National Company Law Appellate Tribunal
Deepak Modi vs Shalfeyo Industries Private Limited ... on 31 March, 2023
1
NATIONAL COMPANY LAW APPELLATE TRIBUNAL
PRINCIPAL BENCH
NEW DELHI
COMPANY APPEAL (AT)(INSOLVENCY) NO.1019 OF 2022
(Arising out of judgement and order dated 16.08.2022 passed by
National Company Law Tribunal, Jaipur in CP (IB)
No.79/9/JPR/2019).
In the matter of:
Deepak Modi S/o Sh Ram Sharan Modi,
Suspended director and shareholder of
Corporate Debtor.
250/47, RHB Pratap Enclave Haldighati Marg,
Pratap Nagar,
Sanganer,
Jaipur-302017
Rajasthan Appellant
Vs
1. Shalfeyo Industries Pvt Ltd,
Through its RP
Mr. Umang Jain,
250/47, RHB Pratap Enclave Haldighati Marg,
Pratap Nagar,
Sanganer,
Jaipur-302017
Rajasthan
2. Prime Impex
7/59
Vidhyadhar Nagar,
Jaipur 302039
Also at
H-103,
Badharna Marble Mandi,
Company Appeal (AT)(Ins) No.1019 of 2022
2
VKI Extension,
Jaipur 302013
Rajasthan Respondents
For Appellant: Mr. Abhijeet Sinha, Mr Naresh Kr Sejvani,
Advocates.
For Respondent : Mr Amol Vyas, Mr Vivek Sinha and Mr. Vivek
Malik, Advocates for R2.
Mr Garvit Thukral, Mr Pushpendra Singh Bhadoriya, Advocates for
R1.
JUDGEMENT
(31 MARCH, 2023) st JUSTICE RAKESH KUMAR, MEMBER (JUDICIAL) The present appeal under Section 61 of the Insolvency & Bankruptcy Code, 2016 (hereinafter referred to as 'Code') has been preferred against an order dated 16.08.2022 passed by the Adjudicating Authority, National Company Law Tribunal, Jaipur Bench, Jaipur (hereinafter referred to as Adjudicating Authority). By the said order the Learned Adjudicating Authority has admitted an application filed under Section 9 of the Code by Operational Creditor who is Respondent No.2 in the present appeal. In sum and substance by the impugned order after admitting application filed under Section 9 of the code, Corporate Insolvency Resolution Process (CIRP) was initiated against Respondent No.1 (Corporate Debtor).
Company Appeal (AT)(Ins) No.1019 of 2022 3
2. The appellant is the suspended director and shareholder of Respondent No.1 (Corporate Debtor) namely M/s Shalfeyo Industries Private Ltd which was earlier M/s Adelante Exim India Private Ltd. The Respondent No.2, 'Operational Creditor' approached the Adjudicating Authority by filing an application under Section 9 of the Code read with Rule 6 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016. The said case was registered as CP No.(IB)-79/9/JPR/2020. After filing of the case notices were issued by the Adjudicating Authority and thereafter the Corporate Debtor appeared and filed its response.
3. The applicant, Operational Creditor, alleged in the application that Corporate Debtor had placed purchase orders for supply of granite stone and six invoices were raised for total amount of Rs. 14,78,420/- (Rupees Fourteen lakhs seventy eight thousand four hundred twenty only). The details of invoices, post dated cheques (PDC) alongwith the payment as well as presentation/dishonour of cheques can be examined on the basis of following tabulation:-
Sr. Invoice No. Invoice Date Bill Amount Date of Date of No. PDC dishonour Company Appeal (AT)(Ins) No.1019 of 2022 4 1 PI/01/19-20 21.09.2019 Rs.82,793/- - -
2 PI/03/19-20 27.09.2019 Rs.39,333/- - -
3 PI/04/19-20 13.10.2019 Rs.3,51,553/- 14.12.2019 19.12.2019
4 PI/07/19-20 25.10.2019 Rs.1,98,733/- 25.12.2019 04.01.2020
5 PI/10/19-20 16.11.2019 Rs.2,77,160/- 16.01.2020 18.01.2020
6 PI/12/19-20 05.12.2019 Rs.5,28,668/- 04.02.2020 25.02.2020
Total Rs.14,78,420/-
4. However, out of aforesaid claims some payments were made but non-payment of operational dues to an amount of Rs.11,95,447/- (Rupees Eleven lakhs ninety five thousand four hundred forty seven only) was existing on the date of the filing of the application. The Corporate Debtor entered appearance before the Adjudicating Authority and filed its reply and primarily raised a plea that there was pre-existing dispute between the parties. It was asserted that one M/s SGB Infra Ltd had allotted work to Corporate Debtor to complete the flooring work with the specified quality of material at Jaipur International Airport. The said work order was issued with certain terms and conditions particularly to supply the granite slabs supposed to be in the