Raj Kumar Garg & Anr vs Health Care At Home India Pvt. Ltd. & Anr

(Arising out of Order dated 19th December, 2019 passed by the Adjudicating Authority (National Company Law Tribunal), New Delhi, (Court No. IV) in Company Petition No. IB-1177/ND/2019)

IN THE MATTER OF:

Raj Kumar Garg & Anr. ....Appellants

Versus

Health Care At Home India Pvt. Ltd. & Anr. .....Respondents

Present:

For Appellants: Mr. Sandeep P. Agarwal, Senior Advocate with Mr. Rupesh Tyagi, Advocate.

For Respondents: Mr. Joy Basu, Senior Advocate with Ms. Petal Chandhok, Mr. Rahul Kumar and Ms. Kanak Bose, Advocates. Mr. Sabhay Choudhary, Advocate for R-2.

BANSI LAL BHAT, J.

Appellants herein are the members of the suspended Board of

Directors as also the Shareholders of 'M/s. Satyam Drugs Pvt. Ltd.'

(Respondent No.2/ 'Corporate Debtor'). They are aggrieved of the

impugned order dated 19th December, 2019 passed by the Adjudicating

Authority (National Company Law Tribunal), New Delhi (Court No. IV) in

Company Petition No. IB-1177/ND/2019 whereby and whereunder the 2

Adjudicating Authority has admitted the Company Petition filed under

Section 9 of the Insolvency and Bankruptcy Code, 2016 (hereinafter

referred to as "I&B Code") filed by 'M/s. Health Care At Home India Pvt.

Ltd.' (Respondent No.1/ 'Operational creditor') for initiation of

'Corporate insolvency Resolution Process' of the 'Corporate Debtor'. The

impugned order has been assailed merely on the ground of pre-existing

dispute with regard to some invoices qua supply of goods though

transactions in respect whereof invoices have been raised by the

'Operational Creditor' have not been entirely disputed.

2. The factual matrix of the case needs to be noticed briefly for

identification of the contentious issue and its impact on triggering of

'Corporate Insolvency Resolution Process' at the hands of the

'Operational Creditor'. The 'Operational Creditor' is engaged in the

business of providing para-medical staff/ attendants/ technicians to

patients besides carrying on business of providing medical supplies like

medicines and medical equipments etc. and having business relations

with the 'Corporate Debtor' since June, 2017. The 'Corporate Debtor'

placed Purchase Order with the 'Operational Creditor' for procuring

medical supplies and invoices came to be raised by the 'Operational

Creditor' qua delivery of such products to the 'Corporate Debtor'.

According to the 'Operational Creditor', the 'Corporate Debtor' made

part payment of a few invoices but failed to clear the outstanding

amount. According to the 'Operational Creditor', the 'Corporate Debtor'

Company Appeal (AT) (Insolvency) No. 39 of 2020 3

never raised any dispute qua the delivery of medical supplies and made

part payment towards discharge of the operational debt. Details of the

invoices raised and the payments made through cheques have been

recorded at Para 4 of the impugned order. However, the cheques were

dishonoured as claimed by the 'Operational Creditor' which led to filing

of complaint cases under Section 138 of the Negotiable Instruments Act,

1881 stated to be pending for determination before Ld. Metropolitan

Magistrate. Since the payment was not forthcoming, 'Operational

Creditor' claimed to have served a Demand Notice dated 25th February,

2019 under Section 8 of the 'I&B Code' upon the 'Corporate Debtor'.

