Shri Balaji Paper Pack Private Limited vs Laxmi Crockery Pune Pvt Ltd

[Arising out of Order dated 02nd July, 2020 passed by the Adjudicating Authority (National Company Law Tribunal, Mumbai Bench, Mumbai) in C.P. (IB) No. 3194/NCLT/MB/2019]

IN THE MATTER OF: Shri Balaji Paper Pack Pvt. Ltd. GF No. 2, Shail Building Nr. Swagat Restaurant Office: C.G. Road, Navrangpura Ahmedabad - 380006 (Gujarat) ...Appellant

Versus

Laxmi Crockery (Pune) Pvt. Ltd. No. 2 Ganesh Peth Nr. Burdi Road Pune - 411002 (Maharashtra) ...Respondent

Present: For Appellant : Mr. Rajendra K. Golani, Advocate

For Respondent : Ms. Anandita Singh, Advocate

(20th December, 2022)

KANTHI NARAHARI, MEMBER (TECHNICAL)

Preamble:

The Present Appeal is filed against the Order dated 02nd July, 2020

passed by the Adjudicating Authority (National Company Law Tribunal,

Mumbai Bench, Mumbai) in C.P. (IB) No. 3194/NCLT/MB/2019, whereby

the Adjudicating Authority has dismissed the Application filed by the

Appellant herein.

Company Appeal (AT) (Ins.) No. 792 of 2022 1 of 8 Brief Facts:

Appellant's Submissions:

2. The Learned Counsel appearing for the Appellant submitted the brief

facts which necessitated filing the present Appeal. He submitted that the

Appellant filed the Application before the Adjudicating Authority invoking

Section 9 of the I&B Code, 2016 seeking initiation of Corporate Insolvency

Resolution Process against the Respondent (Corporate Debtor) for defaulting

in making payment to the extent of Rs.65,20,061/-.

3. The Learned Counsel submitted that Appellant being the Operational

Creditor supplied packaging materials to the Respondent and raised invoices

for such ongoing supply of packaging material amounting to Rs.45,34,589/-

as principal amount. The Respondent even after several requests for

payment of the due amount was not paid. Having no other choice but to take

legal recourse, the appellant issued a demand notice dated 23.07.2017 to

the Respondent which was served on 29.07.2019. The Interest on the

operational debt as on 20.07.2019 worked out to Rs.19,85,472/- thus, the

total due amount is Rs.65,20,061/-.

4. The Learned Counsel further submitted that the Respondent vide its

reply dated 08.08.2019 raised false and frivolous claims to avoid payment of

debt due to the Appellant. Having no other alternate the Appellant filed

Section 9 Application before the Adjudicating Authority and the Adjudicating

Authority dismissed the said Application without appreciating the facts that

Company Appeal (AT) (Ins.) No. 792 of 2022 2 of 8 the Respondent liable to pay the debt and defaulted in payment which

expressly borne out from the records.

Respondent's Submissions:

5. The Learned Counsel appearing for the Respondent filed its Reply and

submitted that there is pre-existence of dispute in respect of the payment

which is subject matter before the Adjudicating Authority and this Appellate

Tribunal. It is submitted that the understanding between the Appellant and

the Respondent was in relation to packaging of glassware and their supply.

The Appellant supplied the goods to the Respondent, however, the goods

supplied were defective and a dispute exists in respect of settlement of

accounts of the transactions. The issue of dispute was raised by the

Respondent in its reply dated 08.08.2019 to the demand notice issued by the

Appellant dated 23.07.2019.

6. The Learned Counsel further submitted that the dispute in respect of

the payment / transaction is civil in nature and not within the jurisdiction

of this Tribunal. It is submitted that even otherwise the claim of the Appellant

was barred by limitation. Further, the claim of the Appellant is not

maintainable for the reason that the said claim has been set off by the

invoices raised against the goods supplied by the Respondent to the

Appellant. It is submitted that the Respondent Company is financially

solvent and is carrying on successful business operation.

7. In view of the reasons as stated above the Learned Counsel has prayed

this Bench to dismissed the Appeal as it devoid of any merit.

Company Appeal (AT) (Ins.) No. 792 of 2022 3 of 8 Analysis / Appraisal:

8. Heard the Learned Counsel appeared for the respective parties,

perused the pleadings and documents. After analysing the pleadings, the

issues fell for consideration is whether there is:

(a) existence of dispute?

(b) is barred by limitation?

(c) whether the Appellant maintains the pecuniary jurisdiction to

entertain the claim?

9. Now we deal with issue (a) regarding existence of dispute:

(i) The Appellant filed an Application under Section 9 of the I&B

Code, 2016 before the Adjudicating Authority seeking initiation of

Corporate Insolvency Resolution Process against the Respondent on

the ground that the Respondent defaulted in making the payment to

the extent of Rs.65,20,061/-. The Adjudicating Authority having

noticed the invoices raised by the Appellant, however, comes to the

conclusion that out of 13 invoices, 11 invoices were time barred and

only 2 invoices raised on 31.08.2016 for Rs.2,04,099/- and

1,60,010/- were within the period of limitation. Further, the

Adjudicating Authority was of the view that the materials supplied by

the Respondent (Corporate Debtor) to the Appellant is more than the

principal due claimed by the Appellant, hence the Respondent is

entitled for set off the claim made by the Appellant.

