National Company Law Appellate Tribunal
Srv Techno Engineering Pvt.Ltd vs Purvanchal Vidyut Vitran Nigam Ltd on 23 April, 2024
NATIONAL COMPANY LAW APPELLATE TRIBUNAL
PRINCIPAL BENCH, NEW DELHI
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