National Company Law Appellate Tribunal
M/S Oriental Coal Corporation vs M/S Decore Exxoils Pvt Ltd on 26 October, 2021
National Company Law Appellate Tribunal
Principal Bench, New Delhi
COMPANY APPEAL (AT) (INSOLVENCY) No. 1015 of 2020
(Arising out of Order dated 20th March, 2020 passed by National Company Law
Tribunal, Indore Bench, Ahmedabad, Court-1, in C.P. (IB) No.-
202/9/NCLT/AHM/2018).
IN THE MATTER OF:
M/s. Oriental Coal Corporation
A Proprietary Firm of:
Mr. Animesh R. Agarwal
Having its Registered office at:
65, East High Court Road
Ramdaspeth, Nagpur - 440010
Maharashtra ...Appellant
Versus
M/s. Decore Exxoils Pvt. Ltd.
Having its Registered office at:
Office Block 1A, 5th Floor,
DB City, Corporate Park
Area Hills, Opp. M.P. Nagar,
Zone-1, Bhopal - 462016
Madhya Pradesh. ...Respondent
Appellant: Mr. Bharat Gupta and Ms. Gunjan Arora, Advocates.
Respondent: Mr. Shivek Trehan and Mr. Pranay Mohan Govil,
Advocates.
JUDGEMENT
[Per; Shreesha Merla, Member (T)]
1. This Appeal is filed under Section 61 of the Insolvency and Bankruptcy Code, 2016, (hereinafter referred to as the 'Code') challenging the Impugned Order dated 20.03.2020 passed by the Learned Adjudicating Authority (National Company Law Tribunal, Indore Bench, Ahmedabad) in CP (IB) No. 202/9/NCLT/AHM/2018, by which Order, the Insolvency Application preferred by the Appellant under Section 9 of the Code was -2- dismissed on the ground of 'Pre-Existing Dispute' and also on the ground that it was barred by 'Limitation'.
2. Submissions on behalf of the Learned Counsel for the Appellant:
It is submitted that steam coal was last supplied by the Appellant to the Respondent Company on 14.11.2013 to Mandideep Plant and on 18.11.2014 to the Nagpur Plant; that the alleged Debit Note is dated 01.04.2017 and 24.03.2017 for the respective Plants which is more than two years after the last supplies and therefore by no stretch of imagination should it be construed that after such a long period of time, the Respondent had rejected the goods.
The said goods were never returned by the Respondent to the Appellant which further confirm that there was never any rejection of goods and that the entire consignment was used and retained by the Respondent.
There is no communication of any rejection of goods to the supplier. Had there been any dispute regarding the quality of goods, the Respondent would not have made the payment of Rs. 15 Lakhs/- on 24.11.2014. Further, the Respondent's ledger evidences that amounts were 'due and payable' to the Appellant and the same was adjusted in the year 2017.
The fact that the amounts in the ledger of the Respondent stood outstanding and payable to the Appellant till 01.04.2017, establishes that the alleged Test Analysis Report is false and fabricated. Further, the said Report was not in existence in the year 2014 and the same was never communicated to the Appellant.
Company Appeal (AT) (Insolvency) No. 1015 of 2020 -3- The email dated 05.08.2015 issued by one Mr. Diwarker Rege, on behalf of the Respondent, from his email ID acknowledges that there is some payment outstanding in favour of the Appellant. The amounts mentioned therein are the same amounts which are mentioned in the ledger i.e. Rs.6,31,152/- for Mandideep Plant and Rs.3,32,612/- for the Nagpur Plant.
The Learned Counsel vehemently denied that there was any dispute regarding the quality or quantity of the supply of steam coal and that there was any Test Report stating that the quality was substandard. Learned Counsel placed reliance on the Judgement of the Hon'ble Supreme Court in 'Mobilox Innovations Pvt. Ltd.' Vs. 'Kirusa Software Pvt. Ltd.' (2018) 1 SCC 353, in 'Rajiv Kumar Aggarwal' Vs. 'Panipat Texo Fabs Pvt. Ltd.', 2018 SCC OnLine NCLAT 656 and in 'Anoop Sushil Dubey' Vs. 'National Agriculture Co- operative Marketing Federation of India Ltd.', 2020 SCC OnLine NCLAT 674 in support of his contentions.
3. Submissions on behalf of the Learned Counsel for the Respondent:
Learned Counsel submitted that the Debit Note dated 24.03.2017, the copies of Goods Received Note and copy of Laboratory Test Report of goods clearly demonstrate that the goods supplied were of inferior quality and hence the Adjudicating Authority was right in observing that there was a 'Pre-Existing Dispute' prior to the issuance of the Demand Notice under Section 8 of the Code.
