Rashtriya Polymers & Solvents vs Kanodia Technoplast Limited

Company Appeal (AT) (Ins) No. 1140 of 2023 IN THE MATTER OF: Rashtriya Polymers & Solvents ...Appellant Versus Kanodia Technoplast Ltd. ...Respondent

With

Company Appeal (AT) (Ins) No. 1680 of 2023 & I.A. No. 6050, 6051 of 2023

IN THE MATTER OF: Chemical Suppliers India Pvt. Ltd. ...Appellant Versus Kanodia Technoplast Ltd. ...Respondent

Present: For Appellant: Mr. Gaurav Mitra, Mr. Nikhil Verma, Ms. Mahak Agarwal, Mr. Kapil Sharma, Advocates. For Respondent: Mr. Abhishek Anand, Mr. Karan Kohli, Ms. Palak Kalra, Advocates.

ORDER

(Hybrid Mode)

Per: Justice Rakesh Kumar Jain (Oral)

09.07.2024: This order shall dispose of two appeals bearing

Company Appeal (AT) (Ins) No. 1680 of 2023 titled as Chemical

Suppliers India Pvt. Ltd. Vs. Kanodia Technoplast Ltd. (hereinafter

referred to as the first appeal) filed against the order dated

Company Appeal (AT) (Ins) No. 1140, 1680 of 2023 -2-

16.10.2023 by which the National Company Law Tribunal, New

Delhi, Bench-IV has dismissed the application filed by the appellant

under Section 9 of the Insolvency & Bankruptcy Code, 2016 (in

short 'Code') bearing CP No. (IB)-734 (ND)/2021, inter alia, on the

ground that the application is filed under Section 9 for resolution of

the amount based upon invoices some of which fall within the

period from 23.03.2020 - 24.03.2021 is hit by Section 10A of the

code and even if of some invoices which crosses the threshold,

provided under Section 4, are beyond the aforesaid period, the

segregation is not allowed and the application as a whole has to be

dismissed. Company Appeal (AT) (Ins) No. 1140 of 2023 has been

filed by Rashtriya Polymers & Solvents vs. Kanodia Technoplast Ltd.

(hereinafter referred to as second appeal) against the order dated

12.07.2023 by which application filed by the said appellant under

Section 9 of the Code, has been dismissed.

2. Both these matters are being taken up together because in

both the cases, the Corporate Debtor is the same and in case

anyone of the appeal is allowed then the second appeal would

become redundant or infructuous because two CIRPs cannot be

initiated against the same CD.

Company Appeal (AT) (Ins) No. 1140, 1680 of 2023 -3-

3. For the sake of convenience, we are taking up the first appeal.

The brief facts of this case are that the appellant issued a demand

notice dated 30.09.2021 to the respondent demanding payment of

outstanding debt of Rs. 6,13,26,856/- along with interest of

Rs. 1,71,67,229/- calculated @ 24%, based upon 60 invoices

starting from 01.07.2020 to 03.06.2021. The demand notice was

replied by the respondent on 08.10.2021.

4. Since the amount claimed by the appellant was not resolved

by the respondent, therefore, the appellant filed the application

under Section 9 of the Code on 02.11.2021 for resolution of the

amount of Rs. 7,84,94,085/-.

5. This application has been dismissed by the Tribunal on the

ground that out of the 60 invoices, 53 invoices are of the period

between 01.07.2020 till 23.03.2021 which falls within the period

between 23.03.2020-24.03.2021 i.e. the period prescribed under

Section 10A of the Code during which if the default is committed,

the application under Section 7, 9 & 10 cannot be filed at all.

Company Appeal (AT) (Ins) No. 1140, 1680 of 2023 -4-

6. The Tribunal has held, relying upon the decision of Hon'ble

Supreme Court in the case of Ramesh Kymal Vs. Siemens Gamesa

Renewable Power Private Limited (Civil Appeal No. 4050 of 2020)

decided on 09.02.2021 and the decision of this Court in Company

Appeal (AT) (Ins) No. 387 of 2023 Yatra Online limited Vs Ezeego One

Travel & Tours Limited decided on 31.03.2023 that the application

under Section 9 was not maintainable because the segregation of

the amount of the period falling under Section 10A was not

possible.

