Srv Techno Engineering Pvt.Ltd vs Purvanchal Vidyut Vitran Nigam Ltd

Comp. App. (AT) (Ins) No. 1651 of 2023 & I.A. No. 5952, 5954, 5955 of 2023

(Arising out of the Order dated 12.10.2023 passed by the National Company Law Tribunal, Allahabad Bench, Prayagraj in CP (IB) No. 486/ALD/2019)

IN THE MATTER OF:

SRV Techno Engineering Pvt. Ltd. Having its registered office at :- B-295, Sector - 19, Dwarka, New Delhi - 75 Also, at: 3rd Floor, Tokas Plaza Amberhai, Sector 19, Dwarka New Delhi - 110075. ...Appellant Versus

Purvanchal Vidyut Vitran Nigam Ltd. Having its registered office at: Vidyut Nagar, P.O. DLW, Varanasi, Uttar Pradesh - 221004. ...Respondent

Present

For Appellant: Mr. Abhijeet Sinha, Sr. Advocate, Mr. Gaurav H. Sethi, Mr. Akash Chatterjee, Mr. Deeptanshu Chandra and Mr. Rahul Pawar, Advocates.

For Respondent: None being Ex-parte.

JUDGEMENT

(23.04.2024)

NARESH SALECHA, MEMBER (TECHNICAL)

1. The present Appeal has been filed by SRV Techno

Engineering Pvt. Ltd. (in short Appellant) under Section 61 of the Insolvency & -2- Comp. App. (AT) (Ins.) No. 1651 of 2023

Bankruptcy Code, 2016 (in short 'Code') in Company Appeal (AT) (Insolvency)

No. 1651 of 2023 against the Impugned Order dated 12.10.2023 passed by the

National Company Law Tribunal, Allahabad Bench, Prayagraj (in short

'Adjudicating Authority') in CP (IB) No. 486/ALD/2019.

2. Heard Counsel for the Appellant as the Respondent never participated in

the proceedings. In this connection, it is noted that in the first order sheet dated

18.12.2023, no one had appeared on behalf of the Respondent. Similar position

persisted on 06.02.2024 and since then the Respondent did not appear even on

15.03.2024, therefore it was decided to proceed ex-parte against the Respondent

and the matter was listed for hearing on ex-parte basis on 08.04.2024 and on the

same date the order was reserved.

3. It is noted that petition was filed by the Appellant under Section 9 of the

Code against the Respondent for initiation of Corporate Insolvency Resolution

Process (in short 'CIRP') for amount of Rs. 4,43,42,607/- inclusive of interest on

the date of filing of petition before the Adjudicating Authority on 31.08.2019.

4. The Appellant is involved in business of supply of electrical equipment,

components, servicing and providing allied services thereof, whereas the

Respondent is the company engaged in distribution of electric power in Eastern

area of Uttar Pradesh.

5. Shorn of unnecessary details, it is suffice to note that the Appellant got

awarded two tenders by the Respondent for work of system improvement, -3- Comp. App. (AT) (Ins.) No. 1651 of 2023

strengthening and augmentation for bringing down Aggregate Technical and

Commercial ( in short 'AT&C') losses and to improve consumer supply under

two different projects, namely, Kopaganj (as first project) with revised Bill of

Quantities (in short 'BOQ') with the value of work at Rs. 7,37,93,117/- along

with another project called Ghoshi Project (second project) with revised BOQ of

Rs. 6,72,24,729/-.

6. The Kopaganj Project was awarded through Letter of Intent (in short

'LOI') dated 03.03.2016 issued by the Respondent in favour of the Appellant and

for Ghosi Project the LOI was issued on 27.04.2016 by the Respondent to the

Appellant.

7. It has been pointed out that approval for the BOQ revision of both the

projects was granted by the Managing Direction of the Respondent along with

Director (Technical), Chief Engineer and Superintending Engineer and thereafter

the revision approved BOQ for the first project stood at Rs. 7,37,93,117/- as for

second revised project stood as approved to Rs. 6,72,24,729/.