Company Appeal (AT) (Insolvency) No. 1015 of 2020 -4- That the last payment received from the Respondent was dated 25.11.2014 and the Application under Section 9 was filed on 09.05.2018 and as three years has lapsed, the Adjudicating Authority has rightly observed that the Application was barred by Limitation.
Regarding the email dated 05.08.2015 sent by Mr. Diwarker Rege, the Learned Counsel submitted that the Director of the Respondent Company has filed an Affidavit that the email was sent without authority and hence cannot form an Admission or Acknowledgement of any sort.
As per the statements of accounts provided by the Appellant, the total outstanding as on 31.03.2014 is Rs.16,31,152/- out of which a sum of Rs.10 Lakh/- was paid by the Respondent and a sum of Rs.6,31,152/- remained payable. Thereafter in the month of November 2014, out of the steam coal provided by the Appellant, 69.52 MT of steam coal was found to be inferior. Thereafter the payment of Rs.15 Lakhs/- was made on 24.01.2014, though the outstanding of Nagpur Plant was only Rs.1,36,985/- hence the Respondent paid in excess an amount of Rs.13,63,015/-. Thereafter, the Appellant supplied 234.82 MT of steam coal for Rs.16,95,627/- levying an outstanding sum of Rs.3,32,612/-. Further as the Respondent rejected steam coal worth Rs.5,05,282/-, there was a credit of Rs.1,72,670/- which had to be adjusted by the Appellant. For the Mandideep Plant, the Appellant supplied goods for Rs.6,31,152/-, for which the Respondent generated a Debit Note for Rs.4,58,482/- levying an outstanding sum of Rs.1,72,670/-, which is the same sum which had to be adjusted for Company Appeal (AT) (Insolvency) No. 1015 of 2020 -5- the excess payment made by the Respondent for the Nagpur Plant, therefore no amount was payable by the Respondent to the Appellant. The Learned Counsel relied on the Judgements of the Hon'ble Supreme Court in 'M/s. Capital Partners' Vs. 'Reliance Defence and Engineering Ltd.' [2017 SCC OnLine NCLT 2485], in 'Kalpataru Properties Private Limited' Vs. 'Innovative Ideals & Services (India) Private Limited' [2019 SCC OnLine NCLT 1604], and in 'Laina Power Engineering' Vs. 'Sokeo Power Private Limited' [2018 SCC OnLine NCLAT 414], in support of his contention.
Assessment:
4. The first issue which arises for consideration is whether this Application filed under Section 9 of the Code is barred by Limitation. The ledger entries on record and also the statement of accounts evidence that steam coal was last supplied by the Appellant on 18.11.2014 and an amount of Rs.15 Lakhs/- was paid via RTGS on 24.11.2014 by the Respondent to the Appellant and Debit Notes were raised in the year 2017. This Application under Section 9 was filed on 09.05.2018. The details of invoices with their respective dates are reproduced as hereunder:-
Sr. Invoice No. Amount (Rs.) Invoice Date
1 69(Invoice-1) 15,66,482/- 15.12.2013
2 47(Invoice-2) 6,79,993/- 19.12.2014
5. It is the main case of the Appellant that the Adjudicating Authority has erred in not taking into consideration the email dated 05.08.2015 sent by one Mr. Diwarker Rege from his official email ID with a copy to the Company Appeal (AT) (Insolvency) No. 1015 of 2020 -6- Director. The material on record shows that the said Director has filed an Affidavit before the Adjudicating Authority on 03.10.2019 enclosing the Letter of Appointment of Mr. Diwarker Rege and stating that he was appointed only on 01.08.2015 which is four days prior to the said email. The Director also deposed in the said Affidavit that the said Mr. Rege was under
probation and the subject email was not sent under his instructions.
Curiously, after the email dated 05.08.2015, the Appellant has remained silent. There is no communication on record with respect to any payments 'due and payable', between the period 2015 and 2018.
6. The Hon'ble Supreme Court in 'Babulal Vardharji Gurjar' Vs. 'Veer Gurjar Aluminium Industries Pvt. Ltd. & Anr.', 2020 SCC OnLine SC 647, has addressed to the Applicability of Section 8 of the Limitation Act and observed that there should be a proper foundation to be laid regarding acknowledgement of debt.
