Mr. Pranav Kanoria Suspended Director ... vs Vyshali Energy Private Limited And Anr

Comp. App. (AT) (Ins) No. 1232 of 2023 & I.A. No. 4352, 4354, 4355 of 2023

IN THE MATTER OF:

Pranav Kanoria Suspended Director of Bagalkot ...Appellant Cement & Industries Ltd.

Versus

Vyshali Energy Pvt. Ltd. & Anr. ...Respondent

Present: For Appellants : Mr. Anand Chhibbar, Sr. Adv. with Mr. Tarun Mehta, Saubhagya Chauriha, Ankit, Adv.

For Respondent : Mr. Aravindh S, Mahimai Jayam, Adv. for R1 Mr. Sanjeev Panda, Adv. for R2

ORDER

(Hybrid Mode)

Per: Justice Rakesh Kumar Jain (Oral)

26.03.2025 This appeal is directed against the order dated 11.09.2023

by which an application filed by Respondent under Section 9 of the Code for

the resolution of an amount of Rs. 1,23,31,500/- has been admitted.

2. In brief, the Operational Creditor (Respondent) is engaged in the

business of generation & sale of renewable energy. The Respondent entered

into an energy purchase agreement dated 10.04.2017 (in short 'agreement')

for the sale and supply of energy to the CD (Appellant). The Operational

Creditor alleged to have supplied power to the CD from March, 2017 to

February, 2021.

3. The Operational Creditors raised invoices for the supply of power on

the CD from time to time and the amount of operational debt, in the form of

tax invoices was raised by the OC to the tune of Rs. 1,23,31,500/-.

4. The Operational Creditor, before invoking Section 9 of the Code, served

a demand notice upon the Appellant, under Section 8 of the Code dated

02.03.2022, in which the following averments have been made:-

5. As per the aforesaid notice, the Respondent claimed Rs. 6,09,49,769/-

towards principal, Rs. 1,33,00,965/- towards interest and the total amount

of Rs. 7,42,50,734/-.

6. Notice was replied by the Appellant on 16.03.2022 in which the

Appellant specifically alleged that there is a pre-existing dispute between the

parties and referred to a letter dated 21.04.2021 which was attached as Annexure A5. The precise averment made in the reply regarding pre-existing

dispute is as under:-

7. Although, in the notice under Section 8(1), the Appellant asked for the

resolution of a sum of Rs. 7,42,50,734/- but ultimately when the petition

under Section 9 was filed, the amount was reduced drastically from Rs.

7,42,50,734/- to Rs. 1,42,16,355 i.e. Rs. 1,23,31,500/- towards principal

and 18,84,855 towards interest.

8. In the reply filed to the application under Section 9, the Appellant

specifically raised the issue about pre-existing dispute having been raised by

the Appellant vide letter dated 21.04.2021. The said averment is also

reproduced as under:-

9. Counsel for the Appellant has submitted that no rejoinder was filed,

therefore, contention raised by the Appellant that a dispute was raised vide

letter dated 21.04.2021 has not been addressed to by the

Respondent/Operational Creditor.

10. Be that as it may, the Tribunal while admitting the application filed by

the Respondent has recorded a finding in para 7 in respect of the letter dated

21.04.2201 which read as under:-

"7. Further, with respect to the letter dated 21.04.2021 of the Corporate Debtor, the Operational Creditor has submitted that the letter dated 21.04.2021 is a false and fabricated document created by the Corporate Debtor as an afterthought to create an illusion of a pre-existing dispute between the parties. The Operational Creditor further submits that, the said letter dated 21.04.2021 was never delivered by the Corporate Debtor to the Operational Creditor and the same was brought into picture by the Corporate Debtor for the first time only vide its reply to the Demand Notice. Moreover, the Corporate Debtor has failed to attach the proof of delivery of the above said letter dated 21.04.2021. It is also noted that, the Corporate Debtor has admitted the liability to the Operational Creditor vide email dated 27.05.2021 (same has been referred at Para 4 of this order). Therefore, the Corporate Debtor cannot rely on the dispute raised vide letter dated 21.01.2021 after admitting the liability. Accordingly, this contention of the Corporate Debtor cannot be sustained."

11. In order to challenge the aforesaid findings recorded in para 7 of the

impugned order, Counsel for the appellant has referred to the letter dated

21.04.2021 in which the Appellant has raised the issue / dispute that the

Respondent has not issued the credit notes for the excess charges towards

the energy levied in the bills for the period from 01.04.2018 to 31.03.2021

and also that they have arbitrarily discontinued the supply of power under

group captive scheme. The text of the letter dated 21.04.2021 in which the

Appellant has raised the issue of a dispute is also reproduced as under:-

12. Counsel for the appellant has submitted that though the letter dated

21.04.2021 was attached as Annexure 5 both to the reply dated 16.03.2018

filed to the notice dated 02.03.2022 and also to the reply filed to the

application filed under Section 9 of the Code yet there is no denial anywhere

in the pleadings of the Respondent that the said letter dated 21.04.2021 was

never received or that the said letter is manufactured later on. In this regard,

Counsel for the Appellant has referred to Order VIII Rule 5 of the CPC to

contend that every allegation of fact in the plaint, if not denied specifically or by necessary implication, or stated to be not admitted in the pleadings of the

defendant, shall be taken to be admitted. It is further submitted that it is

nowhere the case of the Respondent in the pleadings that the letter dated

21.04.2021 was not received, yet the Tribunal, on its own, on the argument

of the Respondent, ordered that since there is no proof of delivery of the said

letter dated 21.04.2021, therefore, the said letter cannot be looked into for

the purpose of holding that a dispute was raised by the Appellant herein. It

is submitted that the Appellant can prove a fact when it is denied but if the

fact is not denied then there is no question of proving the same.