8. The Appellant claimed that he successfully completed the entire project

and submitted a completion report to the CEO of the projects which was accepted

by the Superintending Engineer of Mau and Managing Director (in short 'MD')

of the Respondent, both signed meaning acceptance of work's completion and

accordingly completion certificate dated 23.12.2017 was issued by the -4- Comp. App. (AT) (Ins.) No. 1651 of 2023

Superintending Engineer confirming the successful completion of both the

projects by the Appellant for the value indicated in completion certificate.

9. The Appellant submitted that for Kopaganj Project, the Appellant raised

invoices amounting to Rs. 7,38,13,510/- and received the payment from the

Respondent for Rs. 7,29,86,819/-. Similarly, for Ghosi Project, the Appellant

raised invoices amounting to Rs. 6,72,24,553/- and received the amount of

Rs. 5,03,61,369/-.

10. The Appellant submitted that in totality for both the projects he raised

invoices for amounting to Rs. 14,10,38,063/- and received the payment of only

Rs. 12,33,48,156/- and thus there was an outstanding Rs. 1,76,89,875/- as the date

of initiation of CIRP.

11. It has been noted out that the Appellant personally delivered the demand

notice under Section of 8 of the Code to the Respondent on 03.09.2019 and sent

another via registered post on 12.09.2019 and no reply to be demand notice was

received from the Respondent within the mandatory ten days period as stipulated

under the Code.

12. It is the claim of the Appellant that on 06.09.2019, he sent letter to the

Superintending Engineer Mau of the Respondent and in respect thereto,

Superintending Engineer replied vide letter dated 11.09.2019 confirming the

details of outstanding payment to the Appellant vide e-mail dated 31.07.2019. -5-

Comp. App. (AT) (Ins.) No. 1651 of 2023

13. The Appellant pleaded that he filed CP (IB) No. 486/ALD/2019 on

26.11.2019 before the Adjudicating Authority for initiation CIRP against the

Respondent and post initiation of CIRP, the Respondent raised alleged disputes

regarding amount of work done and due payment.

14. As per the Appellant the main reason for alleged dispute by the Respondent

was word done over and above contracted amount and lack of proper sanction by

the competent authority of the Respondent for such excess work.

15. It is the case of the Appellant that he was communicated for the revised

BOQ and was also issued accounts confirmation letter dated 03.10.2017 and work

completion certificate dated 23.12.2017, hence the plea of the Respondent that

lack of competent authority the approval is moon shine defense.

16. The Appellant submitted that after filing the Section 9 application under

the Code before the Adjudicating Authority, the Appellant also filed proceedings

on 16.06.2022 as available to him under Section 18 of MSME Act, 2006 where

the Arbitrator gave the Award in the favour of the Appellant on 04.01.2023 for

Rs. 1,73,84,846/-.

17. The Appellant admitted that he erred in not mentioning the date of default

in the original Section 9 application, however, he filed an appropriate application

bearing MA No. 02/2023 where the correct date of default was stated to be

24.04.2018, as the Corporate Debtor did not make any payment beyond this date. -6-

Comp. App. (AT) (Ins.) No. 1651 of 2023

18. The Appellant also submitted that he found discrepancy in his account due

to non-consideration of some payments received and according to which the total

outstanding amount was Rs. 1,76,89,875/- and not Rs. 4,43,42,607/- and the same

was mentioned in MA No. 02/2023 before the Adjudicating Authority filed before

the Adjudicating Authority.

19. It is the case of the Appellant that the Adjudicating Authority incorrectly

held that due date of filing i.e., 03.03.2023 and did not consider as these facts are

only in nature of the curative facts and to be r/w to the original Section 9 petition

filed on 26.11.2019.

20. The Appellant submitted that the Adjudicating Authority committed the

error in holding that on the date of filing of Section 9 application should be

03.03.2023 and due to Arbitration Award dated 04.01.2023, a dispute already

existed between the Appellant and the Respondent and also held that the Code is

not meant for recovery purpose.

