Switching Avo Electro Power Ltd vs Ambient Computronics Pvt Ltd

[Arising out of Order dated 18th November, 2019 passed by National Company Law Tribunal, Kolkata Bench, Kolkata in C.P. (IB) No. 993/KB/2019]

IN THE MATTER OF: Switching AVO Electro Power Ltd. Having its registered office at: 230 S. N. Roy Road, Kolkata, West Bengal - 700038. ...Appellant (Operational Creditor). Versus

Ambient Computronics Pvt. Ltd. Having its registered office at: 38, AN Path North, SK Puri, Boring Road, Patna, Bihar - 800013. ...Respondent (Corporate Debtor).

Present:

For Appellant: Mr. Abhay K. Das, Advocate. For Respondent: Mr. Kumar Sumit and Mr. Chirag Gupta, Advocates for R-1.

ORAL JUDGMENT

(Virtual Mode)

1. Heard Mr. A.K. Das, Advocate for the Appellant/Operational Creditor and

Mr. Kumar Sumit, Advocate for Respondent/Corporate Debtor. The Operational

Creditor - Switching AVO Electro Power Ltd. filed application under Section 9 of

Insolvency and Bankruptcy Code, 2016 (IBC In Short) before the Adjudicating

Authority (National Company Law Tribunal, Kolkata Bench, Kolkata in Company

Petition (IB) No. 993/KB/2019). The Appellant claimed that the Appellant is in 2

business of supply of UPS Power Storage Equipment and in ordinary course of

business the Operational Creditor supplied UPS Power Storage to the Corporate

Debtor. The Corporate Debtor made default in making payment of the balance

of amount of Rs. 21,07,916/-. Counsel for the Appellant claims that as the

amount was outstanding, Demand Notice under section 8 of I & B Code, 2016,

copy of which is at page 67 was sent on 10th April, 2018. The document of e-mail

as at page 185 shows that the Corporate Debtor received the Notice on 24th April,

2018 and the Corporate Debtor had sent Reply, copy of which is at page 82. The

Reply is dated 30th April, 2018. The Respondent claimed internal disputes with

one other director of the Corporate Debtor namely Mr. Sudhir Kumar.

Respondent claimed in Reply that the Corporate Debtor (which is based in

Kolkata) the supply was not in the knowledge of the head office and that their

own branch which is at Varanasi had failed to submit books of accounts for

periodic compilation, reconciliation and observation. The Corporate Debtor

informed the Operational Creditor in Reply to bear with the Corporate Debtor to

know about lapse and conspiracy behind raised situation between the two

reputed companies. The Corporate Debtor informed that they need sufficient

time for confirmation of the transaction purchase, sale, payment and receipt.

2. The Learned Counsel for the Appellant is pointing out that after sending

such reply dated 30th April, 2018 with e-mail dated 02nd May, 2018 (Page 185)

the Corporate Debtor did not enter into any correspondence or contact with the

Operational Creditor and ultimately the Appellant filed Application under Section

9 of I & B Code, 2016 at 30th May, 2018, copy of which is at page 43. The Learned Company Appeal (AT) (Ins) No. 525 of 2020 3

Counsel referred to Ledger Account of the Operational Creditor which is at page

66 and submits that between the Operational Creditor and the Corporate Debtor

there had been business of Rs. 8,30,45,885 /- out of which Rs. 8,09,37,969/-

had already been paid. However, the Corporate Debtor defaulted in payment of

outstanding bill of Rs. 21,07,916/- in spite of demands. It is argued that Bank

Statement copy of which is at Page 72 shows that the Corporate Debtor had from

time to time made various payments including payment against the invoice, copy

of which is at page 84 of the Appeal Paper Book and the e-way bill is at Page 85.

The Learned Counsel submits that there was no dispute raised by the Corporate

Debtor before Section 8 Notice was sent and even the Reply to Section 8 Notice

stated that they would verify but in spite of that, no follow up & no payment was

made. The Learned Counsel submitted that the Adjudicating Authority erred in

going into the defence that the Corporate Debtor - Company had internal

disputes with one of the directors and that such defence put up by the Corporate

Debtor could be looked into to refuse to admit the Application under Section 9

of I & B Code, 2016.