13. Counsel for the Appellant has further submitted that there are three

invoices in question i.e. 03.01.2020 for an amount of Rs. 68,40,000,

02.02.2020 for an amount of Rs. 65,55,000 and 03.03.2021 for an amount of

Rs. 29,14,684/-. It is submitted that the third invoice dated 03.03.2021 has

been taken out of consideration by the Tribunal itself while recording the

finding as under:-

"5. Further, in relation to the contention made by the Corporate Debtor that the Operational Creditor fails to meet the threshold of Rs. 1 Crore to file the present Application under Section 9 of the IBC as the invoice dated 03.03.2021 raised by the Applicant for a sum of Rs. 29,14,684/- falls under the ambit of Section 10A of the Code, it is seen that the Operational Creditor has raised three invoices on the Corporate Debtor for the supply of power between 03.01.2020 and 03.03.2021 which is in the following manner:

As per these invoices the Corporate Debtor was liable to pay Rs.1,42,16,355/-, which includes the interest amounting to Rs. 18,84,855/-. There is no doubt that the invoice dated 03.03.2021 raised by the Applicant for a sum of Rs.29,14,684/- falls under the ambit of Section 10A of the Code but then too, if the said amount along with its interest of Rs.2,17,583/- is reduced, the amount in default will still be Rs.1,10,84,088/-. Therefore, such contention cannot sustain. For inclusion of interest to arrive at the Operational Debt, reference is made to the Energy Purchase Agreement between the parties which clearly mentions the interest clause and which states that:

"4(viii)(d) Penalty for late Payment: If the Invoices are not paid on or before the Payment Due Date, the Purchaser shall pay at a rate equal to 2% over State Bank of India medium term lending rate calculated for the period from the Payment Due Date and date of actual payment of the Invoices."

Moreover, the Corporate Debtor has not raised any dispute over the agreement, prior to reply to the demand notice nor against the interest claimed over the sum."

14. It is however submitted that the Tribunal while excluding the third

invoice dated 03.03.2021 of an amount of Rs. 29,14,684/- on which interest

component has been assessed as Rs. 2,17,583/-, has added the interest in

the first two invoices i.e. Rs. 549644 and Rs. 1117628 for holding that if the

interest on the first two invoices is also added then it would come to Rs.

1,10,84,088/- which is more than the threshold of Rs. 1 Cr. as provided

under Section 4 of the Code. In this regard, he drew our attention to the terms

and conditions of the agreement dated 10.04.2017. He has first referred to

the condition of payment (the payment due date). It is agreed between the

parties that "the invoice raised by the seller for the monthly credited energy,

shall be paid by the purchaser within 15 days of receipt of such invoice by

the purchaser or within 18 days of dispatch of such invoice by the seller,

whichever is later." Thus, period of 15 days was given for payment of the

invoice raised. It is further argued that there is no provision in the agreement

for interest nor interest was ever agreed upon by the parties. He has also drew

our attention to all the three invoices in which there is no provision of interest

in case invoice was not paid within the stipulated time. In this regard, he has

relied upon a decision of this Court in the case of Rohit Motawat Vs. Madhu

Sharma, CA (AT) (Ins) No. 1152 of 2022 to contend that if the invoice is not signed by both then the interest cannot be charged because it was a unilateral

act on the part of the seller. He has further argued that though there is a

provision of penalty in the agreement which says that if the invoice is not paid

on or before the payment due date, the purchaser shall pay at a rate equal to

2% over State Bank of India medium term lending rate calculated for the

period from the payment due date and date of actual payment of the invoices.

It is submitted that the penalty amount cannot be equated with interest

because there is no such provision in the Code that the penalty can be

charged as interest from the other side to cross the threshold.

15. It is further argued by the Appellant that the Respondent has not come

to the court with clean hands. In this regard, he has relied upon a decision of

the Hon'ble Supreme Court in the case of S.P. Chengalvaraya Naidu (Dead)

by LRS. Vs. Jagannath (Dead) by LRS & Ors., (1994) 1 SCC that the Appellant

had invoked Section 11(6) of the Arbitration and Conciliation Act, 1996 before

the High Court of Karnataka for appointment of Arbitrator in respect of same

agreement. Notice in that application was issued by the High Court which

was received by the Respondent on 01.06.2022 but by concealing this fact,

the application under Section 9 was filed on 07.06.2022.