21. We would like to take into account the relevant portion of the cited

judgment passed by this Appellate Tribunal in the case of M/s Raj Television

Network Limited vs. M/s. Thaicom Public Company Limited [Company Appeal

(AT) (CH) (Ins.) No. 325 of 2023], where on identical facts this Appellate

Tribunal held that on account of mere technical its, substantial rights of the

creditor cannot be prejudiced.

-7-

Comp. App. (AT) (Ins.) No. 1651 of 2023

22. It is the case of the Appellant that the Impugned Order is perverse in

dismissing his application on the ground of pre-existing dispute whereas there

was no dispute whatsoever between the Appellant and the Respondent and the

Respondent did not communicate any pre-existing dispute even after issue of

demand notice issued under Section 8 of the Code. In fact, the Respondent never

replied to demand notice issued by the Appellant.

23. The Appellant cited few judgments in the matter of Ivalue Advisors Pvt.

Ltd. vs. Srinagar Banihal Expressway Ltd. [Company Appeal (AT) (Ins.) No.

1142 of 2019] and Dena Bank vs. C. Shivakumar Reddy [C.A. No. 1650 of 2020]

in support of his points, discussed above.

24. Concluding his remarks the Appellant requested to allow his appeal and set

aside the Impugned Order.

25. As already noted the Respondent never appeared before this Appellate

Tribunal in the present appeal and on 08.04.2024, it was decided to hear the

Appellant on ex-parte basis as such we did not have the pleadings of the

Respondent as well as reply of the Respondent in the present appeal. Hence, we

relied upon the Impugned Order and the original application of the Appellant

before the Adjudicating Authority under Section 9 of the Code, to understand the

pleadings of the Respondent as stated in the Impugned Order and logic and

reasoning of the Adjudicating Authority while the passing the Impugned Order. -8-

Comp. App. (AT) (Ins.) No. 1651 of 2023

26. From the Impugned Order it is seen that the following pleading of the

Respondent were made before the Adjudicating Authority :-

(i) The Respondent is the Government company and therefore exempted

from the purview of the Code and had got protection of not to be

proceeded against under the Code.

(ii) The Respondent refuted that the Appellant was an Operational Creditor

of the Respondent.

(iii) The Respondent stated that the work related to AT&C were decided by

the competent committee i.e., Committee headed by Managing Director

of the Respondent and it was decided on 02.03.2016 to award the work

of Kopaganj Project for Rs. 6,81,30,795.78/- and similarly the

committee decided on 26.04.2016 to award Ghosi Project for

Rs. 5,37,84,634.89/- and relied upon the minutes of their internal

meeting held on 02.03.2016 and 26.04.2016 and further submitted that

based on these two letter of; LOI dated 21.03.2016 was issued w.r.t.

Kopaganj Project and LOI dated 10.05.2016 was issued to the Appellant

for Ghosi Project.

The Respondent had also stated before the Adjudicating Authority that

contract was executed between the Appellant and the Respondent on 21.03.2016

for Kopaganj and on 10.05.2016 for Ghosi Project.

-9-

Comp. App. (AT) (Ins.) No. 1651 of 2023

27. The Respondent also admitted that during the pleadings before the

Adjudicating Authority that a letter dated 11.01.2017 was issued by the

Respondent to the Appellant intimating that by its earlier letter dated 02.12.2016

and 05.12.2016 the representative of the Appellant was informed regarding BOQ

equivalent to Rs. 6,722,24,729.64/- and for Ghosi Project of Rs. 7,37,93,117.92/-

for Kopaganj Project, had been approved with all other terms and conditions of

the tender.

[Note:- at this stage, we note that there seems to be some typographical error in

the Impugned Order while regarding this fact in Part 3 (vii) as we have noted that

final BOQ amounting to Rs. 6,72,24,729/- as mentioned in the present appeal

before us.]

