Mr. Mukul Agarwal vs Royale Resinex Pvt. Ltd

NATIONAL COMPANY LAW APPELLATE TRIBUNAL, PRINCIPAL BENCH, NEW DELHI Company Appeal (AT) (Insolvency) No. 777 of 2020 (Arising out of Order dated 31.07.2020 passed by the Adjudicating Authority (National Company Law Tribunal), New Delhi (Court No.IV) in Company Petition No. IB 1462/ND/2019)

IN THE MATTER OF:

Mukul Agarwal, Ex-Director Greatech Telecom Technologies Pvt. Ltd. R/o: 54-A, Sainik Farms, Khanpur, New Delhi-110062. .... Appellant

Vs

1. Royale Resinex Pvt. Ltd. 502, Aggarwal City Plaza-I, Cyber Plaza, Netaji Subhash Place, Pitampura, New Delhi - 110034.

2. Greatech Telecom Technologies Pvt. Ltd. 54-A, Sainik Farms, Khanpur, New Delhi-110062. Through its IRP

Mr. Manish Kumar Aggarwal, Interim Resolution Professional, Greatech Telecom Technologies Pvt. Ltd., B-22 (SFS), Sheikh Sarai, Phase-I, New Delhi-110017.

Also at:

Immaculate Resolution Professionals Pvt. Ltd. Unit No.111-112, Tower-A, Spazedge Commercial Complex, Sector-47, Sohna Road, Gurgaon-122018. ... Respondents

Present:

For Appellant: Mr. Arun Srivastava, Advocate.

For Respondents: Mr. Bharat Arora, Advocate for R-1. Mr. R. K. Gupta, Ms. Swarlipi Deb Roy and Ms. Mineesha Dhodi, Advocates for IRP

Company Appeal (AT) (Insolvency) No. 777 of 2020 1 JUDGMENT

ASHOK BHUSHAN, J.

This Appeal has been filed against the judgment and order dated

31.07.2020 passed by National Company Law Tribunal, New Delhi, Court

No.IV admitting the Application filed under Section 9 of the Insolvency and

Bankruptcy Code, 2016 (hereinafter referred to as the "Code") by the

Respondent - Operational Creditor. The Suspended Director of the

Corporate Debtor aggrieved by the judgment dated 31.07.2020 has come

up in this Appeal.

2. Brief facts and sequence of events necessary to be noticed for

deciding this Appeal are:

(i) The Operational Creditor supplied poly propylene (PP) to the

Corporate Debtor as per the demand raised by the Corporate

Debtor. Invoices were raised in the name of the Corporate

Debtor.

(ii) The Operational Creditor filed a Civil Suit No.149 of 2015

against the Corporate Debtor for recovery of amount of

Rs.16,44,500/-. The suit was Decreed by Additional District

Judge, Rohini Court vide judgment and order dated

08.09.2016, decreeing the suit for recovery of Rs.16,44,500/-

along with interest @ 12% per annum. The Operational

Creditor filed Execution Petition, which was transferred to the

Company Appeal (AT) (Insolvency) No. 777 of 2020 2 Court of District & Sessions Judge, South District for

Execution of the Decree being case No.424 of 2019.

(iii) The Operational Creditor issued notice under Section 8 of the

Code in Form-3, dated 06.04.2019 to the Corporate Debtor

claiming amount of debt as Rs.25,04,630/-. The notice under

Section 8 of the code was not replied by the Corporate Debtor.

(iv) An Application under Section 9 was filed by the Operational

Creditor before the National Company Law Tribunal, New Delhi

being Company Petition No.IB 1462/ND/2019. The

Application filed under Section 9 was replied by the Corporate

Debtor vide its reply dated 18.09.2019.

(v) The Adjudicating Authority by the impugned order dated

31.07.2020 has admitted the Application and appointed an

Interim Resolution Professional ("IRP"), that is, Mr. Manish

Kumar Aggarwal. Aggrieved by the order dated 31.07.2020,

this Appeal has been filed by the Suspended Director of

Corporate Debtor.

3. We have heard Shri Arun Srivastava, learned Counsel for the

Appellant and Shri Bharat Arora, learned Counsel appearing for

Respondent No.1 - Operational Creditor.

4. The learned Counsel for the Appellant challenging the order of the

Adjudicating Authority has raised following three submissions:

(i) The notice under Section 8 of the Code dated 06.04.2019

issued by the Operational Creditor was not served on the

Company Appeal (AT) (Insolvency) No. 777 of 2020 3 Corporate Debtor. The Notice dated 06.04.2019 was sent on

an incorrect address, that is, '24, Sainki Farms, Delhi-110062.