16. On the other hand, Counsel for the Respondent has argued that, in so

far as, the letter dated 21.04.2021 is concerned, the same has never been

delivered to the Respondent but at the same time, he has admitted that the

said averment has not been made anywhere in the pleadings much less in the

notice issued under Section 8(1) when the litigation started.

17. He has submitted that there is admission on the part of the Respondent

about the amount to be paid and in this regard, he has referred to the finding

recorded by the Tribunal in para 7 of the impugned order where the appellant

had admitted the liability vide email dated 27.05.2021. In this regard, we have

also perused various emails dated 17.04.2021, 30.04.2021, 12.05.2021 and 17.05.2021. From the email dated 17.04.2021 we have found that the

Appellant has made a request to the Respondent not to stop power supply

which will financially impact huge loss on the CD. Similarly in the email dated

30.04.2021 the Appellant has requested for a restoration of power supply

from May, 2021. In the email dated 12.05.2021 the same request has been

made because it was under duress.

18. The moot point involved in this case as to whether the application filed

under Section 9 was maintainable in view of a pre-existing dispute raised by

the Appellant vide letter dated 21.04.2021? The second question is if it is so

then whether the finding recorded by the Tribunal in para 7 of the impugned

order that since the letter dated 21.04.2021 was not alleged to have been

delivered by the Appellant to the Respondent then whether the said letter can

be considered despite the fact that there is no denial anywhere in the entire

pleadings by the Respondent about it?

19. A bare perusal of the letter dated 21.04.2021 would show that there is

a dispute raised by the Appellant which was prior to the filing of section 9

application on 07.06.2022. As per scheme of Section 9, the operational

creditor cannot file the application under Section 9 until and unless notice

under section 8(1) is filed. In this regard, Section 8 is reproduced as under:-

"Section 8: Insolvency resolution by operational creditor. *8. (1) An operational creditor may, on the occurrence of a default,

deliver a demand notice of unpaid operational debtJ2 or 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)J3 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, 1[if any, or] 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 2[payment] 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 demanding 2[payment] of the operational debt in respect of which the default has occurred."

20. As per Section 8, an operational creditor may, on the occurrence of a

default, deliver a demand notice of unpaid operational debt or 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. The manner

is provided in the Rules and Regulations. Once the notice under Section 8 is

delivered, the CD has a right to file reply to the notice within a period of 10

days in which he can raise the issue of existence of a dispute, pendency of

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

invoice in relation to such dispute and or the payment of unpaid operational

debt.

21. Section 9 of the Code provides that 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 in which the pre-existing dispute was raised, the

operational creditor may file an application before the Adjudicating Authority

for initiating the corporate insolvency resolution process.

22. The fact in issue is as to whether the Appellant had raised the dispute

before the application under Section 9 was filed. In this regard. The Appellant

has time and again mentioned not only in his reply to the notice issued under

Section 8 but also to the notice under Section 9(3)(b) as well as the application

filed under Section 9 that the letter dated 21.04.2021 was given to the Respondent but the Respondent did not refer to it in its pleadings and the

Respondent has admitted that he has not made any reference that the said

letter was not delivered to them. In such circumstances, there is no denial on

the part of the Respondent of having received the letter dated 21.04.2021.

Although CPC is not applicable but the basic principle regarding admission

denial of document is applicable. It is mentioned in Order 8 Rule 5 that every

allegation of fact in the plaint, if not denied specifically or by necessary

implication, or stated to be not admitted in the pleadings of the defendant,

shall be taken to be admitted except as against a person under disability. The

Respondent is not a person under disability and since there is no denial,

therefore, this fact is admitted by the Respondent.

23. It has also been held by the Hon'ble Supreme court in the case of

Mobilox Innovations Pvt. Ltd. Vs. Kirusa Software Pvt. Ltd., Civil Appeal No.

9405 of 2017 that "40. 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. It is important to separate the grain from

the chaff and to reject a spurious defence which is mere bluster. However, in

doing so, the Court does not need to be satisfied that the defence is likely to

succeed. The Court does not at this stage examine the merits of the dispute

except to the extent indicated above. So long as a dispute truly exists in fact and is not spurious, hypothetical or illusory, the adjudicating authority has

to reject the application."

24. In such circumstances, we have come to the conclusion that since the

delivery of the letter dated 21.04.2021 has not been denied, therefore, the

same was duly received by the Respondent and the finding recorded in this

regard by the Tribunal in para 7 of the impugned order is hereby repelled.

25. Since, we have already taken a view that there was a pre-existing

dispute in this matter, therefore, the admission of the application filed under

Section 9 is per se illegal.

26. Counsel for the Appellant has submitted that the amount of

Rs.1,23,31,500/- was deposited, in terms of the order dated 20.09.2023,

which was subject to the outcome of this appeal, by way of Fixed Deposit in

favour of "Registrar, National Company Law Appellate Tribunal, New Delhi"

has to be returned to the Appellant. The Registrar is directed to return the

aforesaid amount to the Appellant within 15 days from the date of this order

alongwith interest accrued upon it.

27. No costs.

I.As, if any, pending are hereby closed.

[Justice Rakesh Kumar Jain] Member (Judicial)

[Mr. Naresh Salecha] Member (Technical)

SC/RR