28. The Respondent also admitted that letter dated 11.01.2017 and noting to

the office files of the Respondent demonstrated signature of MD of Respondent

along with Director (Technical), Chief Engineer and Superintending Engineer

stating to have approved for revised agreement for Rs. 7,37,93,117.92/- for

Kopaganj Project and Rs. 6,72,24,729.64/- for Ghosi Project.

29. It was the case of the Respondent before the Adjudicating Authority that

the Appellant raised invoices over and above the for these additional works there

was no effective order of the Competent Authority/ Committee for the same and

further submitted that merely approval of the MD in the file cannot constitute an

effective order which can be relied for the existence of the debt. -10-

Comp. App. (AT) (Ins.) No. 1651 of 2023

30. The Respondent also taken the plea regarding absence of privity of contract

for the additional work between the Appellant and the Respondent and stated that

the Respondent has already paid amount of Rs. 12,33,48,188/- and pleaded that

Section 9 application has been filed only for recovery.

31. The Respondent again took a plea before the Adjudicating Authority of non

approval/ sanction by the competent committee in asking the Appellant to do

additional work and contested accordingly the claims of the Appellant.

32. The Respondent has taken plea before the Adjudicating Authority that the

Appellant sought a reference under provisions of MSME Act, 2006 and thus stand

debarred to use the IBC.

33. The Respondent strongly took up plea before the Adjudicating Authority

that the Respondent being a Government Company whose 100% of the share are

held by the State Government makes it instrumentality of state and therefore

insolvency proceedings cannot be initiated against it.

34. Another argument the Respondent has taken before the Adjudicating

Authority that the Respondent had annual turnover of Rs. 11,000 Crores and

employed about 8,000 staff and the claim is miniscule and therefore, does not

deserve to be entertained under Section 9 of the Code.

35. The Respondent has also taken a plea that one of the objectives of IBC qua

operational debts is to ensure that the amounts of such debts, which is usually

smaller than that of financial debts, does not enable operational creditors to put -11- Comp. App. (AT) (Ins.) No. 1651 of 2023

the corporate debtor into the insolvency resolution process, prematurely or initiate

the process for extraneous consideration.

Findings

36. The several issues raised in the present appeal and mainly on the ground

that additional work got done, albeit with the approval of MD of the Respondent,

however was not approved by the competent committee, the Appellant has taken

recourse to Arbitration under MSME Act, the Respondent being a government

company is out of purview of the Code and further the debt of default was not

correctly mentioned in the original petition and therefore, pleaded that the

Adjudicating Authority to dismiss the application filed under Section 9 of the

Code. .

37. We have already noted that the Respondent issued and signed the

agreement with relation to Kopaganj Project and Ghosi Project along with the

additional work issued to the Appellant.

38. It has also been taken on record that the BOQ for Kopaganj Project

underwent a revision and the Appellant received the approval for revised BOQ

from the Superintending Engineer of Respondent No. 2 on 27.09.2016 for

Rs. 7,37,93,117/- and similarly Superintending Engineer issued the approval for

revised BOQ on 18.10.2016 for Rs. 6,72,24,729/- for Ghosi Project after

receiving approval from the MD of Respondent No. 2 along with Chief Engineer, -12- Comp. App. (AT) (Ins.) No. 1651 of 2023

Director (Technical) of the Respondent No. 2 and the Appellant commenced work

accordingly.

39. It has been confirmed by the parties during the pleadings before the

Adjudicating Authority that both the project works were completed successfully

and completion certificate was issued by the Respondent in favour of the

Appellant which reads as under :-

-13-

Comp. App. (AT) (Ins.) No. 1651 of 2023

40. From the completion certificate dated 23.12.2017 seen above, it is noted

that the total amount which has been certified to be completed by the Appellant

is of Rs. 14,10,17,846/-. Similarly, from the details brought out before us, it is

seen that total amount of invoices raised by the Appellant was Rs. 14,10,38,063/-

and the Appellant is stated to have been paid Rs. 11,81,08,663/-.