range of 16 mm to 18 mm. A plea was taken that instead of supply by the Operational Creditor of granite slabs in the range of 16 mm to 18 mm, granite slabs supplied were of 15 mm to 15.5 mm thickness and this was Company Appeal (AT)(Ins) No.1019 of 2022 5 the reason subsequently SGB Infra Ltd vide its letter dated 16.12.2019 asked the Corporate Debtor for removal of the flooring on account of aforesaid differences. Besides raising disputes, certain objections were also raised in respect of proposed IRP Namely Mr. Vikas Rajwarsi. However, since before the Adjudicating Authority the said proposed IRP by filing an IA had shown his difficulty to proceed and as such the said issue had become infructuous. The Corporate Debtor in its reply had stated as follows:-
"b. In pursuance to the above work order, the Corporate Debtor vide work orders dated 04.10.2019 and 18.10.2019 placed an order for granite slabs with the Applicant. At the first round of inspection by SBL Infra Limited on 15.12.2019, there was deficiency found in the goods in the material quality and it was observed that the granite was of 15 mm to 15.5 mm whereas as per the specification of work orders, it was supposed to be of range of 16 mm to 18 mm. Thereafter, SGB Infra Ltd vide letter dated 16.12.2019 requested removal of the flooring on account of aforementioned difference. Company Appeal (AT)(Ins) No.1019 of 2022 6 c. The Corporate Debtor duly communicated to aforesaid issues to the Operational Creditor and parallelly wrote to his banker to stop payment of cheques issued to the Applicant. However, the applicant unloaded the further material at the site despite clear instructions of return back given to his lorry drivers and the personnel but they refrained to take back the same. It is also pertinent to mention that even the staff of the Applicant himself had clearly given in writing that they are unloading the material as per instructions and directions of his boss. d. The Corporate Debtor has further submitted that Annexure-E of the Application annexed to show the receipt of quality check of goods, is actually not the receipts of quality checks rather the pages from the diaries of guard/custodian who maintains the details of loading and unloading stock. Further the applicant has only annexed pages running from 51 to 53 only and conveniently suppressed page No.54 and 55 of the said diary which contains the details of the deficient goods and the statement of lorry driver who mentions that the product is 14.5-15 mm and all these goods will be Company Appeal (AT)(Ins) No.1019 of 2022 7 changed. Further it is submitted that the applicant has also suppressed the reply dated 07.01.2020 to its statutory notices issued under the Negotiable Instruments Act, 1881 wherein the issue of the quality of goods were raised categorically.
5. After filing of the reply by the Corporate Debtor the Operational creditor also filed a detailed rejoinder. The Operational Creditor further raised an issue that in reply the Corporate Debtor had brought on record certain forged documents and as such an application under section 340 of Cr PC 1973 was also preferred. In rejoinder, as has been noticed by the Adjudicating Authority, following stand was taken by the Operational Creditor:-
"The Applicant has submitted that the Corporate Debtor has forged and fabricated the diary pages which have been annexed with the Reply. The aforesaid act amounts to perjury for which a separate application has been referred by the Application under Section 340 of the Code of Criminal Procedure, 1973. It has been submitted that the document at page 48 of the Reply is forged and fabricated document as the noting which has been Company Appeal (AT)(Ins) No.1019 of 2022 8 mentioned by the Corporate Debtor in the para has been written by it subsequent to the signatures of Mr. Ratul Singhal and Mr. Ravinder, only to fabricate the said document. The entire material mentioned at Pg No.55 of the diary was unloaded and accepted by the Corporate Debtor without any demur. The alleged remark has been made only to save the Corporate Debtor from making the payment to the Operational Creditor and to create a camouflage of the dispute between the parties.'
