Manjeet Kaur Sran vs Tricolite Electrical Industries Ltd

IN THE MATTER OF: Manjeet Kaur Sran .....Appellant Vs. Tricolite Electrical Industries Ltd. ......Respondents

Present : For Appellant: Mr. Vipul Srivastava, Mr. Rajindra Vats, Mr. Sidhartha Masson, Advocates For Respondents: Mr. Shikhil Suri, Mr. Shiv Kumar Suri, Ms. Shilpa Saini, Ms. Nikita Thapar, Respondents

02.09.2019 - M/s 'Tricolite Electrical Industries Ltd.' ('Operational Creditor')

filed application u/s 9 of the Insolvency & Bankruptcy Code, 2016 ('I&B' Code,

for short) against M/s. 'HBN Homes Colonisers Private Limited' ('Corporate

Debtor'). The Adjudicating Authority ('National Company Law Tribunal') Court

No. IV, New Delhi by Impugned order dated 24th July, 2019 having admitted the

same. The appeal has been preferred by Appellant - shareholder.

2. Learned counsel for the Appellant submits that the claim is 'barred by

limitation' and in fact no amount was payable. However, from the record, we

find the following facts emerge.

Company Appeal (AT)(Insolvency) No. 894 of 2019

3. The Respondent ('Financial Creditor') raised various invoices of the

'Corporate Debtor' to the tune of Rs. 3,21,24,511/- and further transferred the

amount to M/s Mitelite Electric Company Private Limited' which is a sister

concern of the Respondent-'Corporate Debtor' on behalf of the 'Corporate

Debtor'.

4. Invoices have been detailed by the Adjudicating Authority as mentioned

below:-

No. Invoice No. Date Amount

1 SI/M/12-13/0169 31.07.2012 44,84,231/-

2 SI/M/12-13/0170 31.07.2012 71,31,876/-

3 SI/M/12-13/0265 30.09.2012 3,13,580/-

4 SI/M/12-13/0347 01.11.2012 49,05,381/-

5 SI/M/12-13/0352 04.11.2012 15,07,614/-

6 SI/M/12-13/0353 04.11.2012 8,13,897/-

7 SI/M/12-13/0354 04.11.2012 4,95,333/-

8 SI/M/12-13/0467 11.01.2013 16,10,537/-

9 SI/M/12-13/0468 11.01.2013 18,70,473/-

10 SI/M/12-13/0469 11.01.2013 16,94,122/-

11 SI/M/13-14/0003 10.04.2013 5,40,687/-

12 SI/M/13-14/0004 10.04.2013 12,378/-

13 SI/M/13-14/0048 07.05.2013 2,55,859/-

14 SI/M/13-14/0099 01.06.2013 12,43,486/-

15 SI/M/13-14/0100 01.06.2013 54,817/-

16 SI/M/13-14/018 26.07.2013 17,30,000/-

Company Appeal (AT)(Insolvency) No. 894 of 2019 admin 2 2,86,64,271/-

Add: Amount transferred to Mitlite Electric 34,60,240/-

Company dated 31.03.2013 & 11.06.2013. Total 3,21,24,511/-

5. The 'Operational Creditor' claimed that the 'Corporate Debtor' paid a sum

of Rs. 2,62,96,033/- and there are outstanding dues of Rs. 58,28,478/- along

with interest of Rs. 36,73,378/- @ 18% as on 30.09.2017, totalling to a sum of

Rs. 95,01,856/- is still payable.

6. Demand Notice u/s 8(1) was issued by the Respondent - 'Operational

Creditor' on 25th October, 2017 which is the reason the Appellant has taken plea

that the claim is 'barred by limitation.'

7. However, from the record, we find that the Appellant - 'Operational

Creditor' issued Legal Notice u/s 271 of Companies Act, 2013 within the period

of limitation on 20th May, 2015 to the 'Corporate Debtor' to pay outstanding

amount of Rs. 58,28,478/- along with 18% interest with clear understanding

that if payment is not made winding up proceedings will be filed against

'Corporate Debtor'. The 'Corporate Debtor' replied to the Legal Notice on 26th

August, 2015 denying the liability wherein after the Demand Notice u/s 8(1)

issued by 'Operational Creditor' on 25th October, 2017.

8. From the aforesaid facts, we find that the claim of the Respondent -

'Financial Creditor' was not barred by limitation.

Company Appeal (AT)(Insolvency) No. 894 of 2019 admin 3

9. It was next contended that the total amount has been actually paid to the

Respondent - 'Operational Creditor'.

10. Learned counsel for the Appellant tried to justify the stand, however, such

stand cannot be accepted as the 'Corporate Debtor' had taken plea that the

amount payable was barred by limitation.

