Mcc Concrete vs Northway Spaces Ltd

MCC Concrete 11, Shreenath Bungalows Opp. Yash Complex, 30 Mtr. Gotri-Gorwa Ring Road, Vadodara 390 021 ...Appellant. Versus

Northway Spaces Ltd. Formerly Known as Mayfair Space Ltd. Opp. Delhi Public School, Old Padra Vadsar Ring Road, Vadodara, Gujarat State ...Respondent. Present: For Appellant: Mr. Malak Manish Bhatt and Mr. Udbhav Nanda, Advocates.

For Respondent: Mr. Manu Aggarwal, Advocate.

JUDGMENT

JARAT KUMAR JAIN, J:

This Appeal has been preferred by the Appellant M/s MCC Concrete

(Operational Creditor) against the order dated 12/02/2020 passed by the

Adjudicating Authority (National Company Law Tribunal), Ahmadabad Bench,

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Ahmadabad. Whereby the Application preferred by the Appellant under

Section 9 of the Insolvency and Bankruptcy Code (In Short I&B Code) has

been rejected.

2. Brief facts of this case are that the Operational Creditor (Appellant

herein) has supplied ready MCC Concrete at various sites of the Corporate

Debtor (Respondent herein) upon placing purchase order by the Corporate

Debtor. Pursuant thereto the Operational Creditor had issued invoices upon

the Corporate Debtor along with delivery challans. The delivery challans are

signed and stamped by the Corporate Debtor. The Corporate Debtor was

earlier known as Mayfair Spaces Ltd. Hence, all the invoices and delivery

challans were issued in the name of Mayfair Spaces Ltd. As per ledger account

the Operational Creditor has supplied goods to the Corporate Debtor for the

total sum of Rs. 02,29,94,288/-. Whereas, the Corporate Debtor has made

part payment of Rs. 02,09,30,948/-. Even after several email

communications, the Corporate Debtor has not made any payment for

balance amount of Rs. 20,63,340/-. Therefore on 11/02/2017 the

Operational Creditor has sent a demand notice to the Corporate Debtor.

Despite receipt of the notice, the Corporate Debtor has neither replied to the

notice nor made any payment. Therefore, the Operational Creditor has filed

an Application under Section 9 of the I&B Code before the Adjudicating

Authority for initiation of Corporate Insolvency Resolution Process (CIRP)

against the Corporate Debtor.

3. The Corporate Debtor resisted the Application on the ground that the

invoices dated 15/07/2013 and 18/10/2013 bearing nos. 661 and 360 of Rs.

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5,33,120/- and Rs. 5,16,460/- respectively have been issued to the Corporate

Debtor. As per the said invoices, goods were delivered to Mayfair Corporate

Park. The Corporate Debtor has no connection with Mayfair Corporate Park.

Therefore, the said invoices were returned by the Corporate Debtor vide its

letter dated 16/07/2013 and 21/10/2013 stating that the bills are

erroneously sent to them. Again, 14 invoices (particulars mentioned at pg.76

of the appeal paper-book) were issued by the Operational Creditor without

proper challans which shows that goods were not delivered to the Corporate

Debtor. The claim of the Operational Creditor is based on the invoices which

are of 2013, whereas the application is filed on 15/01/2018. Thus, the claim

is barred by limitation.

4. After hearing the parties, Ld. Adjudicating Authority held that

Operational Creditor is maintaining a running account of the Corporate

Debtor and as per the ledger account, the last payment of Rs. 12 lacs were

made by the Corporate Debtor on 05/11/2015 and the Application is filed on

15/01/2018. Thus, the application is within limitation. Ld. Adjudicating

Authority held that on 15/07/2013 and 18/10/2013 no order was placed by

the Corporate Debtor, therefore, the invoices dated 15/07/2013 and

18/10/2013 bearing nos. 661 and 360 have been issued erroneously.

Therefore, the Corporate Debtor vide its letter dated 16/10/2013 and

21/10/2013 sent back the invoices stating that the Corporate Debtor has no

connection with Mayfair Corporate Park to whom the goods were delivered.