The Notice was subsequently withdrawn as according to the

'Operational Creditor' some inadvertent errors crept therein. This was

followed by a fresh Demand Notice sent on 16th April, 2019 claiming a

payment of Rs.2,02,07,685.96/- together with interest at the rate 18%

per annum within 10 days from receipt of the Notice. The 'Corporate

Debtor' responded to the Notice claiming that an amount of

Rs.1,97,06,210/- was outstanding dues recoverable from the

'Operational Creditor' by the 'Corporate Debtor' on account of the

reverse sales made by the 'Corporate Debtor' and since an amount of

Rs.2,24,15,101/- as outstanding dues was payable by the 'Corporate

Debtor' to the 'Operational Creditor' on account of purchases made by

the 'Corporate Debtor' from the 'Operational Creditor', after adjusting

the recoverable dues on account of reverse sales only an amount of

Rs.27,08,891/- was payable by the 'Corporate Debtor' and the

Company Appeal (AT) (Insolvency) No. 39 of 2020 4

'Corporate Debtor' had prepared a cheque for such amount which could

be collected by the 'Operational Creditor'. According to 'Operational

Creditor', an amount of Rs.80,72,422/- plus interest computed upto

05th December, 2019 totalling Rs.86,24,658/- was due and payable by

the 'Corporate Debtor' and since default has occurred, the 'Operational

Creditor' sought initiation of 'Corporate Insolvency Resolution Process'

against the 'Corporate Debtor'. The Adjudicating Authority, on

consideration of the entire gamit of controversy as unfolded by the

documents on record and taking note of the fact that the 'Operational

Creditor' had denied reverse sales amounting to Rs.1,97,06,210/- made

by the 'Corporate Debtor' found that the offer of the 'Corporate Debtor'

to pay a mere sum of Rs.27,08,891/- only was designed to evade its

liability in respect of the total claim put up by the 'Operational Creditor',

thus culminating in passing of the impugned order.

3. Learned counsel for Appellants submits that none of the invoices

bears any acknowledgment by the 'Corporate Debtor'. It is contended

that 15 disputed invoices were never communicated to the 'Corporate

Debtor' before issuance of Demand Notice and there was no proof of

such products having been delivered. It is submitted that demand for

the alleged operational debt of Rs.2,02,07,685.96/- was raised only in

the second Demand Notice dated 16th April, 2019. As regards dishonour

of 17 cheques for total amount of Rs.18,50,000/-, it is submitted that

such cheques were dishonoured for "Stop Payment" and not for

Company Appeal (AT) (Insolvency) No. 39 of 2020 5

"insufficient funds" and such cheques were not against any specific

invoice. It is submitted that the 'Corporate Debtor' was never aware

about the disputed invoices. It is further submitted that the dispute qua

the disputed invoices was raised on the very first opportunity. Lastly, it

is submitted that there is no default on the part of the 'Corporate

Debtor' as admitted amount of Rs.27,08,891/- was already tendered

and the 'Corporate Debtor' informed the 'Operational Creditor' through

its reply to Demand Notice that the cheques in respect of such amount

have been prepared and same could be collected by the 'Operational

Creditor' from the office of the 'Corporate Debtor'.

4. Per contra, learned counsel for the 'Operational Creditor' submits

that the 'Corporate Debtor' never raised any dispute relating to supply

of goods and the payment of amounts due and payable in lieu of supply

of such goods. Reference is made to emails dated 09.10.2018,

11.10.2018, 17.10.2018 and 26.11.2018 to establish admission by the

'Corporate Debtor' qua the liability of payment of debt in favour of the

'Operational Creditor' before issuance of Demand Notice. Reference is

also made to issuance of 17 cheques by the 'Corporate Debtor' in favour

of the 'Operational Creditor' in discharge of the payable debt prior to

issuance of Demand Notice. As regards withdrawal of 1st Demand

Notice, it is submitted that due to certain inadvertent errors, a mistake

had crept in the Demand Notice and the 1st Demand Notice was

accordingly withdrawn to rectify the mistake and 2nd Demand Notice

Company Appeal (AT) (Insolvency) No. 39 of 2020 6

was issued on 16.04.2019. Lastly, it is pointed out that the 'Corporate

Debtor' has admitted liability in respect of operational debt to the tune

of Rs.27,08,891/- and since the claim includes right to payment even if

it is disputed, the debt and default established against the 'Corporate

Debtor' did warrant initiation of 'Corporate Insolvency Resolution

Process'.