3. The Learned Counsel for the Respondent is submitting that if the tax

invoice as at Page 84 is perused and the invoice number is seen and the address

of the consignee is kept in view which had address at Varanasi, the e-way bill

which shows the name of the Corporate Debtor, the address given is of

Bhullanpur at Marhauli in Uttar Pradesh and thus it is argued that the goods

were never supplied to the Corporate Debtor and this has been rightly accepted

by the Adjudicating Authority if the impugned order is perused and Paragraph 8 Company Appeal (AT) (Ins) No. 525 of 2020 4

of the impugned order is considered. The Learned Counsel submits that the

Corporate Debtor had never received these goods and the Learned Counsel

pointed out Reply which was filed before the Adjudicating Authority, copy of

which is at page 108 and referred to ground U that there was no agreement

between the Operational Creditor and the alleged Corporate Debtor and that no

security has been obtained by the Operational Creditor. It is argued that there

was corrupt practices adopted by Operational Creditor and said Mr. Sudhir

Kumar who was one of the directors of the Corporate Debtor. The Learned

Counsel argued that the Company already has a dispute pending with the said

Director Mr. Sudhir Kumar in Ld. NCLT. It is also stated that the screenshot at

Annexure A-7 which is at page 48 of the Rejoinder does not show that actually

GST was paid. It is argued that even if it is paid, there is procedure to get refund

of the same. It is also argued that the Corporate Debtor is authorized dealer of

Exide and the Appellant was competitor and thus false case was filed and the

Adjudicating Authority has rightly dismissed the Application under Section 9.

4. We have gone through the Judgment of the Adjudicating Authority. The

Adjudicating Authority took note of the internal disputes between the Directors,

which particulars were placed before the Adjudicating Authority. The

Adjudicating Authority in Paragraph 8 of the Impugned Order went on to analyze

the documents filed by the Appellant and observed that the invoice relied on, did

not show the delivery address of the Corporate Debtor which was a registered

address of the Company and was at Patna in Bihar. It is further observed as

under:

Company Appeal (AT) (Ins) No. 525 of 2020 5

"It is significant to note here that the said invoice refers to delivery of goods at Varanasi. Where as the registered office of the corporate debtor is at Patna. Moreover the registered branch office at Varanasi was shifted to Lucknow as per the registration certificate dated 14.12.2017. (Copy of registration certificate is at page 90 of the Reply). So also it is evident that a complaint was lodged to the ROC Patna alleging financial inaccuracy and revenue collection etc. as to the affairs of the corporate debtor company. (Notice of ROC dated 31.1.2018). In the said circumstances it cannot be hold that there is delivery of goods to the corporate debtor as alleged. Non production of proof of delivery of goods for which claim is made in this application and invoices is fatal in the nature of this case.

No explanation is forthcoming form the side of the Operational Creditor as to non production of the invoices proving the delivery of goods to the corporate debtor to its registered address. The Operational Creditor has got the burden to prove that the amount claimed is due to the Operational Creditor upon delivery of goods as alleged in the Application."

Making such observations, the Adjudicating Authority referred to the

format which was submitted and concluded that there were no such pleadings

and also observed that there was no supporting evidence to prove that Corporate

Debtor had placed orders for purchasing the goods referred to in the invoices.

For such and other reason, the Application came to be rejected.

5. Having heard the Learned Counsel for both sides, we find that defence

apparently shows that the Corporate Debtor had some disputes with one of the Company Appeal (AT) (Ins) No. 525 of 2020 6

Directors and made allegations against the said director. The Appellant has filed

copy of the Bank Statements which is at Page 72 and in ordinary course of

business, there are various entries in the Bank Statement which show payments

from the Corporate Debtor. The Reply sent by the Corporate Debtor copy of which

is at Page 82 may be reproduced. The Corporate Debtor in response to Section 8

Notice replied:

"Dear Sir,

In reference to your notice we would like to inform you that negotiation of said business transaction and payment terms & conditions, payment reminders & follow ups are not in head office information.