On this basis it is held that there is pre-existing dispute regarding the goods

supplied and invoices raised thereof. Hence, rejected the application.

Company Appeal (AT) (Ins) No. 527 of 2020 4

5. Being aggrieved with this order, the Operational Creditor has filed this

Appeal.

6. Ld. Counsel for the appellant made following submissions:

i. There is no pre-existing dispute with respect to the two invoices.

Actually, the goods delivered on the site of Mayfair Corporate Park

which is developed by Mayfair Spaces Ltd. (respondent) which is an

associated entity of the respondent. Delivery challans are duly signed

and stamped by the respondent. Therefore, respondent cannot

dispute the said invoices.

ii. The 14 invoices raised against the respondent amount to

Rs. 08,53,775/- have been acknowledged with the seal and stamp of

respondent.

iii. The ledger account placed on record by the appellant is in-tune

with claims of the appellant.

iv. Within three years from the date of acknowledgment, the

application is filed. Thus, it is within limitation.

7. Per contra, ld. counsel for the respondent has made the following

submissions:

i. The appellant has failed to establish that there is an Operational

Debt of more than Rs. 1 lac due to it from the respondent. As per ledger

only Rs. 70,165/- is due which is less than Rs. 1 lac. Therefore, the

application under section 9 is not maintainable.

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ii. The respondent has never supplied the copy of ledger account to

the appellant. The copy of the ledger account produced by the appellant

is unsigned and source of procurement is not disclosed. Therefore, it

cannot be relied upon.

iii. The appellant has supplied the goods to Mayfair Corporate Park

but erroneously raised the disputed bills to the respondent. Thus, there

is a pre-existing dispute in regard to payment of these invoices.

iv. The appellant has claimed Rs. 20,63,340/- without filing any

statement of accounts.

v. The section 9 application could not have been decided only on the

basis of absence of reply to demand notice.

8. After hearing the arguments of ld. counsel for the parties we have

perused the record.

9. The Hon'ble Supreme Court in Mobilox Innvations Pvt. Ltd. Vs. Kirussa

Software Pvt. Ltd. 2017 1 SCC Online SC 353 held as to what are facts to be

examined by the Adjudicating Authority while examining an Application

under Section 9 of I & B Code which is 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)

Company Appeal (AT) (Ins) No. 527 of 2020 6

(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? 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 Section 9, 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."

10. In the light of this pronouncement firstly we examined whether there is

an operational debt exceeding Rs. 1 lac as defined under Section 4 of the I&B

Code. In the application under Section 9 of the I&B Code, it is mentioned that

appellant has supplied ready-mix concrete material to respondent for their

various construction sites from 30/09/2012 to 20/10/2014 for which various

invoices were issued from time to time as against the total outstanding

payment of Rs. 02,29,94,288/-. The respondent (Corporate Debtor) has paid

a sum of Rs. 02,09,30,948/- and balance of Rs. 20,63,340/- is outstanding

as on 11/11/2015.

Company Appeal (AT) (Ins) No. 527 of 2020 7

11. The respondent denied this fact and according to him as per the ledger,

the outstanding amount is only Rs. 70,165/-. In support of this contention,

the respondent filed ledger account of appellant maintained by the respondent

for period of 01/04/2012 to 20/03/2018. (See Page 97-102 of Appeal Paper

Book) The respondent has produced its statement of accounts which clearly

shows that the total amount outstanding against the appellant is Rs. 70,165/-

which is less than Rs. 1 lac. The appellant has not pointed out any error in

the statement of account filed by the respondent.

12. In rebuttal, the Appellant has filed the ledger account of the appellant,

copy of which served by the respondent upon appellant. In this ledger account

the amount payable to appellant is shown as Rs.19,89,130/-.

13. The respondent has taken a serious objection that the respondent's

officer has not supplied any such copy of ledger account to the appellant.

Such unsigned copy cannot be relied upon.

14. We have considered the objection in regard to the ledger account filed

by the appellant (please see pg. 117-122 of the appeal paper-book). It is true

that this ledger account is not signed by anybody and the appellant has not

disclosed the name of respondent's officer who has supplied the copy of this

ledger account. The copy of ledger account which is filed by the respondent is

also an unsigned document. It is not argued on behalf of the respondent that

the ledger account filed by the appellant is forged or fabricated. We are of the

view that the ledger account filed by the appellant is genuine and shows the

true picture. Thus, it is a reliable document.

