Unistill Alcoblends Pvt. Ltd vs India Brewery & Distillery Pvt. Ltd

Unistill Alcoblends Pvt. Ltd. ...Appellant

Versus

India Brewery & Distillery Pvt. Ltd. ...Respondent

For Appellant: Shri Rajshekhar Rao, Shri Ranjeet Singh Sidhu, Shri Raghav Kacker and Ms. Rajshree Jaiswal, Advocates

For Respondent: Ms. Pallavi Sengupta, Advocate

ORDER

16.01.2020 This Appeal has been filed by Appellant claiming to be

Operational Creditor against Impugned Order dated 11th January, 2019

passed by the Adjudicating Authority (National Company Law Tribunal,

Bengaluru Bench) in C.P. (IB) No.147/BB/2018. The Application had been

filed by the Appellant under Section 9 of the Insolvency and Bankruptcy Code,

2016 (IBC - in short) against the Respondent - Corporate Debtor. The

Appellant claims that the Appellant and the Respondent had business

arrangement whereunder the Respondent had to manufacture India Made

Foreign Liquor (IMFL) for various brands of the Appellant and also to

separately supply Extra Neutral Alcohol (ENA) to the Appellant. For the

purpose, Appellant provided advance payments, working capital to purchase

raw material and manufacture IMFL for the brands of the Appellant.

According to the Appellant, for the purpose, Appellant had also supplied High 2

peed Bottling Unit Equipment to the Respondent. It is stated that there was

an Agreement dated 21st February, 2011 with regard to the manufacture of

IMFL. There was also a Memorandum of Understanding dated August, 2011

with regard to the supply of High Speed Bottling Unit Equipment. It is the

case of the Appellant that in view of such business relations, the Appellant

had on 30th June, 2012 paid an advance amount of Rs.47,57,800/- for

purchase of ENA; Appellant provided working finance as per the Agreement,

and Rs.16,77,827/- was payable by the Respondent towards raw material.

The High Speed Bottling Unit had also been supplied. The Appellant claims

that the Respondent stopped production of IMFL and the arrangement came

to be terminated in the month of November, 2012. According to the Appellant,

the Respondent is liable to pay Rs.47,57,800/- plus Rs.16,77,827/- and is

also liable to return the equipment supplied by the Appellant or in default,

pay Rs.30,00,000/- which is the written down value of High Speed Bottling

Unit. The Appellant claims that the Section 9 Application was filed claiming

total outstanding dues of Rs.2,38,16,374/-.

2. The learned Counsel for the Appellant states that this amount includes

amount of interest which has been disputed by the Respondent as not part of

Agreement but even if the portion of interest was to be excluded, outstanding

dues were more than Rs.1 Lakh. According to the Appellant, in view of the

dues, Notice under Section 8 of IBC was sent on 5th April, 2018 (Page - 147)

and the Respondent replied on 14th April, 2018 (Page - 159). Subsequent to

such Reply, Respondent filed suit so that arbitration proceedings could be

initiated. The learned Counsel referred to document at Page - 161 as the

Company Appeal (AT) (Ins) No.162 of 2019 3

Section 9 Petition under the Arbitration Act. It is further the case of the

Appellant that even subsequent to Section 8 Reply, the Respondent admitted

liability to pay by sending another letter dated 5th May, 2018 (Page - 128) and

the liability has been admitted even in the balance sheet of the Corporate

Debtor (Page - 134 at 136) which balance sheet was with regard to the

Financial Year ending 31st March, 2017.

3. Learned Counsel for the Respondent submitted that under the

Agreement concerned, there was no provision for interest and the Respondent

was not liable to pay interest. It is also claimed that the advances made were

not debt payable to the Appellant. In fact, it is claimed that the Respondent

had counter claimed against the Appellant as the Respondent had enrolled

employees with a view to meet the requirements of the Appellant but the

Appellant did not meet the guaranteed offtake as a result of which, the

Respondent was unable to meet its financial obligations. It is also claimed

that the amounts claimed were old amounts of 2012 and thus, the Section 9

Application was rightly rejected by the Adjudicating Authority.

4. Against this, the learned Counsel for the Appellant has referred to letter

sent by the Respondent on 15th April, 2014 (Annexure A9 - Page 121), and

then another letter dated 19th November, 2015 (Page - 125), and then yet

another letter was sent by the Respondent (Page - 126) on 6th July, 2017 and

letter dated 14th February, 2018 (Page - 127) in which letters, the Respondent

continuously acknowledged the amounts due even specifying the amount

outstanding. The learned Counsel pointed out that within the period of

limitation, the Respondent continuously issued such written

Company Appeal (AT) (Ins) No.162 of 2019 4

acknowledgements and in fact, even after vague Reply dated 14th April, 2018

(to Section 8 Notice dated 5th April, 2018), the Respondent sent yet another

letter dated 5th May, 2018 (Page - 128) which read as under:-

"We profusely thank you for the courtesies extended to us on 27th April, 2018.

In continuation of our discussion on the above subject matter during the course of our meeting, we would like to inform you that the balance outstanding as per our books of accounts will be cleared within 6 to 8 months.

In case if you initiate any further legal action on us in this period, we reserve our right to pursue the matter legally.

Further this letter is being issued on the basis of our mutual understanding arrived at the meeting held on 27.04.2018."

5. The Counsel pointed out that clearly Respondent admitted that it had

dues to pay which were also appearing in books of accounts. Counsel referred

back to the balance sheet of the Respondent which is at Page - 134 at 136.

The balance sheet is for the Financial Year ending 31st March, 2017 and the

Counsel referred to Note 4 (Page - 136) to submit that the Respondent showed

in its books of accounts that it had to pay Rs.1,30,05,426/- to the Appellant

- Unistill.

6. The learned Counsel states that although the amount is shown under

the heading of long term borrowings, the nature of dealings between the

parties are apparent from the Agreement which they entered into and the

business dealings which they had and which are reflected even in the various

acknowledgements issued by the Respondent.

Company Appeal (AT) (Ins) No.162 of 2019 5

7. Considering the documents pointed out by the leaned Counsel for the

Appellant, and the fact that the learned Counsel for the Respondent is unable

to show us any document before the Notice under Section 8 was issued which

would indicate that there was any dispute communicated by the Respondent

to the Appellant, we find that the Adjudicating Authority erred in dismissing

the Section 9 Application observing that "it is deemed that there is dispute

prior filing the instant petition". What was relevant was to see whether there

was pre-existing dispute when Section 8 Notice was issued.

8. There is nothing to show that there was any other reason why Section

9 Application was required to be rejected

9. For the above reasons, we allow the Appeal. We set aside the Impugned

Order. We remit back the matter to the Adjudicating Authority. The

Respondent may, before Section 9 Application is admitted by the Adjudicating

Authority, settle the dispute with the Appellant, if the Respondent so wants.

The Appellant and Respondent will appear before the Adjudicating Authority

on 10th February, 2020. If the Respondent does not settle the dispute before

that date, the Adjudicating Authority will admit the Section 9 Application and

pass further necessary Orders required to be passed under the IBC.

The Appeal is disposed accordingly. No costs.

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

[Kanthi Narahari] Member (Technical) /rs/md

Company Appeal (AT) (Ins) No.162 of 2019