6. The Adjudicating Authority minutely examined the issue and discussed the same in detail in following manner:-
"10.The main issue present before us is regarding the amount due by the Corporate Debtor to the Operational Creditor. The undisputed fact in the matter is that the Applicant had supplied the goods and raised as many as six invoices the details of which have been mentioned para IV of the application. The payment against invoice dated 21.09.2019 and 27.09.2019 amounting to Rs. 82,973/- and Rs. 39,333/- respectively are not a matter of dispute as the Applicant itself has stated that the amount of these invoices has duly been paid with Company Appeal (AT)(Ins) No.1019 of 2022 9 respect to the invoices dated 13.10.2019 an amount of Rs. 1,90.886/- (3,51,553 i.e. the bill amount (-) 1,60,667 i.e. the balance amount apportioned towards the third bill). Hence, the total amount of debt defaulted from the
4 invoices is Rs. 11,95,447/-. It is seen from the records produced before us that the 4 post-dated cheques dated 14.12.2019, 25.12.2019, 16.01.2020 & 04.02.2020 were all presented in the bank for clearance but for the cheque dated 14.12.2019, 25.12.2019 & 04.02.2020 the payment was stopped by the drawer. Whereas for the cheque dated 16.01.2020, the cheque was returned with the endorsement of funds insufficient. The said goods were admittedly delivered to the Corporate Debtor.
11. It is seen from Annexure E-5 of the application that the goods were duly supplied to the Corporate Debtor. The Corporate Debtor has raised the point that there was an existence of a dispute to the quality of goods that was supplied by the Operational Creditor. The Corporate Debtor has submitted that the material provided by the Applicant was not as per the specified purchase order i.e. the granite was of 15 mm to 15.5 mm whereas as per Company Appeal (AT)(Ins) No.1019 of 2022 10 the specification of work orders it was supposed to be a range of 16 mm to 18 mm. The Corporate Debtor has submitted that the inspection report dated 16.12.2019 whereby it was directed to remove the flooring which is in city side porch area at on cost.
12. The Corporate Debtor has annexed a series of emails exchanged between the parties as Annexure I of the application. The Corporate Debtor vide mail dated 16.12.2019 has informed the Operational Creditor regarding the low quality of material and further informed that the management has decided to stop all payment on immediate basis. In reply to the said email the Applicant herein stated that the material was dispatched as per the specifications laid down in the purchase order and further there was no prior intimation regarding the non-desirable quality of the material. In the said reply, it was also stated that all the material has been consumed without any complain with respect to the quality. Thereafter, another mail was referred to by the Corporate Debtor whereby it has been stated that the Corporate Debtor had rejected the complete truck Company Appeal (AT)(Ins) No.1019 of 2022 11 load on 15.12.2019. In the said email only the Operational Creditor was requested to replace the material within 5 days or accept the debit note.
13. It is seen that only after this inspection report was given to the Corporate Debtor the Corporate Debtor stopped payment of the post-dated cheques dated 14.12.2019, 25.12.2019 & 04.02.2020. It appears that it is only after the inspection report was given to the Corporate Debtor, the Corporate Debtor mailed the Operational Creditor regarding the quality of goods. There is no document on record which can show that the issue regarding the quality of goods was raised before the said date. These goods have been consumed by the Corporate Debtor in the project undertaken as mentioned above. Further, in the mail annexed at page 46 of the application the Corporate Debtor has stated that all the goods supplied were destroyed in front of the Operational Creditor representative Mr. Sher Singh. Thereafter, the demand notice dated 27.12.2019 in compliance with Section 8 of the Code was issued. The said notice was replied to vide letter dated 07.01.2020. Company Appeal (AT)(Ins) No.1019 of 2022 12 In the said reply the Corporate Debtor has stated that the goods were jointly inspected by the parties.
14. Hence, in our view, there was no dispute raised at the time of delivery of goods when the inspection was required to be carried out. It is only after the Inspection Report was provided to the Corporate Debtor, that the Corporate Debtor raised issues regarding the quality of goods delivered. There exists a clear debt as the Corporate Debtor has consumed the goods and therefore, is under an obligation to pay the Operational Creditor with respect to the goods consumed. It is evident from the reasons stated hereabove that Corporate Debtor has clearly defaulted in payment of debt due to the Operational Creditor.
16. Therefore, in the present matter at hand, there is a clear debt, repayment of which has been defaulted by the Corporate Debtor and there appears to be no pre- existing dispute between the parties. Any allusion to such dispute appears to be confirmed.