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15. We have reconciled these ledger accounts. We noted that following 17

items are missing in the copy of ledger account filed by the respondent which

are as under:

16. Following ledger account is filed by the Appellant, in this account above

referred items are shown in the box however, these items are missing in the

ledger account (See Page 97-102 of Appeal Paper Book) filed by the

Respondent.

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17. From the above referred ledger account maintained by the respondent

we hold that as on 31/03/2017, operational debt Rs. 19,89,130/- was due

and payable and has not yet been paid.

18. Hon'ble Supreme Court, in the case of Mobilox Innovations Pvt. Ltd.

(Supra) held that what is the scope of ascertaining the existence of a dispute

at the time of admitting the Application, which is as follows:- "it is clear,

therefore, that once the operational creditor has filed an application, which is

otherwise complete, the adjudicating authority must reject the application

under Section 9(5)(2)(d) if notice of dispute has been received by the

operational creditor or there is a record of dispute in the information utility.

It is clear that such notice must bring to the notice of the operational creditor

the "existence" of a dispute or the fact that a suit or arbitration proceeding

relating to a dispute is pending between the parties. Therefore, all that the

adjudicating authority is to see at this stage is whether there is a plausible

contention which requires further investigation and that the "dispute" is not

a patently feeble legal argument or an assertion of fact unsupported by

evidence."

19. Now, we have considered whether there is a pre-existing dispute

between the parties. As per the respondent, the appellant has delivered goods

to Mayfair Corporate Park but erroneously sent invoices dated 15/07/2013

and 18/10/2013 bearing nos. 661 and 360 amounting to Rs. 05,33,120/-

and 05,16,460/-. The respondent has no connection with Mayfair Corporate

Park, therefore they have returned the invoices to the appellant. According to

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the appellant, the Mayfair Corporate Park is a construction project developed

by Mayfair Spaces Ltd. (respondent) and thus they are associated entities.

Therefore, the disputed invoices were rightly sent to the respondent.

21. As we have noted that the appellant is relying on the ledger account

maintained by the respondent. In this ledger account the amount of disputed

invoices are not shown. Therefore, we hold that there is no dispute between

the parties in regard to the aforesaid invoices. Thus, we do not agree with the

finding of ld. Adjudicating Authority that there is a pre-existing dispute

between the parties.

22. Now, we have considered the objection of ld. counsel for the respondent

that the claim is barred by limitation. The ledger account is a running account

which shows that on 05/11/2015, the respondent has made payment of Rs.

12 lacs to appellant and from this date of acknowledgment within three years,

that is on 15/01/2018 the application is filed. Thus, the application is within

period of limitation. We agree with the finding of the Adjudicating Authority

that the application is filed within the period of limitation.

23. Ld. Adjudication Authority while examining the application under

Section 9 of I&B Code has not considered the ledger account filed by the

appellant. The statement shows that there is an outstanding due of Rs.

19,89,130/- on 31/03/2017. There is no pre-existing dispute. The

Adjudicating Authority erroneously rejected the claim on the ground that the

claim raised by the appellant falls within the ambit of disputed claim.

24. From the record, as we find that the respondent has failed to pay more

than Rs. 1 lac and in absence of any pre-existing dispute and the record being Company Appeal (AT) (Ins) No. 527 of 2020 17

complete, we hold that the application under section 9 of I&B Code preferred

by the appellant was fit to be admitted.

25. For the reasons aforesaid, we set aside the impugned order dated

12/02/2020 and remit the case to the Adjudicating Authority for admitting

the application under Section 9 of I&B Code after notice to the Corporate

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

26. The appeal is allowed with the aforesaid observations and directions.

No costs.

[Justice Jarat Kumar Jain] Member (Judicial)

[Balvinder Singh] Member (Technical)

NEW DELHI 22nd January, 2021.

SC

Company Appeal (AT) (Ins) No. 527 of 2020