Smartron Indian Pvt. Ltd vs Zte Corporation

M/s. Smartron Indian Private Limited ...Appellant

Vs.

M/s. ZTE Corporation ...Respondent

Present: For Appellant: - Mr. Mithun Shashank and Mr. M.V. Mukunda, Advocates.

For Respondent: - None

O R D E R

18.07.2019─ The Respondent- 'M/s. ZTE Corporation' filed

application under Section 9 of the Insolvency and Bankruptcy Code, 2016

("I&B Code" for short) in January, 2019 wherein notice was issued on

Appellant- 'M/s. Smartron Indian Private Limited'- ('Corporate Debtor')

which filed its reply. It appears that the Respondent filed a rejoinder to

the same.

2. The 'Corporate Debtor' thereafter sought permission to file sur-

rejoinder/ additional counter and additional documents, which has been

rejected by the Adjudicating Authority (National Company Law Tribunal),

Hyderabad Bench, Hyderabad, by impugned order dated 21st June, 2019

asking the parties to argue on merit.

Contd/-..........

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3. Learned counsel for the Appellant submitted that certain more

documents are required which are necessary for the proper adjudication

of the case. However, we are not inclined to grant any more time to the

Appellant as already six months have passed and application under

Section 9 still pending.

4. In the case of "Binani Industries Limited vs. Bank of Baroda &

Anr.─ Company Appeal (AT) (Insolvency) No. 82 of 2018 etc." , this

Appellate Tribunal has already held that an application under Sections 7

or 9 or 10 relates to initiation of the 'Corporate Insolvency Resolution

Process'. It is neither a litigation nor a money suit or money claim,

therefore, the question of sur-rejoinder/additional counter and additional

documents does not arise.

5. One opportunity which was required to be given to the 'Corporate

Debtor' has since been given and it has filed its reply affidavit. Now, it is

on the basis of the record available and the stand so taken by the

'Corporate Debtor', the Adjudicating Authority is required to decide the

matter, as has already been held by the Hon'ble Supreme Court in

"Innoventive Industries Ltd. Vs. ICICI Bank and Ors, (2018) 1 SCC

407" disposed on 31st August, 2017, wherein the Hon'ble Supreme Court

made following observations:

Company Appeal (AT) (Insolvency) No. 733 of 2019 -3-

"27. The scheme of the Code is to ensure that

when a default takes place, in the sense that a

debt becomes due and is not paid, the insolvency

resolution process begins. Default is defined in

Section 3(12) in very wide terms as meaning

non-payment of a debt once it becomes due and

payable, which includes non-payment of even

part thereof or an instalment amount. For the

meaning of "debt", we have to go to Section

3(11), which in turn tells us that a debt means a

liability of obligation in respect of a "claim" and

for the meaning of "claim", we have to go back to

Section 3(6) which defines "claim" to mean a

right to payment even if it is disputed. The Code

gets triggered the moment default is of rupees

one lakh or more (Section 4). The corporate

insolvency resolution process may be triggered

by the corporate debtor itself or a financial

creditor or operational creditor. A distinction is

made by the Code between debts owed to

financial creditors and operational creditors. A

financial creditor has been defined under

Company Appeal (AT) (Insolvency) No. 733 of 2019 -4-

Section 5(7) as a person to whom a financial debt

is owed and a financial debt is defined in Section

5(8) to mean a debt which is disbursed against

consideration for the time value of money. As

opposed to this, an operational creditor means a

person to whom an operational debt is owed and

an operational debt under Section 5(21) means a

claim in respect of provision of goods or services.

"29. The scheme of Section 7 stands in

contrast with the scheme under Section 8 where

an operational creditor is, on the occurrence of a

default, to first deliver a demand notice of the

unpaid debt to the operational debtor in the

manner provided in Section 8(1) of the Code.

Under Section 8(2), the corporate debtor can,

within a period of 10 days of receipt of the

demand notice or copy of the invoice mentioned

of a dispute or the record of the pendency of a

suit or arbitration proceedings, which is pre-

existing- i.e. before such notice or invoice was

received by the corporate debtor. The moment

Company Appeal (AT) (Insolvency) No. 733 of 2019 -5-

there is existence of such a dispute, the

operational creditor gets out of the clutches of the

Code.

30. On the other hand, as we have seen, in

the case of a corporate debtor who commits a

default of a financial debt, the adjudicating

authority has merely to see the records of the

information utility or other evidence produced by

the financial creditor to satisfy itself that a

default has occurred. It is of no matter that the

debt is disputed so long as the debt is "due" i.e.

payable unless interdicted by some law or has

not yet become due in the sense that it is payable

at some future date. It is only when this is

proved to the satisfaction of the adjudicating

authority that the adjudicating authority may

reject an application and not otherwise."

6. Such law having laid down by the Hon'ble Supreme Court, the

Adjudicating Authority and the parties are required to deal with it in

accordance with law. However, we make it clear that we are not

expressing any opinion on merit or counter claim made by the parties,

Company Appeal (AT) (Insolvency) No. 733 of 2019 -6-

which is required to be decided by the Adjudicating Authority. The

Adjudicating Authority has already heard the case and reserved the

order, we hope the Adjudicating Authority will pass appropriate order at

an early date.

The appeal is dismissed. No cost.

(Justice S.J. Mukhopadhaya) Chairperson

(Kanthi Narahari) Member(Technical) Ar/g

Company Appeal (AT) (Insolvency) No. 733 of 2019