7. Learned Counsel for the appellant has argued that the finding

recorded by the Tribunal that the amount cannot be segregated is

contrary to the facts noticed by the Tribunal. In this regard, he has

referred to paragraph 11 of the impugned order in which the

Tribunal itself has made the segregation of the amount based upon

Invoices No. 1 to 53, which falls within the period provided under

Section 10A and Invoices No. 54 to 60 falls after the period provided

under Section 10A. The said chart is reproduced for a quick glance

which read as under:

Company Appeal (AT) (Ins) No. 1140, 1680 of 2023 -5-

Company Appeal (AT) (Ins) No. 1140, 1680 of 2023 -6-

8. It is further submitted that the amount arising out of the

invoices from 54 to 60 is Rs. 1,65,89,311/- which is more than the

amount of threshold provided under Section 4 of Rs. 1 crore,

Company Appeal (AT) (Ins) No. 1140, 1680 of 2023 -7-

therefore, the application could not have been dismissed by the Ld.

Tribunal and deserves to be admitted. In support of his

submissions, he has relied upon a decision of this Court in

Company Appeal (AT) (Ins) No. 39 of 2023 titled as Naresh

Choudhary Vs. Sterling Enamelled Wires Pvt. Ltd. decided on

16.08.2023. It is submitted that in the decided case, notice under

Section 8 was given on 14.08.2021 claiming total amount of

Rs.2,07,11,209/- which included the amount based upon the Non-

LC and the LC amount.

9. It is further submitted that the Non-LC amount which falls

within the period between 23.03.2020-24.03.2021 (as prescribed

under Section 10A) do not have any effect on the maintainability of

the application under Section 9 if the non LC amount is above the

threshold and the application can be maintained on the said

amount. In this regard, the observations made by this Tribunal are

reproduced as under:

"15. This brings us to the second issue for determination as to whether the debt arising out of the invoices fell during the period which attracts the bar of Section 10A of IBC. It is the case of the Appellant that the Operational Creditor has not provided the date of default either in the Section 8 demand notice or in the Section 9 application. Further, it has been

Company Appeal (AT) (Ins) No. 1140, 1680 of 2023 -8-

stated that payments were to be made by the Corporate Debtor by way of LC which was to be created within 90 days from each invoice and hence the date of default would be 90 days post the date of each such invoice. Since the Appellant had not created any LC within a period of 90 days the default occurred on the 90th day from the day of invoice. After calculating the 90th day of these invoices, it has been contended that the date of default arises between 01.05.2020 to 29.05.2020 which clearly falls in the ambit of Section 10A and hence barred from being subject to IBC proceedings.

16. Refuting the above, it has been submitted by the Learned Counsel for the Respondent No.1 that the Corporate Debtor had placed four purchase orders which find place at pages 272-275 of APB. Of the four purchase orders, only two purchase orders (3rd and 4th purchase orders) make reference to the creation of LC of 90 days. As regards the other two purchase orders (1st and 2nd purchase orders), there was no such stipulation of 90-day LC. Hence in respect of these two purchase orders, the date of default was the date of invoice. It was stated that the invoices raised under the 4th purchase order were anyways already excluded. It was further submitted that even if the 3rd and 4th purchase orders are excluded, the first two purchase orders cumulatively amount to default which is above the threshold limit of Rs.1 crore necessary for filing an insolvency application. We are satisfied with the reasoning offered by the Operational Creditor and do not find any force in the contention of the Appellant.

17. We have no hesitation in observing that in the present case, all requisite conditions necessary to trigger CIRP under Section 9 stands fulfilled with operational debt having been

Company Appeal (AT) (Ins) No. 1140, 1680 of 2023 -9-

acknowledged and default committed thereto and there being no real pre-existing disputes discernible from given facts. For the foregoing reasons, we are of the view that the Adjudicating Authority has rightly admitted the application of the Operational Creditor filed under Section 9 of IBC. We are satisfied that the impugned order does not warrant any interference. There is no merit in the Appeal. The Appeal is dismissed. No order as to costs."

10. In reply, counsel appearing for the respondent has vehemently

argued that the issuance of notice under Section 8 of the Code is

sine qua non for the purpose of maintainability of an application

under Section 9. He has further submitted that if the invoices

falling between the dates 23.03.2020-24.03.2021 are also a part of

the said notice then the application under Section 9 on that basis is

not maintainable. He has relied upon the decision of Hon'ble

Supreme Court in Ramesh Kymal Vs. Siemens Gamesa Renewable

Power Private Limited (supra) and the decision of this Court in Yatra

Online Limited Vs Ezeego One Travel & Tours Limited (supra) in

support of his contention.