Company Appeal (AT)(Ins) No.1019 of 2022 13
17. Under sub-section (4) of Section 9 of the Code, the Operational Creditor may propose the name of a Resolution Professional to be appointed as Interim Resolution Professional (IRP) but it is not obliged to do so. In the instant case, the Operational Creditor had proposed an IRP although the proposed IRP has withdrawn its consent before this Tribunal. Hence, this bench can appoint the RP from the pool of RPs empanelled with the IBBI.
18. In view of this Mr. Umang Jain, duly registered with the Insolvency and Bankruptcy Board of India, with Registration No. IBBI/IPA-001/IP-P01959/2020- 2021/13105 (email:caumangjain @gmail.com: mobile No.+91 9351846668, is hereby appointed as the IRP. The IRP is directed to take all such steps as are required under the statute, inter alia in terms of Sections 15, 17, 18, 19, 20 and 21 of the Code and transact proceedings with utmost dedication, honesty and strictly in accordance with the provisions of the Code, and Rules and Regulation thereunder."
Company Appeal (AT)(Ins) No.1019 of 2022 14
7. The present appeal has been preferred by the Corporate Debtor against the order of the Adjudicating Authority. While pressing the appeal, Mr. Abhijeet Sinha, learned counsel for the appellant had drawn our attention to different pages and paragraphs of the impugned order particularly page 27a, 27b, 27d, 27j, 27k. He tried to justify that there was admittedly pre-existing dispute which was required to be noticed by the Adjudicating Authority but incorrectly appreciated and rejected the plea of the Corporate Debtor regarding pre-existing dispute. Shri Sinha has also drawn our attention to purchase order at Page 46, invoice at page 48. He has specifically drawn our attention to Page 147 of the Memo of Appeal i.e. an Inspection Report dated 16.12.2019. By way of referring to aforesaid document Shri Sinha has argued that long back on 16.12.2019 M/s SGB Infra Ltd after conducting inspection had directed the Corporate Debtor for removal of granite flooring because of quality issue. The Corporate Debtor was informed that the material fitting done by him was found not as per specification standard. He has also placed reliance on the judgement of Hon'ble Supreme Court in Rajratan Babulal Agarwal Vs Solartex India Pvt Ltd & Ors (2023) 1 SCC 115. He submitted that in view of law settled on the point that in case of establishment Company Appeal (AT)(Ins) No.1019 of 2022 15 of pre-existing dispute before issuance of notice under Section 8 of the Code or even before the Adjudicating Authority the correct approach which was to be adopted by the Adjudicating Authority was to reject the application filed under Section 9 of the Code by the Operational Creditor/Respondent No.2.
8. In the present appeal detailed reply has also been filed by the Respondent No.2/Operational Creditor. It has been categorically stated in the reply that the Operational Creditor had supplied material to the Corporate Debtor in respect of which Operational Creditor also raised six invoices to the tune of Rs.14,78,420/- and till initiation of CIRP an amount of Rs.11,95,447/- was outstanding whereas no dispute with regard to quality of goods was raised by the Corporate Debtor. However, he refused to make payment resulting in initiation of CIRP against the Corporate Debtor. It is further case of the Respondent No.2/Operational Creditor that whatever material were supplied by him were accepted by the Corporate Debtor without any dispute and this was the reason that the Corporate Debtor utilised entire granite slabs supplied by the Operational Creditor and since, it appears that the work was not executed in appropriate manner SGB Infra Ltd had asked the Corporate Debtor for removal of floor from the premises of the Company Appeal (AT)(Ins) No.1019 of 2022 16 Airport Authority, Jaipur. In para 5 of the reply it has been indicated as if the Corporate Debtor has made some forgery in record in respect of unloading of the material. We propose to reproduce para 5 of the reply as follows:-
"5. That the contents of Para No. 7.4 of the Appeal are vehemently denied. It is submitted that the corporate debtor while submitting response to the insolvency application before the Ld. NCLT. Jaipur Bench has submitted forged and fabricated documents being Page No.55 which is a part of an Annexure-3 of the Reply to the Company Petition. A bare perusal of the Page No.55 as annexed alongwith the reply to the company petition gives an impression that material which has been unloaded by the operational creditor in the premises of the corporate debtor has been returned with the remark "2000........ माल 14-1/2-15 mm है । यह पूरा माल बदला जायेगा। पार्टी के कहने से अनलोड िं ग . Whereas the fact of the matter is that the aforesaid remark has been added subsequent to the signature made by Shri Ratul Singhal (Partner of the Operational Creditor) and Mr. Ravindra (Employee of the Corporate Debtor). The said fact can be corroborated from the photograph which was taken by the Operational Creditor from its Mobile after signing the said page and given back to the employee of the corporate debtor. It is submitted that a bare perusal of the said photograph would reveal that no such remark was made at Page No.55 of the diary when the material was unloaded and the said remark has been made only after the filing of the petition in a manner that the space existing between the signature of Mr. Ravinder and description of the material has been used with a malafide intention to create a dispute about the quality of the material supplied to the corporate debtor. When the aforesaid forgery and fabrication came to the notice of the respondent no.2, an application under section 340 Company Appeal (AT)(Ins) No.1019 of 2022 17 Cr.PC was filed before the NCLT, Jaipur Bench and the same is pending for adjudication. Copy of the application filed by the respondent no.2 before the NCLT, Jaipur Bench is being enclosed and marked as Annexure R- 2/1."