Your total of this supply is not in knowledge of head office/other promoter Director, Mr. Sudhir Kumar one of the Director of the Company, only uses the name of the company without involving company work, bank transaction etc and personally use the business activity with his fraudulent work and company head office is not aware the matter.

Our branch is failed to submit books of accounts for periodic compilation, reconciliation & observation.

A very important thing is that Mr. Anand Singh was very much aware about malpractices of our authorized director for branch operation & was informed by Mr. R.U. Siddiqui one of director of the company that he should do no further transaction with that branch & recover his outstanding if any.

Company Appeal (AT) (Ins) No. 525 of 2020 7

Mr. Sudhir Kumar & Mr. Anand Singh are close friends of childhood because fathers of both of them were DLW Varanasi employees & they stayed together in campus of DLW Varanasi.

If you need immediate recovery of your balance amount, please go through use of instrument received against credit (BG/LC/PDC) otherwise Mr. Anand Sigh had supplied material on his own relationship guarantee then he deposit from his & his friend's a/c.

Right now head office does not know about anything of this transaction but we are very sure your staff Mr. Anand Singh & Mr. Sudhir Kumar know that where they have sold that consignment & received payment in which account.

Please bear with us and try to know about lapses & conspiracy behind raised situation between two reputed companies.

Because the address used for communication is different, on the invoice buyer/consignee Ambient Computronics Pvt. Ltd.-Lucknow & address is of Varanasi GST No. is of Varanasi all these things are also very confusing.

Please verify billing address through GST No. & understand whole manipulation of this transaction.

The whole case is individually manipulated & motivated.

Therefore we need sufficient time for confirmation of this transaction purchase, sale, payment & receipt."

6. Thus, the stand taken by the Corporate Debtor shows that the branch

office of Corporate Debtor had not communicated with the head office and they

Company Appeal (AT) (Ins) No. 525 of 2020 8

wanted to verify and confirm the transactions. The internal disputes of the

directors would not be relevant for throwing out of the Application under Section

9 of I & B Code, 2016. In any case, that was not a dispute which was raised or

communicated to the Operational Creditor any time before Notice under Section

8 was sent. In the facts of the matter, we find that the Adjudicating Authority

erred in approaching the Application under Section 9 and the form submitted in

a manner as if a plaint was being examined or it was some suit. Considering the

format and particulars required to be given in the format, if the Application is

complete, it is required to be admitted unless the Corporate Debtor shows Pre-

Existing Dispute. Here the dispute raised was that there was no dealing between

the Corporate Debtor and the Operational Creditor; that there was no agreement.

However, the same Corporate Debtor had in reply referred to its dispute with the

branch office and stated that they wanted to verify the transaction. The Bank

Statement of the Operational Creditor shows that there were various payments

and more than Rs. 3 crores are stated to have been paid from the outstanding

dues and for a small amount of Rs. 21,07,916/- the Operational Creditor has

been required to move the Adjudicating Authority. Counsel for Appellant pointed

out Rejoinder Affidavit & Invoice with Annexure A-6 to submit that the Invoice

dated 21.10.2017 has stamp and signature of receipt by Varanasi Office of

Corporate Debtor. It is stated that the E-way Bill can have address where goods

are required to be delivered. It does not matter till the Invoice is Acknowledged.

We find substance in the Submissions for Appellant.

Company Appeal (AT) (Ins) No. 525 of 2020 9

7. For the above reasons, we allow Appeal and set aside the Impugned Order

passed by NCLT, Kolkata Bench, Kolkata. We remit back the matter to the

Adjudicating Authority. On receipt of copy of this Judgment, the Adjudicating

Authority is requested to admit the Application under Section 9 of IBC and pass

further orders as required to be passed under the provisions of I & B Code, 2016.

Such order may be passed by the Adjudicating Authority unless the Corporate

Debtor settles with the Operational Creditor before Order is passed. The Parties

to appear before the Adjudicating Authority on 09.11.2020.

[Justice A.I.S. Cheema] Member (Judicial)

[Justice Anant Bijay Singh] Member (Judicial)

New Delhi, 15th October, 2020.

Basant B./md.

Company Appeal (AT) (Ins) No. 525 of 2020