It is submitted that inspite of Adjudicating Authority directing

the Operational Creditor to bring material to prove service of

notice, the Appellant could not prove service of notice before

the Adjudicating Authority. Service of notice under Section 8

is mandatory requirement. Without serving notice under

Section 8, no Application under Section 9 can be maintained

and the Application filed by Operational Creditor was required

to be rejected on this ground alone. The Adjudicating

Authority without returning any finding regarding service of

notice has admitted the Application.

(ii) The Application under Section 9 of the Code was filed by the

Operational Creditor on the basis of Decree of the Civil Court

dated 08.09.2016. The Application filed on the basis of Decree

of Civil Court cannot be said to be an Application for an

'operational debt'. The Respondent was not an Operational

Creditor and no 'operational debt' being due on the Corporate

Debtor, hence, the Application under Section 9 was not

maintainable.

(iii) The Appellant is a going concern. The original claim of

Operational Creditor was only for Rs.11 lakhs and to secure

interest of Operational Creditor, the Appellant had got

prepared a Demand Draft dated 17.08.2020 of the amount of

Company Appeal (AT) (Insolvency) No. 777 of 2020 4 Rs.16,44,500/-. Photocopy of the Demand Draft was attached

along with Appeal, but the said amount has not been accepted

by the Operational Creditor. The Corporate Debtor is a going

concern and having turnover of approximately Rs.12 crores

and there are 100 employees (pre-lockdown) and there is good

turnover after lockdown.

5. Shri Bharat Arora, learned Counsel appearing for Respondent No.1

refuting the submissions of learned Counsel for the Appellant contends

that notice under Section 8 of the Code dated 06.04.2019 was sent to the

Corporate Debtor, which was duly received by it. No reply to Section 8

notice was submitted by the Corporate Debtor and in the reply which was

filed to Section 9 Application of the Operational Creditor, there was no

pleading on behalf of the Appellant that notice under Section 8 has not

been served. The Operational Creditor has filed an affidavit of compliance

and an affidavit has also been filed before the Adjudicating Authority along

with which, photocopy of the receipt issued by India Post was attached. In

the receipt issued by India Post the address of the Corporate Debtor is 24

instead of 54-A, which was mistake by the Postal Authorities. Whereas

notice was issued in the name of Corporate Debtor at the correct address

of the Corporate Debtor, that is, 54-A, Sainik Farm, Khanpur, New Delhi -

110062. It is clear from the photocopy of the notice brought on the record

by the Appellant himself at page 93. It is submitted that the submission

of the Appellant that there was no 'operational debt' due is incorrect. The

debt, which was due on the Corporate Debtor was towards supply of poly

Company Appeal (AT) (Insolvency) No. 777 of 2020 5 propylene, which was supplied by the Operational Creditor to the Corporate

Debtor. The amount of debt stood crystalized by judgment and Decree

dated 08.09.2016 in Civil Suit No.149 of 2015. With regard to the third

submission of the Appellant, it is submitted that the Corporate Debtor

failed to discharge his obligation to pay the debt due to the Operational

Creditor. The Operational Creditor had full authority to initiate

proceedings under Section 9 of the Code. The Adjudicating Authority has

rightly admitted the Application filed by the Operational Creditor.

6. The first submission of the Appellant is regarding service of notice.

The notice under Section 8 issued by the Operational Creditor dated

06.04.2019 is at page 93 of the paper-book. True copy of the notice in

Form-3 has been annexed, following is the extract from Form-3 notice:

"FORM 3

[See Clause (a) of Sub-rule (1) of Rule 5] FORM OF DEMAND NOTICE DEMANDING PAYMENT UNDER THE INSOLVENCY AND BANKRUPTCY CODE, 2016

[Under Rule 5 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016]

6th April, 2019

To, M/s Greatech Telecom Technologies Private Limited, Through it's Managing director/ Director(s) 54-A, Sainik Farm, Khanpur, New Delhi-110062. ...Corporate Debtor

From M/s Royale Resinex Private Limited Through it's Authorised Representative, 502, Aggarwal City Plaza-I, Cyber Plaza, Netaji Subhash Place, Pitampura, Delhi. ...Operational Creditor"

