M/S Gupta Exim (India) Private Limited vs M/S Knitcraft Apparels International ...

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NATIONAL COMPANY LAW APPELLATE TRIBUNAL PRINCIPAL BENCH NEW DLEHI COMPANY APPEAL (AT(INSOLVENCY) NO.497/2021 (Arising out of Judgement/Order dated 01.04.2021 passed by the National Company Law Tribunal, Principal Bench, New Delhi in Company Petition No.(IB)-34(PB)/2021) In the matter of: M/s Gupta Exim (India) Pvt Ltd 144, DLF Industrial Area, Phase I, Faridabad, Haryana 121003 Through its RP Shri Vivek Raheja Appellant

Vs

M/s Knitcraft Apparels International Pvt Ltd N-49, Kirti Nagar, New Delhi-15 Respondent

For Appellant: Mr Harsh Garg and Mr. Pulkit Goyal, Advocates.

For Respondent: Mr Keshri Kumar, Advocate.

JUDGEMENT

VIRTUAL MODE

JUSTICE RAKESH KUMAR, MEMBER (JUDICIAL)

The present Appeal has been preferred under Section 61 of the

Insolvency & Bankruptcy Code, 2016 (hereinafter referred to as 'the IBC)

against the order dated 01.04.2021 passed by the Adjudicating Authority,

National Company Law Tribunal, Principal Bench, New Delhi in Company

Petition No.(IB) 34(PB)/2021. By the said order the Adjudicating Authority

has dismissed the petition filed under Section 9 of the IBC Code by the

Appellant primarily on the ground that the same did not meet the threshold

Company Appeal (AT)(I) No. 497/2021 2

limit of default as set out by notification dated 24.03.2020 issued under

Section 4 of the IBC.

2. The Appellant's case is that the Appellant/Operational Creditor is a

Company incorporated under the provisions of the Companies Act. The

Appeal was filed by Mr. Vivek Raheja, who was earlier appointed as Interim

Resolution Professional and now working as Resolution Professional in

Corporate Insolvency Resolution Process (CIRP) in the matter of M/s Gupta

Exim (India) Pvt Ltd as an application under Section 7 of the IBCO Code

bearing CP(IB)No.312/CHD/HRY/2018 was admitted by the National

Company Law Tribunal, Chandigarh vide order dated 29.10.2019.

3. That as per the Appellant, both Appellant/operational creditor and

Respondent/Corporate Debtor were in trade with each other from a long time,

and there was running account between them. For the said job work

work/processing of fabric the appellant/operational creditor used to raise

invoices to the corporate debtor for which the Corporate Debtor promised to

make payment against each invoice soon after the delivery of goods by way of

electronic transfer or through cheques. The Appellant claimed that the

Corporate Debtor had failed to make payment of 56 invoices ranging from

dated 27.07.2019 to 14.10.2019 and as such defaulted in making payment to

the tune of Rs. 69,39,771/- towards the appellant/operational creditor. The

Appellant further claimed that earlier also 'Demand Notice' was issued on

20.01.2020. However, subsequently it was withdrawn since there were

certain defects. The Appellant has specifically pleaded that another Notice

dated 12.03.2020 was sent to the Corporate Debtor/Respondent demanding

Rs.69,39,771/-. In paragraph 7.6 of the Memo of Appeal it has been

Company Appeal (AT)(I) No. 497/2021 3

categorically stated that the 'Demand Notice' dated 12.03.2020 demanding an

amount of rs.69,39,771/- was sent by Registered Post on 14.03.2020 at the

registered Address of the Corporate Debtor available on the master date of the

Company which was delivered to the Corporate Debtor on 17.03.2020.

4. That it is further case of the Appellant that the Respondent/Corporate

Debtor never raised any dispute within the stipulated period nor did it raise

any dispute qua outstanding amount, nor did it deposit the outstanding dues.

In the meanwhile, on 24.03.2020 the Central Government through

Notification enhanced quantum of default for the purpose of IBC from Rs.1

lakh to Rs. 1 Crore. It is further admitted by the Appellant that the

Appellant/Operational Creditor i.e. M/s Gupta Exim (India) Pvt Ltd

(appellant) filed an application under Section 9 of IBC read with Rule 4 of

Insolvency & Bankruptcy (Application to Adjudicating Authority) Rules, 2016

(hereinafter referred to as Rule, 2016) vide E-Diary No.0710102036282020

dated 28.04.2020 for initiation of CIRP against the Respondent/M/s Knitcraft

Apparels International Pvt Ltd -Corporate Debtor for default of an amount of

Rs.69,39,771/-

5. The Application under Section 9 of the IBC filed by the Appellant was

heard by the Adjudicating Authority and order was reserved. Subsequently

the impugned order was pronounced on 01.04.2021 and the same was

dismissed since the default amount did not meet the threshold limit of default

as per Notification dated 24.03.2020.