5. Heard learned counsel for the parties and perused the record.

6. The factum of medical supplies emanating from the 'Operational

Creditor' and its delivery to the 'Corporate Debtor' manifesting in raising

of several invoices during the relevant period is not in controversy. The

status of Respondent Nos.1 and 2 as 'Operational Creditor' and

'Corporate Debtor' respectively is also not in dispute. It is also not in

issue that the claim lodged by the 'Operational Creditor' in respect of

medical supplies affected to 'Corporate Debtor' falls within the ambit of

'operational debt' which was due and payable. The 'Corporate Debtor'

did question the veracity of some of the invoices for the first time in

reply to the Demand Notice and not before that. No evidence of any

amount lying outstanding on account of reverse sales, much less a

cogent and credible proof, has been placed on record by the 'Corporate

Debtor' who admitted having issued cheques in favour of the

'Operational Creditor' for an amount totalling Rs.18,50,000/- which

were dishonoured upon presentation by the 'Operational Creditor' for

the reason; 'Stop Payment'. This is also an admitted position in the case

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that seven complaint cases under Section 138 of the NI Act came to be

filed by the 'Operational Creditor' against 'Corporate Debtor' for

bouncing of these cheques. We are told that Special Leave Petitions

arising out of such complaints are pending consideration before the

Hon'ble Apex Court. Be that as it may, the fact remains that the

'Corporate Debtor' was responsible for bouncing of cheques and this

fact is not disputed by the 'Corporate Debtor' who has advanced the

unsubstantiated plea of stopping payment against those cheques on the

basis of an understanding that those cheques would not be presented

by the 'Operational Creditor' for encashment without prior approval of

the 'Corporate Debtor'. There is not an iota of evidence on record even to

hint that as many as seventeen cheques were issued by the 'Corporate

Debtor' in favour of the 'Operational Creditor' as security and not in

discharge of legally enforceable obligation arising out of the operational

debt which was payable. That apart, on its own showing the 'Corporate

Debtor' has admitted liability in respect of an amount of Rs.27,08,891/-

being payable after adjusting the recoverable amount on account of

reverse sales from the payable amount in regard to only three invoices.

The fact that the 'Corporate Debtor' in response to the second Demand

Notice enclosed the copy of cheque for an amount of Rs.27,08,891/-

would not absolve the 'Corporate Debtor' of such liability for two

reasons:-

(a) that the previously issued 17 cheques by 'Corporate Debtor' in

discharge its liability qua the invoices had bounced;

Company Appeal (AT) (Insolvency) No. 39 of 2020 8

(b) that such payment was offered with the express stipulation

that the same would be full and final settlement towards the

'Operational Creditor's claim.

7. The offer of payment of a part of the claim with a condition

attached having the effect of 'Operational Creditor' relinquishing

its claim in respect of the balance amount payable in law cannot

be envisaged as a payment in compliance to statutory notice

under Section 8(1) of the 'I&B Code'. Section 8 (2)(b) provides that

once the 'Corporate Debtor' receives the Demand Notice, it shall

within 10 days of the receipt of demand notice bring to the notice

of the 'Operational Creditor' the payment of unpaid operational

debt either by sending an attested copy of the record of electronic

transfer of the unpaid amount from the Bank account of the

'Corporate Debtor' or by sending an attested copy of record

demonstrating encashment of cheque by the 'Operational

Creditor'. Section 9 of the 'I&B Code' entitles the 'Operational

Creditor' to seek initiation of 'Corporate Insolvency Resolution

Process' inter alia on the ground that the 'Operational Creditor'

did not receive payment from the 'Corporate Debtor'. A combined

reading of Sections 8 and 9 of the 'I&B Code' leaves no room for

doubt that the payment of unpaid operational debt has to be

unqualified and evidenced by electronic transfer from Bank

account of the 'Corporate Debtor' to the Bank account of the

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'Operational Creditor' and that the 'Operational Creditor' can

initiate 'Corporate Insolvency Resolution Process' only if he does

not receive payment from the 'Corporate Debtor'. Admittedly, in the

instant case, even the payment of the admitted part of the claim

amounting to Rs.27,08,891/- has not been received by the 'Operational

Creditor'. Default being in excess of Rupees One Lac would warrant

initiation of 'Corporate Insolvency Resolution Process' at the instance

of 'Operational Creditor'.

8. Viewed in the context of aforestated reasons, we do not find any

legal infirmity in the impugned order of admission passed by the

Adjudicating Authority. The appeal lacks merit and is liable to be

dismissed. We accordingly dismiss the appeal. No costs.

[Justice Bansi Lal Bhat] Member (Judicial)

[V.P. Singh] Member (Technical)

NEW DELHI 22nd May, 2020

AR

Company Appeal (AT) (Insolvency) No. 39 of 2020