11. We have heard both the counsel for the parties and perused

the record with their able assistance.

Company Appeal (AT) (Ins) No. 1140, 1680 of 2023 -10-

12. The issue involved in this case travels in a narrow compass, as

to whether an application under Section 9, filed on the basis of

invoices which fall within the period of Section 10A and also beyond

the said period is maintainable in case the invoices of period beyond

of Section 10A are sufficient to cross the threshold?

13. The answer of this question lies in the decision by this Court

in the case of Naresh Choudhary Vs. Sterling Enamelled Wires Pvt.

Ltd. (supra) in which the same issue was involved. Notice under

Section 8 has nothing to do with the invoices which fall within the

period of Section 10A and beyond the period of Section 10A as

notice under Section 8 is given by Operational Creditor to the

Corporate Debtor so that the Corporate Debtor may either make the

payment or raise the issue of pre-existing dispute.

14. All that has to be seen by Ld. Tribunal is that the invoices

relied upon by the Operational Creditor beyond the period of

Section 10A crosses the threshold of Rs. 1 crore for the purpose of

maintaining the application. The Judgment in the case of Ramesh

Kymal Vs.Siemens Gamesa Renewable Power Private Limited (supra)

of the Hon'ble Supreme Court as well as the decision of this Court

in the case of Yatra Online Ltd Vs Ezeego One Travel & Tours Limited

Company Appeal (AT) (Ins) No. 1140, 1680 of 2023 -11-

are not applicable to the facts of this case. The relevant para of

Yatra Online Limited Vs Ezeego One Travel & Tours Limited which

has been strongly relied upon by the respondent is reproduced as

under:

"15. Admittedly, the application under Section 9 has to be filed

after a notice under Section 8 of the Code is delivered. Meaning

thereby notice under Section 8 of the Code is a sine qua non to

maintain an application under Section 9 of the Code. Section 8

of the Code provides that the Operational Creditor shall deliver

a demand notice upon the Corporate Debtor who may within a

period of 10 days of the receipt of the demand notice either

raise the issue of an existing dispute or bring to notice of the

Operational Creditor that the payments have been made / paid

of operational debt and an application under Section 9 of the

Code could be filed only after the expiry of period of 10 days

from the date of delivery of notice. The Resolution Professional

who was appointed on 09.03.2021 and is familiar with the

provisions of the Code mentioned the date of default as

30.10.2020 in the notice and after the notice, the application

under Section 9 of the Code too contained the date of default as

30.10.2020. Thus, the positive case before the Adjudicating

Authority, at the instance of the Resolution Professional, was

Company Appeal (AT) (Ins) No. 1140, 1680 of 2023 -12-

that the date of default is 30.10.2020 and not July 2019 but

while contesting the application filed under Section 10A the RP

conveniently changed the date of default from 30.10.2020 to

July, 2019 in order to wriggle out of the rigorus of Section 10A

of the Code.

16. In the background of the aforesaid facts and circumstances

of the case, the question thus would arise as to whether the

date of default, mentioned in the demand notice as well as in

the application filed under Section 9 of the Code, which has not

been amended even if it was allegedly wrongly mentioned, can

be changed in the litigation which arises from a miscellaneous

application?"

15. In view of the aforesaid discussion, we find merit in the

present appeal, therefore, the same is hereby allowed and the

impugned order is set aside. The application bearing CP No. (IB)

734/ND/2021 is hereby restored. The matter is remanded back to

the Ld. National Company Law Tribunal to proceed further in

accordance with law. The Parties are directed to appear before the

Tribunal on 26.07.2024.

16. In so far as the second appeal is concerned, we have not gone

into the merits of the said appeal because the first appeal has since

Company Appeal (AT) (Ins) No. 1140, 1680 of 2023 -13-

been allowed. Therefore, the second appeal is hereby dismissed as

redundant and infructuous. No Costs.

[Justice Rakesh Kumar Jain] Member (Judicial)

[Mr. Naresh Salecha] Member (Technical)

[Mr. Indevar Pandey] Member (Technical)

sa/rr

Company Appeal (AT) (Ins) No. 1140, 1680 of 2023