41. We also note that the Appellant conceded before the Adjudicating

Authority that the default amount was actually of Rs. 1,76,89,875/- which was

wrongly mentioned as Rs. 4,43,42,607/- in their application along with non

disclosure of date of default and this was mentioned by the Appellant before the

Adjudicating Authority much earlier to passing of the Impugned Order and during

pleadings itself brought to the notice of the Adjudicating Authority of these facts

through MA No. 02/2023, which was disposed off by the Adjudicating Authority

vide order dated 07.08.2023. Hence, the amount claimed by the Appellant as

default amount was to be treated as Rs. 1,76,89,875/- along with the date of

default 24.04.2018.

42. Since, the Respondent did not appear before this Appellate Tribunal we

have taken the help of the Impugned Order to understand their point of view

which we noted in the preceding discussions.

43. The Respondent also doubted regarding existence of letter dated

02.12.2016 and 05.12.2016 since they could not trace these letters in their files. -14-

Comp. App. (AT) (Ins.) No. 1651 of 2023

In this connection, we would like to take into account the exact wording as

recorded in the Impugned Order which reads as under :-

"The Respondent has contended and stated that the existence

of letters dated 02.12.2016 and 05.12.2016 are seriously

disputed as the same are not available with the respondent

and the same have not been appended with the petition."

44. We take note from the Impugned Order which reads as under:-

"3. (vii.) The Respondent has further stated that a letter dated 11.01.2017 was issued to the claimant, intimating that by earlier letters dated 02.12.2016 and 05.12.2016, the representative of the claimant has already been informed that Bill of Quantity (BOQ) equivalent to Rs.6,722,24,729.64 for Ghosi town and Rs.7,37,93,117.92p for Kopaganj town has been approved and that all other terms and conditions and rates will be as per agreement The respondent has further stated that along with this letter dated 11.01.2017 notings of the office file bearing signatures of Managing Director (PuVVNL), Director Technical, Chief Engineer (technical) (R-APDRP) and Superintending Engineer (RAPDRP) stating to be. an approval for revised agreement value of Rs.7,37,93,117.92p for Kopaganj and Rs.6,72,24,729.64p for Ghosi town have been appended with the petition. viii. The Respondent has contended that from perusal of the letter dated 11.01.2017 and official noting, it appears that the claimant had raised invoice, which was over and above the contracted amount claiming to be the additional work having -15- Comp. App. (AT) (Ins.) No. 1651 of 2023

been done apart from the work assigned under the contract. The respondent has further contended that noting in the file do not have behind them sanction of the law to be an effective order and merely writing in the file cannot constitute an effective order which can be relied for the existence of a debt. The respondent has further contended that the signature of the Managing Director does not in itself demonstrate the approval been given and it is at the best counter signature having no trappings of approval by proper application of mind." (sic) (Emphasis Supplied)

45. We find, above pleadings of the Respondent before the Adjudicating

Authority as recorded in the Impugned Order rather strange and find that the

Respondent at one end accept all work done by the Appellant even with the

approval of MD, however, has chosen to refute the claim of work done by the

Appellant merely due to fact that the competent committee of the Respondent has

not recorded its approval on file.

We wonder how this impacts the claims of the Appellant as the approval

by the committee or the Managing Director, at the best is outlook and process of

the Respondent and subject to doctrine to indoor management and by this cannot

adversely impact and impair the rights of the Appellant.

46. In the aforesaid discussions, we note that the Impugned Order records that

the Respondent doubted existence of letter dated 02.12.2016 and 05.12.2016 as -16- Comp. App. (AT) (Ins.) No. 1651 of 2023

these were not available in the files of the Respondent. We find it strange to note

that the same Impugned Order, observed in Para 3(vii) of the Impugned Order,

where it has been mentioned that the Respondent has stated that a letter dated

11.01.2017 was issued to the claimant intimating that vide earlier letter dated

02.12.2016 and 05.12.2016 the representative of claimant has already been

informed that revised BOQ for Kopaganj Project and Ghosi Project has been

approved along with terms and conditions as per agreement.