7. In the instant case, in para 4 of the Section 9 Application, which deals with 'particulars of Operational Debt' in column 1(c) the date on which the debt fell due is mentioned as follows:-
(c) The date from which Invoice (I)/December 15th, 2013 such debt fell due. (Mandideep) Invoice (II)/December 19th, 2014 (Nagpur)
8. The date on which the default occurred has been clearly specified in column 2(a) as December 19th, 2014. The only suggestion with respect to any acknowledgement is in para V in residuary point no. 8 in which the particulars of 'Financial Debt' with documents and evidence on record is required to be mentioned. In this column the disputed email dated Company Appeal (AT) (Insolvency) No. 1015 of 2020 -7- 05.08.2015 is mentioned. Limitation is a mixed question of law and facts and we are of the considered view that no case has been made for extension of period of Limitation as the actual date of default is mentioned in the Section 9 Application as 19.12.2014. The last goods were supplied on 18.11.2014, admittedly the last payment was made on 25.11.2014 and the Application under Section 9 was filed on 09.05.2018. The record does not show any communication between 2015 and 2018. For all these reasons, we hold that the Application is barred by Limitation.
9. Now we address ourselves to the main issue as to whether there is any 'Pre-Existing Dispute' existing between the parties prior to the issuance of the Notice mandated under Section 8 of the Code, based on the touchstone of the ratio of the Hon'ble Supreme Court in 'Mobilox Innovations Pvt. Ltd.' (Supra), where in the Hon'ble Apex Court has observed as follows:-
"40. It is clear, therefore, that once the operational creditor has filed an application, which is otherwise complete, the adjudicating authority must reject the application under Section 9(5)(2)(d) if notice of dispute has been received by the operational creditor or there is a record of dispute in the information utility. It is clear that such notice must bring to the notice of the operational creditor the "existence" of a dispute or the fact that a suit or arbitration proceeding relating to a dispute is pending between the parties. Therefore, all that the adjudicating authority is to see at this stage is whether there is a plausible contention which requires further investigation and that the "dispute" is not a patently feeble legal argument or an assertion of fact unsupported by evidence. It is important to separate the grain from the chaff and to reject a spurious defence which is mere bluster. However, in doing so, the Court does not need to be satisfied that the defence is likely to succeed. The Court does not at this stage examine the merits of the dispute except to the extent indicated above. So long as a dispute truly exists in fact and is not spurious, hypothetical or illusory, the adjudicating authority has to reject the application."
Company Appeal (AT) (Insolvency) No. 1015 of 2020 -8-
10. The definition of the word 'dispute', is in fact, illustrative, the 'Corporate Debtor' is not left with the only option of showing the 'existence of dispute' by way of a pending Suit or Arbitration but can exercise its right to show that goods and/or services supplied were substandard and deficient in quality.
11. Section 5(6) of the Code defines 'dispute' as follows:-
"5. Definitions.--In this Part, unless the context otherwise requires,--
................................
(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
(c) the breach of a representation or warranty;"
12. In the instant case, in their Reply/objections to the Application the Respondent/'Corporate Debtor' has raised the issue of inferior quality of steam coal supplied, that Debit Notes were issued and that production was suspended due to the inferior quality of goods supplied by the Appellant herein, consequently resulting in production losses. It is the main contention of the Learned Counsel appearing for the Appellant that these Debit Notes were belatedly raised by the 'Operational Creditor'. The fact remains that there was a running account between both the Companies and the Appellant was supplying steam coal to both the Plants that is Mandideep Plant and Nagpur Plant to the Respondent Company and amounts were adjusted in the ledgers for supply of steam coal.
13. The Hon'ble Supreme Court in para 45 of 'Mobilox Innovations Pvt. Ltd.' (Supra) has observed as follows:-
"45. Going by the aforesaid test of "existence of a dispute", it is clear that without going into the merits Company Appeal (AT) (Insolvency) No. 1015 of 2020 -9- of the dispute, the appellant has raised a plausible contention requiring further investigation which is not a patently feeble legal argument or an assertion of facts unsupported by evidence. The defense is not spurious, mere bluster, plainly frivolous or vexatious. A dispute does truly exist in fact between the parties, which may or may not ultimately succeed, and the Appellate Tribunal was wholly incorrect in characterizing the defense as vague, got-up and motivated to evade liability."
14. A perusal of the Debit Note dated 24.03.2017 read together with the Goods Received Notes and the Laboratory Test Report of the goods supplied show that there is a 'Pre-Existing Dispute', prior to the issuance of the Notice under Section 8. The defence raised by the 'Corporate Debtor' is not a sham defence and not a feeble or unsupported assertion. The record shows that there is documentary evidence filed in support of the defence. To reiterate, in their Reply all the facts with respect to substandard quality of material, the issuance of Debit Notes raised for the same, has been stated. We are of the considered view that the ratio laid down by the Hon'ble Supreme Court in 'Mobilox Innovations Pvt. Ltd.' (Supra) is squarely applicable to the facts of this case, and hence this Appeal fails and is dismissed accordingly. No Order as to costs.
[Justice Anant Bijay Singh] Member (Judicial) [Ms. Shreesha Merla] Member (Technical) NEW DELHI 26th October, 2021 ha Company Appeal (AT) (Insolvency) No. 1015 of 2020