6. In the present Appeal, the Respondent/Corporate Debtor appeared and

filed Notes of Written Submissions. In the Notes of Written Submissions, the

Respondent has denied any outstanding amount as claimed by the Appellant

Company Appeal (AT)(I) No. 497/2021 4

and he has also in categorical term denied even service of 'Demand Notice'

either by registered post or through email.

7. We have heard in detail Mr. Harsh Garg, learned counsel who appeared

alongwith Mr. Pulkit Goyal, Learned Counsel for the Appellant and Mr. Keshri

Kumar, Learned Counsel for the Respondent. Learned Counsel for the

appellant assailing the impugned order has emphatically argued that the cut

off date for consideration of the pecuniary jurisdiction was the date on which

for the first time he issued 'Demand Notice' under Section 8 of IBC read with

Rule 6 of IBC Rules, 2016. It was argued that regarding the outstanding

undisputed dues the Appellant had initially issued Notice in the year 2020,

however, there were certain technical error, therefore, it was subsequently

withdrawn and finally on 12.03.2020 Demand Notice was issued and served

validly on Respondent/Corporate Debtor. According to the Learned Counsel

for the Appellant since the 'Demand Notice' was already issued for its service

on Respondent/Corporate Debtor prior to amendment in Section 4 of the IBC

Code whereby limit for Demand was fixed as Rs.1 crore instead of Rs.1 lakh,

the date of Demand Notice was required to be treated as date for filing of the

application under Section 9 of the IBC and as such the Adjudicating Authority

has grossly erred in rejecting the application under Section 9 of the IBC filed

by the Appellant. He submits that the order is liable to be set aside.

8. Heard Mr. Pulkit Goyal, learned counsel for the Respondent/Corporate

Debtor opposing the Appeal has argued that the Application under Section 9

of the IBC filed by the Appellant was required to be outrightly rejected on the

ground that the application under Section 9 was filed on behalf of the

Appellant by Shri Vivek Raheja who has admitted in his affidavit at running

Company Appeal (AT)(I) No. 497/2021 5

page 145 of the Appeal that he was Resolution Professional/Authorised

Representative of M/s Gupta Exim (India) Pvt Ltd which is Appellant and

Operational Creditor. By way of referring to Section 11(a) of IBC, the Learned

Counsel for the Respondent has argued that the Application filed under

Section 9 of the IBC by the Appellant was required to be rejected on this sole

ground.

9. Learned Counsel for the Respondent has further placed reliance on an

order passed by a Coordinate Bench of NCLAT, Principal Bench, New Delhi in

Company Appeal (AT)(Ins) No.813 of 2021 -Jumbo Paper Products Vs Hansraj

Agrofresh Pvt Ltd which is quoted hereinbelow:

"It is seen that notification dated 24.03.2020 (supra) makes it

umambiguously clear that the threshold limit to be considered for Section

9 application will be Rs. 1 crore. This threshold limit will be applicable

for application filed under section 7 or 9 on or after 24.03.2020 even if

debt is of a date earlier than 24.03.2020."

10. According to the Learned Counsel for the Respondent there is no error

in the order impugned warranting interference by this Appellate Tribunal.

11. Besides hearing learned counsel for the parties we have minutely

examined the facts, rules, provision of the Code and order passed in Jumbo

Paper Products case (supra). It is admitted case of the Appellant that he issued

Demand Notice dated 12.03.2020 under Section 8 of the IBC which was sent

through registered post on 14.03.2020, as per statement made in para 7.6 of

the Memo of appeal. The appellant admits that the said Demand Notice was

delivered on the Corporate Debtor on 17.03.2020.

Company Appeal (AT)(I) No. 497/2021 6

12. Keeping in view the fact that the Appellant has admitted that Demand

Notice sent under Section 8 of the IBC was sent through registered post on

14.3.2020 and delivered on 17.03.2020, ten (10) days' time was thereafter

available to the Corporate Debtor to respond to the Notice either by way of

disputing the claim or making payment. Before proceeding on aforesaid issue

it would be profitable to reproduce Section 8, 9.1 and Rule 5 of IBC as follows:

8.Insolveny resolution by operational creditor (1) An operational

creditor may, on the occurrence of a default, deliver a demand notice of

unpaid operational debtor copy of an invoice demanding payment of the

amount involved in the default to the corporate debtor in such form and

manner as may be prescribed.

(2) The corporate debtor shall, within a period of ten days of the receipt

of the demand notice or copy of the invoice mentioned in sub-section (1)

bring to the notice of the operational creditor--

(a) existence of a dispute, if any, and record of the pendency of the suit

or arbitration proceedings filed before the receipt of such notice or invoice

in relation to such dispute;

(b) the repayment of unpaid operational debt--

(i) by sending an attested copy of the record of electronic transfer of the

unpaid amount from the bank account of the corporate debtor; or

(ii) by sending an attested copy of record that the operational creditor has

encashed a cheque issued by the corporate debtor.

