which was
issued, whose period had still not expired, and was terminated by the
Appellant itself indicates that there has been dispute between the parties.
Furthermore, when the Notice of dispute was given by the Corporate Debtor
where allegations have been made denying the reconciliation and claiming
certain amounts due on the Operational Creditor itself, the dispute cannot be
said to be moon-shine dispute and the Adjudicating Authority did not commit
any error in rejecting Section 9 Application.
Company Appeal (AT)(Insolvency) No. 388 of 2023 Page 3 of 4
We do not find any error in the Impugned order. The Appeal is
dismissed.
[Justice Ashok Bhushan] Chairperson
[Mr. Barun Mitra] Member (Technical) akc/nn
Company Appeal (AT)(Insolvency) No. 388 of 2023 Page 4 of 4
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