Clearly, both the statement recorded in the Impugned Order as submitted

by the Respondent are contradictory. The fact is that the Respondent has accepted

and communicated to the Appellant regarding acceptance of the revised BOQ and

the same should have been dealt with by the Adjudicating Authority suitably.

47. We feel that it will be travesty of justice, if the claims of the Operational

Creditor like the Appellant herein are refuted and denied by Public Sector

Undertakings like Respondent herein in such casual, catastrophic and unfortunate

manner. Afterall it is the faith on such PSUs, Operational Creditors like the

Appellant here in start the execution of the work immediately, sometimes even

without for formal contract, based on LOI.

48. Hence, the ground of alleged lack of proper approval by the committee of

the Respondent and therefore, the Respondent is not bound to make the payment

is just not acceptable and stand rejected in the strongest terms. -17-

Comp. App. (AT) (Ins.) No. 1651 of 2023

49. As regard the plea of pre-existing dispute based on the Arbitration Award

made by the Single Arbitrator, whereby the Arbitrator passed an award of Rs.

1,73,84,846/- in favour of the Appellant under Section 18 of MSME Act, 2006,

we take into consideration the fact that the Appellant filed an application under

Section 9 of the Code on 26.11.2019 and had already issued the demand notice to

the Respondent under Section 8 of the Code on 03.09.2019, whereas the

Appellant initiated proceedings under MSME Act, 2006 much later on

16.06.2022 and the award was received on 04.01.2023. Hence, without going

into controversy of Arbitration Award under MSME Act, 2006 V/s the application

filed under Section 9 of the Code, it is suffice to note that at the time of filing the

application by the Appellant under Section 9 of the Code i.e., on 16.11.2019, there

was no petition by the Appellant regarding any arbitration nor any award came in

favour of the Appellant which was wrongly presumed to be pre-existing dispute

by the Adjudicating Authority in the Impugned Order. On face of it, the

assumptions and rational taken by the Adjudicating Authority in this regard on

the aspect of pre-existing dispute it patently illegal and required to be treated

accordingly.

50. This view is also supported by judgment of this Appellate Tribunal

rendered in case iValue Advisors Pvt. Ltd. (Supra), where it has been held that

relief under MSME Act, 2006 cannot be considered as pre-existing dispute

between the parties the relevant paras read as under :- -18-

Comp. App. (AT) (Ins.) No. 1651 of 2023

"9. We have heard Counsel for both sides and going through the matter, we find that the Adjudicating Authority erred in concluding that because Operational Creditor had moved the MSME Authorities, it showed pre-existing dispute. The Appellant had a relief open under the MSME Act and only because the Appellant moved the Authority under MSME Act, it does not mean that there is a pre-existing dispute. The dispute raised by the Appellant before the MSME was that it had dues to recover and that the Respondent has not paid.

This by itself does not mean that there is pre-existing dispute as far as the Respondent is concerned. Under the IBC Section 5 Sub-Section (6), the dispute is defined as under:-

"(6) "dispute" includes a suit or arbitration proceedings relating to--

(a) the existence of the amount of debt;

(b) the quality of goods or service; or © the breach of a representation or warranty"

10. Section 17 of MSME Act reads as under:-

"17. Recovery of amount due.--For any goods supplied or services rendered by the supplier, the buyer shall be liable to pay the amount with interest thereon as provided under section 16"

Sub-Section (1) of Section 18 of that Act reads as under:-

"(1) Notwithstanding anything contained in any other law for the time being in force, any party to a dispute may, with regard to any amount due under section 17, make a reference to the Micro and Small Enterprise Facilitation Council."

-19- Comp. App. (AT) (Ins.) No. 1651 of 2023

Thus the context of the word "dispute" in Section 18 takes colour from Section 17 of MSME Act. It is different from context of Section 5(6) read with Section 8 of IBC."

(Emphasis Supplied)

51. It is also noted that the Appellant has conceded that in his original

application, the date of default was not mentioned and vide MA No. 02 of 2023

the Appellant brought to the notice of the Adjudicating Authority the correct date

as 24.04.2018.