Explanation.--For the purposes of this section, a "demand notice" means

a notice served by an operational creditor to the corporate debtor

Company Appeal (AT)(I) No. 497/2021 7

demanding repayment of the operational debt in respect of which the

default has occurred.

9. Application for initiation of corporate insolvency resolution

process by operational creditor-(1) After the expiry of the period of ten

days from the date of delivery of the notice or invoice demanding payment

under sub-section (1) of section 8, if the operational creditor does not

receive payment from the corporate debtor or notice of the dispute under

sub-section (2) of section 8, the operational creditor may file an

application before the Adjudicating Authority for initiating a corporate

insolvency resolution process.

Rule 5:

5. Demand notice by operational creditor-(1) An operational creditor

shall deliver to the corporate debtor, the following documents namely:

a) a demand notice in Form 3; or

b) a copy of an invoice attached with a notice in Form 4.

(2) The demand notice or the copy of the invoice demanding payment

referred to in sub-section (2) of section 8 of the Code, may be delivered to

the corporate debtor;-

a) at the registered office by hand, registered post or speed post

with acknowledgement due; or

b) by electronic mail service to a whole time director or designated

partner or key managerial personnel, if any, of the corporate

debtor.

Company Appeal (AT)(I) No. 497/2021 8

(3) a copy of the demand notice or invoice demanding payment served

under the rule by an operational creditor shall also be filed with an

information utility, if any.

13. On examination of aforesaid provisions in context with undisputed fact

of the present case it is evident that 'Demand Notice' issued under Section 8

of the IBC was claimed to be delivered on 17.03.2020. Thereafter within 10

days from the date of receipt of Demand Notice, the Corporate Debtor was

having time either to explain regarding existing dispute or payment of the

amount etc. Counting date from the alleged date of delivery of Notice, 10 days

time was going to expire on 27.03.2020. However, before the expiry of 10 days

for responding by the Corporate Debtor on the Demand Notice, on 24.03.2020

in exercise of powers conferred under Section 4 of the IBC the Central

Government on 24.03.2020 issued notification whereby the minimum default

amount for filing cases under Section 7, 9 and 10 of the IBC was enhanced

from Rs.1 lakh to Rs. 1 crore. In the present case it is admitted case of the

Appellant as mentioned in para 7.9 of the Memo of Appeal that the Appellant

filed application under Section 9 of the Code read with Rule 4 of Rules, 2016

vide E Diary No.0710102036282020 dated 28.04.2020. Meaning thereby that

the said application was filed much after the issuance of notification dated

24.03.2020 and as such the Adjudicating Authority has rightly rejected the

application filed under Section 9 of the IBC by the appellant. Section 9 of the

IBC further makes it clear that after the expiry of 10 days from the date of

receipt of Notice under Section 8 of the IBC the said Application can be filed.

Meaning thereby that before expiry of 10 days' time of service of Demand

Company Appeal (AT)(I) No. 497/2021 9

Notice the Appellant was not having any cause of action for filing application

under Section 9 of the IBC. Since the appellant in the present case had filed

application under Section 9 after enhancement of the pecuniary jurisdiction

there was no reason to entertain such application by the Adjudicating

Authority and same has rightly been rejected.

14. Of course, by the impugned order the application under Section 9 was

dismissed only on the ground of enhancement of pecuniary jurisdiction, this

Tribunal is of the opinion that the Learned Counsel for the Respondent was

right in making submission that the application filed before the Adjudicating

Authority by the Appellant which was filed for initiation of CIRP was not to

be entertained in view of rider incorporated in Section 11(a) of the IBC. The

provisions contained in Section 11 is reproduced hereinbelow:-

"11. The following persons shall not be entitled to make an application to

initiate corporate insolvency resolution process under this Chapter,

namely:--

(a) a corporate debtor undergoing a corporate insolvency resolution

process; or

Xxx"

15. On examination of the aforesaid provisions certainly the Appellant was

not entitled to file Application under Section 9 of the IBC since the Appellant

was already under CIRP. However, we are refraining to record any specific

finding on the present issue considering the fact that the application filed by

the Appellant/Operational Creditor was primarily rejected on the ground that

it did not meet the threshold limit of default as set out by the Notification

dated 24.03.2020. Moreover, the issued decided by the Adjudicating

Company Appeal (AT)(I) No. 497/2021 10

Authority by the impugned order has already been set at rest by a Coordinate

Bench of this Tribunal in Company Appeal (AT)(Ins) No.813 of 2021 in the

matter of Jumbo Paper Products Vs Hansraj Agrofresh Pvt Ltd (Supra). We

donot find any ground for interference. The Appeal stands dismissed. No

order as to costs.

(Justice Rakesh Kumar) Member (Judicial)

(Dr. Ashok Kumar Mishra) Member (Technical)

4th July, 2022

Bm

Company Appeal (AT)(I) No. 497/2021