Company Appeal (AT) (Insolvency) No. 777 of 2020 6

7. From the above, it is clear that notice was addressed at the correct

address of the Corporate Debtor, that is, 54-A, Sinik Farm, Khanpur, New

Delhi - 110062. However, in the postal receipt, which was issued by the

India Post, instead of No.'54-A', '24' was mentioned, on the basis of which

postal receipt, the Appellant is submitting that notice was not served on

the Corporate Debtor. When the notice was issued by the Operational

Creditor at the correct address of the Corporate Debtor, we have no doubt

that the envelope containing the address of the Corporate Debtor must be

same as reflected in the notice dated 06.04.2019. The mere fact that

receipt, which was issued by India Post mentions address of the Corporate

Debtor instead of No.54-A, it is mentioned 24, does not bely the sending of

notice. We further notice that Corporate Debtor had filed the reply to

Section 9 Application, which has been brought on the record at page 99 of

the paper-book dated 18.09.2019. In the Application filed under Section

9, there is specific mention of notice dated 06.04.2019 issued by the

Operational Creditor. Notice dated 06.04.2019 specifically mentioned in

the List of Dates and Events as well as in Part-IV of the Application and

copy of notice dated 06.04.2019 was filed as Annexure A-4 along with the

Application. In the reply, which was filed by Corporate Debtor dated

18.09.2019, there was no plea that notice dated 06.04.2019 was not served

on the Corporate Debtor. Both in the preliminary objection and reply on

merits, there is no specific denial of non-receipt of notice dated 06.04.2019,

which clearly supports the submission of learned Counsel of the

Company Appeal (AT) (Insolvency) No. 777 of 2020 7 Operational Creditor that notice was duly issued on correct address and

was served on the Respondent - Corporate Debtor.

8. The learned Counsel for the Appellant relied on judgment of this

Tribunal in "Company Appeal (AT) (Ins.) No.961 of 2019 in Anil Syal v.

Sanjeev Kapoor & Anr." as well as "Jaya Patel v. Gas Jeans Pvt. Ltd.

- Company Appeal (AT) (Ins.) No.308 of 2018" and contends that service

of notice under Section 8 is sine qua non for proceedings under Section 9

of the Code. There can be no doubt about the above proposition laid down

by this Tribunal in the above cases. However, present is a case where, we

are satisfied that notice was duly served by the Operational Creditor on the

correct address of the Appellant-Corporate Debtor.

9. Now we come to the second submission of learned Counsel for the

Appellant that Application under Section 9 was not maintainable, since

there was no 'operational debt' due on the Corporate Debtor. The learned

Counsel submits that Application based on Judgment and Decree of the

Civil Court dated 08.09.2016 cannot be said to be an 'operational debt',

hence, the Application deserved to be rejected. It is submitted that

Operational Creditor having already filed its Application for Execution of

the Decree, it ought to have pursued the Execution Application instead of

filing Section 9 Application. We need to first notice the nature of debt as

detailed in the Application filed by Operational Creditor under Section 9.

In Part-IV of the Application under the heading "Details of Transactions on

Account of which debt fell due", following has been stated by Operational

Creditor:

Company Appeal (AT) (Insolvency) No. 777 of 2020 8 "Details of Transactions on Account of which debt fell due

Royale Resinex Private Limited ("Operational Creditor") is a private limited company incorporated under the Companies Act, 1956, having its registered office at 502, Aggarwal City Plaza-I, Cyber Plaza, Netaji Subhash Place, Pitampura, New Delhi-110034 and is being managed by Directors; Mr. Neeraj Aggarwal and Mehander Prasad.

Greatech Telecom Technologies Private Limited ("Corporate Debtor) is a private limited company incorporated under the Companies Act, 1956, having its registered office at 54-A, Sanik Farm, Khanpur, New Delhi-110062.

The corporate debtor had approached the operational creditor for the supply of poly proplene (pp). Accordingly, as per the demand raised by the Corporate Debtor, material was supplied and against which invoice was raised in the name of Corporate Debtor. The material ordered by the Corporate Debtor was duly supplied by the Operational Creditor and the same was also duly received by the Corporate Debtor without any dispute.

The Operational Creditor was shocked and surprised, since Corporate Debtor stopped conducting business with the Operational Creditor without clearing the outstanding amount.

There were various oral communications between the Corporate Debtor and the Operational Creditor regarding the outstanding amount due from Corporate Debtor but the corporate debtor failed to pay the said outstanding amount and interest thereupon.