52. In this regard, the Impugned Order take note that on date of filing

application under Section 9, the Applicant did not mention the date of default and

amount of default was also incorrect hence on the date of filing it was not legal

valid petition under Section 9 of the Code.

53. The Impugned Order also note that these deficiencies were corrected only

on 03.03.2023 and therefore the Appellant deemed to have filed legal and valid

petition only on 03.03.2023, by which time the award of the Arbitrator was

pronounced on 04.01.2023. The Adjudicating Authority considered it to be pre-

existing dispute before the filing application filed under Section 9 of the Code by

the Appellant.

54. In this regard, we note that under Section 9(5)(ii)(a) of the Code the

Adjudicating Authority can reject the application and communicate such decision -20- Comp. App. (AT) (Ins.) No. 1651 of 2023

to the Operational Creditor if the application is incomplete. However, we will

read the proviso under Section 9 of the Code (5), reproduced as under :-

"9. Application for initiation of corporate insolvency resolution process by operational creditor. - (5) The Adjudicating Authority shall, within fourteen days of the receipt of the application under sub-section (2), by an order-

(i) admit the application and communicate such decision to the operational creditor and the corporate debtor if, -

(a) the application made under sub-section (2) is complete;

(b) there is no 3 [payment] of the unpaid operational debt;

(c) the invoice or notice for payment to the corporate debtor has been delivered by the operational creditor;

(d) no notice of dispute has been received by the operational creditor or there is no record of dispute in the information utility; and

(e) there is no disciplinary proceeding pending against any resolution professional proposed under sub-section (4), if any.

(ii) reject the application and communicate such decision to the operational creditor and the corporate debtor, if -

(a) the application made under sub-section (2) is incomplete;

(b) there has been 1 [payment] of the unpaid operational debt;

(c) the creditor has not delivered the invoice or notice for payment to the corporate debtor;

-21- Comp. App. (AT) (Ins.) No. 1651 of 2023

(d) notice of dispute has been received by the operational creditor or there is a record of dispute in the information utility; or

(e) any disciplinary proceeding is pending against any proposed resolution professional:

Provided that Adjudicating Authority, shall before rejecting an application under sub clause (a) of clause (ii) give a notice to the applicant to rectify the defect in his application within seven days of the date of receipt of such notice from the Adjudicating Authority."

(Emphasis Supplied)

55. From it is clear that the Adjudicating Authority has jurisdiction to reject

the application being incomplete but is also obligated that before such rejection

has to give a notice to the Applicant to rectify the defects in his application within

seven days of the date of receipt of such notice from the Adjudicating Authority.

56. We note that no notice seems to have been issued by the Adjudicating

Authority to the Appellant.

57. In this record, we will like to refer to the judgment by this Appellate

Tribunal in the matter of M/s Raj Television Network Limited (Supra) where it

has been held that on account of mere technicalities the party's substantial rights

cannot be prejudiced and when the Operational Creditor made attempt to rectify

such procedural defect at later stage such acts cannot be held against him and -22- Comp. App. (AT) (Ins.) No. 1651 of 2023

become a ground for dismissal of the petition filed under Section 9 of the Code.

The relevant portion reads as under :-

"33. There is no rule limiting 'amendment' to 'accidental' errors. An 'amendment', which is necessary for the just decision of a case can be allowed. Also that, an 'amendment', in 'general', is not to be refused, in a mechanical and casual manner. In fact, the 'pleadings' can be amended, to substantiate, to elucidate and expand the 'pre-existing facts', 'already existing'.

34. A 'person', will not be refused permission, to 'amend the pleadings', merely because of some mistakes, negligence, inadvertence, or even infraction of rules of procedure, as the case may be. No person should suffer, in lieu of technicalities of law and to minimise the litigation between the parties.

35. Merits / demerits of the case, set up by the proposed amendment, would not be seen at that time of consideration of application, for amendment, but would be seen at that time of 'trial'.