11. In view of the decision of Hon'ble Supreme Court in "Innoventive Industries

Ltd. Vs. ICICI Bank (2018) 1 SCC 407]", the Hon. Supreme Court will consider

the question of application u/s 7 and 9 observed as follows:-

"27. The scheme of the Code is to ensure that

when a default takes place, in the sense that a debt

becomes due and is not paid, the insolvency

resolution process begins. Default is defined in

Section 3(12) in very wide terms as meaning non-

payment of a debt once it becomes due and

payable, which includes non-payment of even part

thereof or an instalment amount. For the meaning

of "debt", we have to go to Section 3(11), which in

turn tells us that a debt means a liability of

obligation in respect of a "claim" and for the

meaning of "claim", we have to go back to Section

3(6) which defines "claim" to mean a right to

payment even if it is disputed. The Code gets

Company Appeal (AT)(Insolvency) No. 894 of 2019 admin 4 triggered the moment default is of rupees one lakh

or more (Section 4). The corporate insolvency

resolution process may be triggered by the

corporate debtor itself or a financial creditor or

operational creditor. A distinction is made by the

Code between debts owed to financial creditors

and operational creditors. A financial creditor has

been defined under Section 5(7) as a person to

whom a financial debt is owed and a financial debt

is defined in Section 5(8) to mean a debt which is

disbursed against consideration for the time value

of money. As opposed to this, an operational

creditor means a person to whom an operational

debt is owed and an operational debt under Section

5(21) means a claim in respect of provision of goods

or services.

28. When it comes to a financial creditor triggering

the process, Section 7 becomes relevant. Under the

explanation to Section 7(1), a default is in respect of a

financial debt owed to any financial creditor of the

corporate debtor- it need not be a debt owed to the

applicant financial creditor. Under Section 7(2), an

application is to be made under sub-section (1) in such

Company Appeal (AT)(Insolvency) No. 894 of 2019 admin 5 form and manner as is prescribed, which takes us to

the Insolvency and Bankruptcy (Application to

Adjudicating Authority) Rules, 2016. Under Rule 4,

the application is made by a financial creditor in Form

1 accompanied by documents and records required

therein. Form 1 is a detailed form in 5 parts, which

requires particulars of the applicant in Part I,

particulars of the corporate debtor in Part II,

particulars of the proposed interim resolution

professional in part III, particulars of the financial

debt in part IV and documents, records and evidence

of default in part V. Under Rule 4(3), the applicant is

to dispatch a copy of the application filed with the

adjudicating authority by registered post or speed

post to the registered office of the corporate debtor.

The speed, within which the adjudicating authority is

to ascertain the existence of a default from the records

of the information utility or on the basis of evidence

furnished by the financial creditor, is important. This

it must do within 14 days of the receipt of the

application. It is at the stage of Section 7(5), where the

adjudicating authority is to be satisfied that a default

has occurred, that the corporate debtor is entitled to

Company Appeal (AT)(Insolvency) No. 894 of 2019 admin 6 point out that a default has not occurred in the sense

that the "debt", which may also include a disputed

claim, is not due. A debt may not be due if it is not

payable in law or in fact. The moment the

adjudicating authority is satisfied that a default has

occurred, the application must be admitted unless it

is incomplete, in which case it may give notice to the

applicant to rectify the defect within 7 days of receipt

of a notice from the adjudicating authority. Under sub-

section (7), the adjudicating authority shall then

communicate the order passed to the financial

creditor and corporate debtor within 7 days of

admission or rejection of such application, as the case

may be.

"29. The scheme of Section 7 stands in contrast

with the scheme under Section 8 where an

operational creditor is, on the occurrence of a

default, to first deliver a demand notice of the

unpaid debt to the operational debtor in the manner

provided in Section 8(1) of the Code. Under Section

8(2), the corporate debtor can, within a period of 10

days of receipt of the demand notice or copy of the

invoice mentioned of a dispute or the record of the

Company Appeal (AT)(Insolvency) No. 894 of 2019 admin 7 pendency of a suit or arbitration proceedings,

which is pre-existing- i.e. before such notice or

invoice was received by the corporate debtor. The

moment there is existence of such a dispute, the

operational creditor gets out of the clutches of the

Code.

30. On the other hand, as we have seen, in the

case of a corporate debtor who commits a default

of a financial debt, the adjudicating authority has

merely to see the records of the information utility

or other evidence produced by the financial creditor

to satisfy itself that a default has occurred. It is of

no matter that the debt is disputed so long as the

debt is "due" i.e. payable unless interdicted by

some law or has not yet become due in the sense

that it is payable at some future date. It is only

when this is proved to the satisfaction of the

adjudicating authority that the adjudicating

authority may reject an application and not

otherwise."

Company Appeal (AT)(Insolvency) No. 894 of 2019 admin 8

12. From the aforesaid finding of the Hon'ble

Supreme Court, it is clear that the claim even if disputed, if default is more than

Rs. 1 lakh, the Appellant will initiate the proceedings against the 'Corporate

Debtor'. Submission is made on behalf of the Appellant that the amount

disputed by the 'Corporate Debtor' amounts to existence of dispute but such

submission cannot be accepted.

It does not come within the meaning of existence of dispute. Dispute

raised regarding quantum of amount in the absence of any suit or arbitration or

other evidence, it cannot be said to be pre-existing dispute.

We find no merit in this appeal. The Appeal is dismissed. However,

although the appeal is dismissed, this order will not come in the way of Appellant

to settle the matter with the Respondent and others u/s 12A of the 'I&B' Code.

[Justice S. J. Mukhopadhaya] Chairperson

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

[Kanthi Narahari] Member (Technical)

ss/gc

Company Appeal (AT)(Insolvency) No. 894 of 2019 admin 9