Company Appeal (AT) (Insolvency) No. 777 of 2020 9 Thereafter, the operational creditor instituted a suit for recovery against the Corporate Debtor bearing civil suit No.575402 of 2016 titled "M/S Royale Resinex Private Limited versus M/S Greatech Telecom Technologies Private Limited", wherein Sh. Prashant Kumar, Ld. ADJ, Rohini Court, Delhi on 08.09.2016 was pleased to decree the said suit for recovery in favor of the Operational Creditor herein along with the interest and cost of the suit to be paid by the Corporate Debtor herein."

10. When we look into the transaction of account on which debt fell due,

it is clear that transaction was for supply of poly propylene by the

Operational Creditor to the Corporate Debtor and due to non-payment of

the amount towards the material supplied by the Operational Creditor, the

amount became due. The amount due, thus, is an amount under the

provisions of goods and is fully covered with the definition of Section 5(21)

of the Code, which is to the following effect:

"5(21) "operational debt" means a claim in respect of the provision of goods or services including employment or a debt in respect of the payment of dues arising under any law for the time being in force and payable to the Central Government, any State Government or any local authority"

11. Thus, the claim of the Operational Creditor was in respect of

provisions of goods, that is, supply of poly propylene. The mere fact that

when the Corporate Debtor did not pay the amount, suit for recovery was

filed in the year 2016 by the Operational Creditor, which was also Decreed

Company Appeal (AT) (Insolvency) No. 777 of 2020 10 on 08.09.2016, does not in any manner effect the transaction out of which

the amount fell due. The fact that amount was adjudicated and a Decree

was passed, in no manner take away the nature of 'operational debt'. We

may notice that under Part-V of Form-3, in Item No.3 following has been

mentioned:

"3 PARTICULARS OF AN Judgment and Decree ORDER OF A COURT, dated 08.09.2016 TRIBUNAL OR ARBITRAL passed by Sh. Prashant PANEL ADJUDICATING ON Kumar, Ld., ADJ, Rohini THE DEFAULT, IF ANY Court in Civil Suit No.149 (ATTACH A COPY OF THE of 2015 (New No.575402 ORDER of 2016) titled M/S Royale Resinex Private Limited Vs. Greatech Telecom Technologies Private Limited

Copy of Judgment and Decree dated 08.09.2016 is annexed herewith and marked as ANNEXURE A-5."

12. When the Form-3 itself contemplates about giving details of

particular of an order of Court, the Decree of the Civil Court in favour of

the Operational Creditor, it in no manner affect the maintainability of the

Application filed by the Operational Creditor under Section 9 of the Code.

We, thus, are fully satisfied that the Application filed by Respondent under

Company Appeal (AT) (Insolvency) No. 777 of 2020 11 Section 9 was fully maintainable and the claim of the Respondent was a

claim of 'operational debt' and we do not find any merit in the submission

of the learned Counsel for the Appellant that there was no 'operational

debt'.

13. We may also notice the judgments of this Tribunal relied by learned

Counsel for the Appellant in support of his submission that Application

under Section 9 filed by Respondent was not maintainable. Learned

Counsel for the Appellant has relied on judgment of this Tribunal in

"International Asset Reconstruction Co. Pvt. Ltd. v. Jayant Vitamins

Ltd. - Company Appeal (AT) (Ins.) No.1472 of 2019". The above

judgment was a case where Application filed by Operational Creditor was

dismissed as barred by time. In the above case, Application was filed under

Section 9 in the year 2019 whereas suit of recovery was Decreed on 17th

October, 2005, which was held to be barred by time. Paragraph 2 of the

judgment is as follows:

"2. The Corporate Debtor - 'Jayant Vitamins Ltd.'

committed default on 13th September, 1996. Thereafter,

Appellant filed suit for recovery which was decreed on

17th October, 2005 and a case for execution is pending.

Therefore, we find that the application under Section 7

was barred by limitation."

The above judgment in no manner help the Appellant in the facts of

the present case.

Company Appeal (AT) (Insolvency) No. 777 of 2020 12

14. The next judgment relied by learned Counsel for the Appellant is

"HDFC Bank Ltd. v. Bhagwan Das Auto Finance Ltd. - Company

Appeal (AT) (Ins.) No.1329 of 2019", which was a case filed under Section

7 by the HDFC Bank. In the above case, this Tribunal came to the

conclusion that Application was filed with malicious intent and on the said

finding, the Appeal was dismissed. In the present case, the Application

filed by Respondent under Section 9 cannot be said to be filed with

malicious intent, when inspite of Decree passed by the Civil Court in favour

of the Respondent, no payments were made to it. The Operational Creditor

had every right to invoke the provisions of Code. The mere fact that

Execution Application filed by Operational Creditor is pending in Civil

Court was no impediment for initiating proceedings under the Code.