43. In the present case, even though, the Appellant / Respondent, had 'come out with the plea' that the amendment in pleadings was sought for by the Respondent / Petitioner in IA(IBC)/733/CHE)/2022 in IBA/491/2020 with the inordinate delay of 2½ years, keeping in mind, of a prime fact, that the 'Amendment', 'in pleadings' is in 'imperative one', for a proper, effective and efficacious adjudication of the controversies, involved in the main IBA/491/2020 on the file of the Adjudicating Authority / Tribunal. Added further, -23- Comp. App. (AT) (Ins.) No. 1651 of 2023

the Adjudicating Authority / Tribunal, had given liberty to the Respondent / Petitioner / Operational Creditor on 10.06.2022 in IBA/491/2020 to file an 'Amendment Application', this Tribunal, comes to a consequent conclusion, that IA(IBC)/733/CHE)/2022 in IBA/491/2020 is a 'Bonafide' one and to 'minimise litigation' between the parties and also that 'No Party', should suffer on account of 'technicalities' of Law, and viewed in that prospective, the allowing of IA(IBC)/733/CHE)/2022 in IBA/491/2020, by the Adjudicating Authority / Tribunal, on 26.07.2023 is free from any legal flaws. Accordingly, the Appeal sans merits.

44. In fine, the Company Appeal (AT)(Ins.) No.325/2023 is dismissed by this Tribunal, for the reasons ascribed in this Appeal. No Costs. The connected IA 991/2023 (for stay) is closed."

(Emphasis Supplied)

58. In this connection, we would also refer to judgement of Hon'ble Supreme

Court of India has passed in the matter of 'Dena Bank v. C. Shivakumar Reddy'

C.A. No. 1650 of 2020. The relevant paras are read as under :-

"144. There is no bar in law to the amendment of pleadings in an application under Section 7 of the IBC, or to the filing of additional documents, apart from those initially filed along with application under Section 7 of the IBC in Form-1. In the absence of any express provision which either prohibits or sets a time limit for filing of additional documents, it cannot be said that the Adjudicating Authority committed any illegality or error in permitting the Appellant Bank to file -24- Comp. App. (AT) (Ins.) No. 1651 of 2023

additional documents. Needless however, to mention that depending on the facts and circumstances of the case, when there is inordinate delay, the Adjudicating Authority might, at its discretion, decline the request of an applicant to file additional pleadings and/or documents, and proceed to pass a final order. In our considered view, the decision of the Adjudicating Authority to entertain and/or to allow the request of the Appellant Bank for the filing of additional documents with supporting pleadings, and to consider such documents and pleadings did not call for interference in appeal."

(Emphasis Supplied)

59. Thus, we find merit in the arguments of the Appellant in support of his case

that the Appellant was entitled to cure the defects.

60. In view all above, we are unable to accept the logic of the Adjudicating

Authority recorded in the Impugned Order regarding incorrect date. Once the date

of the original application filed under Section 9 of the Code is treated as

26.11.2019, there is no question of any pre-existing dispute.

61. It is also noted that the Appellant fairly and consciously brought to the

notice of the Adjudicating Authority therefore MA No. 02 of 2023 of correct

outstanding amount of Rs. 1,76,89,935/- which was also incidentally confirmed

by the award under MSME Act, 2006. The Adjudicating Authority should have

taken into consideration these facts before passing the Impugned Order. -25-

Comp. App. (AT) (Ins.) No. 1651 of 2023

62. We also note that demand notice under Section 8 of the Code was issued

on 03.09.2019 to the Respondent and no dispute was ever raised by the

Respondent prior to issue of such demand notice. In fact, the Respondent chose

not to reply to such demand notice.

63. In view of above detailed discussions, we find merit in the appeal. The

appeal is allowed and we set aside the Impugned Order. No Costs. Interlocutory

Application(s), if any, are Closed.

[Justice Rakesh Kumar Jain] Member (Judicial)

[Mr. Naresh Salecha] Member (Technical)

[Mr. Indevar Pandey] Member (Technical)

Sim