(ii) It is an admitted fact that the Appellant issued a demand notice

dated 23.07.2019 to the Respondent demanding a sum of

Company Appeal (AT) (Ins.) No. 792 of 2022 4 of 8 Rs.65,20,061/- including interest. The Respondent vide its reply

dated 08.08.2019 to the said demand notice stated that payment

referred in the demand notice was set off on the ground that the

Appellant lifted the goods from the Respondent and the Appellant was

supposed the remit the tax amount to the Respondent so that proper

invoices can be raised for the same.

(iii) From the reply of the Respondent dated 08.08.2019, it is evident

that the Respondent has not raised any dispute with regard to the

very same claim amount prior to issuance of demand notice dated

23.07.2019. Further, in the reply, it is also clear that even the

Respondent has not raised invoices on the Appellant for the goods

supplied (if any). Having failed to raise any invoices on the Appellant

by the Respondent, claiming any dues from the Appellant, the

question of set off, the claim between the Appellant and the

Respondent does not arise. This Tribunal is of the view that the

averments made in the reply by the Respondent is clearly an

afterthought only for the purpose of vitiating the proceedings.

Further, as per Section 8(2)(a) of the I&B Code, 2016, the existence

of dispute, 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. As per the above position of law the dispute

must be specific with regard to the same amount. In that present

case, the Respondent failed to raise any dispute prior to issue of

Company Appeal (AT) (Ins.) No. 792 of 2022 5 of 8 demand notice and claim of set off is only an afterthought as stated

(supra). Accordingly, the issue is answered.

(b) Whether the claim is barred by limitation & (c) maintains the

pecuniary jurisdiction to entertain the claim?

Now we deal with both the issues together:

(i) The Learned Counsel for the Respondent vehemently contended

that claim is barred by limitation since the application filed after 3

years from the date of default. The Adjudicating Authority extracted

the invoices raised by the Appellant in a tabular column. From the

perusal of the invoices, the Appellant raised 13 invoices amounting

to Rs. 45,34,589/- towards principal due. The Adjudicating Authority

taken a stand that out of 13 invoices claimed by the Appellant 11

invoices are time barred i.e. the last invoice dated 23.08.2016 and the

Application under Section 9 was filed on 26.08.2019, therefore, it is

beyond 3 years as per Section 137 of the Limitation Act. However, the

(2) invoices both dated 31.08.2016 are within the period of limitation,

since the application filed on 26.08.2019. Having taken into

consideration the 2 invoices which are within the period of limitation,

the Adjudicating Authority failed to consider that the amount even

for the 2 invoices satisfies the minimum threshold prescribed under

Section 4 of the I&B Code, 2016 (pre-amended). As per Section 4 of

the I&B Code, 2016 the minimum threshold was Rs.1,00,000/- and

the amount for the 2 invoices both dated 31.08.2016 was

Rs.3,64,100/-, thus, it exceeds the minimum threshold as prescribed

Company Appeal (AT) (Ins.) No. 792 of 2022 6 of 8 under the law prior to the amendment. The Adjudicating Authority

miserably failed to take into consideration the pecuniary jurisdiction

under which the application ought to have been admitted. Thus, the

observation of the Adjudicating Authority is factually incorrect with

regard to the non-maintainability of the application.

Thus, the issues are answered against the Respondent.

10. The Adjudicating Authority having noticed that the claim of the

Appellant is more than Rs.1,00,000/- and is within the threshold limit,

however, was of the view that the claim made by the Respondent is more

than the claim made by the Appellant. The said observation is without any

basis. Further the Adjudicating Authority was of the view that though the

Corporate Debtor raised the claim after the issuance of demand notice,

however, it observed that the goods were delivered by the Corporate Debtor

to the Appellant before issuance of demand notice and raising of invoices

was delayed by the Corporate Debtor, is in our view absurd and without any

basis.

11. Viewed in that perspective, this Tribunal comes to an irresistible and

inescapable conclusion that the order passed by the Adjudicating Authority

is per-se illegal and the same is hereby set aside.

Conclusion:

12. Resultantly, the Company Appeal is allowed with a direction to the

Adjudicating Authority to admit the application and initiate Corporate

Company Appeal (AT) (Ins.) No. 792 of 2022 7 of 8 Insolvency Resolution Process (CIRP) proceeding against the Respondent /

Corporate Debtor. No orders as to cost.

[Justice Ashok Bhushan] Chairperson

[Mr. Kanthi Narahari] Member (Technical)

[Mr. Barun Mitra] Member (Technical) pks

Company Appeal (AT) (Ins.) No. 792 of 2022 8 of 8