15. We may refer judgment of this Tribunal in "Punjab National Bank

vs. M/s Vindhya Cereals Pvt. Ltd. - Company Appeal (AT) (Ins.) No.854

of 2019", where this Tribunal laid down following in paragraphs 8 and 9:

"8. This Tribunal in the case of Company Appeal (AT) (Ins)

No. 323/2019 (Neeraj Jain Vs. Yes Bank Ltd. & Anr.)

decided on 10.04.2019 held that Section 7 being an

independent proceedings is nothing to do with the

pendency of Criminal Case relating to misappropriation

of funds. This Tribunal in the case of Comp. App. (AT)

(Ins) No. 1021/2019 (Karan Goeal Vs. M/s Pashupati

Jewellers & Ors.) decided on 01.10.2019 held that

merely because suit has been filed by the Financial

Company Appeal (AT) (Insolvency) No. 777 of 2020 13 Creditor and pending, cannot be ground to reject the

application under Section 7 of the I&B Code.

9. In the light of above pronouncement, we are of the

considered view that the Financial Creditor can proceed

simultaneously under SARFAESI Act, 2002 as well as

under I&B Code. Section 238 of I&B Code provides that

the provisions of this code shall have effect,

notwithstanding anything inconsistent therewith

contained in any other law for the time being in force or

any instrument having effect by the virtue of any such

law. Thus, the non-obstante clause of the I&B Code will

prevail over any other law for the time being in force."

16. In the above case, it is held that the provisions of the Code namely

under Section 238 shall have an overriding effect. Hence the Application

under Section 9 filed by the Operational Creditor cannot be defeated on the

ground that any Application for execution was pending, more so, when

inspite of Decree passed on 08.09.2016, no payment was made by the

Corporate Debtor.

17. Another judgment relied by learned Counsel for the Appellant in

Company Appeal (AT) (Ins.) No.452 of 2020 - Sh. Sushil Ansal v. Ashok

Tripathi and Ors. where the Appellant was a home buyer and an allottee

and in whose favour there was already a certificate issued by UP RERA. In

the above circumstances, this Tribunal held that the Decree holder though

Company Appeal (AT) (Insolvency) No. 777 of 2020 14 come within the definition of 'creditor', does not fall within the definition of

'financial creditor' and cannot file an Application under Section 7 due to

the above reason, the said Appeal was allowed and Application filed under

Section 7 by allottee was held to be not maintainable. The above judgment

does not help the Appellant in the present case. The judgment of this

Tribunal in "Digamber Bhonwen v. JM Financial Asset Reconstruction

Company Limited - Company Appeal (AT) (Ins.) No.1379 of 2019" as

well as Sushil Ansal (supra) were also to the same effect, where the Appeal

was allowed by rejecting the submission that in Section 3(10) of the Code,

the definition of 'creditor', the 'decree holder' is included. In the above

cases, the Application came for consideration was an Application under

Section 7 and the question was as to whether the Applicant was 'Financial

Creditor', where it was held that Applicant was not 'Financial Creditor'. The

above judgment is clearly distinguishable.

18. We have already held in foregoing paragraphs that Respondent was

'Operational Creditor' and the nature of transaction was 'operational debt',

hence, we do not find any substance in submission of the learned Counsel

for the Appellant that Application under Section 9 was not maintainable.

19. Now we come to the last submission of the learned Counsel for the

Appellant that Corporate Debtor is a going concern, hence, the Application

under Section 9 was not maintainable. We do not find any substance in

this submission. Even when a going concern is unable to discharge its

debt, the Operational Creditor is entitled to invoke Section 9, hence, the

Application filed by Operational Creditor under Section 9 cannot be said to

Company Appeal (AT) (Insolvency) No. 777 of 2020 15 be non-maintainable on the ground that Corporate Debtor is a going

concern. We thus reject this submission.

20. In view of the forgoing discussions, we do not find any substance in

any of the submission of the learned Counsel for the Appellant. We do not

find any error in the judgment of the Adjudicating Authority admitting

Section 9 Application filed by the Respondent. There is no merit in the

Appeal. The Appeal is dismissed. No order as to costs.

[Justice Ashok Bhushan] Chairperson

[Dr. Alok Srivastava] Member (Technical)

NEW DELHI

30th March, 2022

Ash/NN

Company Appeal (AT) (Insolvency) No. 777 of 2020 16