9. Mr. Amol Vyas, learned counsel for Respondent No.2 submitted that since outstanding debt was not being cleared by the Corporate Debtor and first postdated cheque for an amount of Rs.3,51,553/- stood dishonoured on 19.12.2019. The Operational Creditor issued demand notice under Section 8 of the Code on 27.12.2019. Even after issuance of demand notice three cheques i.e. an amount of Rs.1,98,073/-, 2,77,160/- and 5,28,668/- stood dishonoured on 4.1.2020, 18.1.2020 and 25.2.2020 respectively. Learned counsel for Respondent No.2 has argued that though there was no plausible pre-existing dispute, the Corporate Debtor with a view to get the application filed under Section 9 of the code, rejected has taken as an unsustainable plea that too by forging certain documents as if there was a dispute. Learned Counsel for Respondent No.2 has also drawn our attention to a communication made by Operational Creditor to the Corporate Debtor which was in reply to mail dated 16.12.2019 sent by the Corporate Debtor regarding quality of material. He submits that the said reply which is at running page 74 of the Memo of Appeal itself reflects that the Company Appeal (AT)(Ins) No.1019 of 2022 18 Corporate Debtor had raised frivolous and concocted story regarding the quality. We may propose to reproduce the communication sent on behalf of the Operational Creditor to Corporate Debtor which is at page 74 as follows:-
Mr. Deepak Medi, Director ADELANTE EXIM INDIA PRIVATE LIMITED G846, ROAD NO. 14. VISHWAKARMA INDUSTRIAL AREA JAIPUR-302013 PHONE NO. 6141-4915096 MOBILE NO. 491- 3166815551 EMAIL ID: [email protected] Subject: REPLY OF YOUR MAIL, RECEIVED DATED 1642.2619 REGARDING QUALITY OF MATERIAL Dear Mr. Deepak, With respect to your mail received on 16.12.2019 regarding the quality of material supplied by in which you have allegedly raised a frivolous, concocted story regarding the low quality of material in order to save yourself from clutches of nonpayment of our dues. We have dispatched the materials per the specifications specified laid down in the said purchase order issued by you, and after getting approval quality check from your side that the material is as per your desired quality. Also, there is no previous intimation to us from your side that the material is not of desirable quality. Even if the material is not of your desired quality you have consumed all the material supplied and there was no complaint raised by you with respect to quality of the material supplied earlier. It seems that it is nothing but a delay tactic adopted by you to dodge away from your liabilities of payment.
I was your duty to convey the same before consumption of all material but there is no communication/no letter/no email with respect to any complaint with Company Appeal (AT)(Ins) No.1019 of 2022 19 respect to material So if there was any issue regarding quality of material it was your duty to convey/inform to us on the mom day of supply when each slab quantity was inspected and measured. Hence it is proved beyond any doubt that you are deliberately withholding payment for the reason best known to you before due date of cheque died 13.12.2019 of payment/presenting the cheque to the bank, Hence, contention given by you for quality of material is false and frivolous and it's all a fabricated story presented to withhold my payment Hence, you are requested to repay the unpaid debt as mentioned in the ledger account enclosed, You have also stopped one of our cheque, despite balance in your account which is very unethical practice of business depicting your deliberate intension withholding our payment. Please note that all advance cheque given against our material bills and interest by your goodself will be deposited in time & if dishonored appropriate action will be taken in due course. Thanks and Regards For Prime Impex Stones Akul Singhal Partner Contact No.9928092694"
10. Learned counsel for the Respondent No.2 has also drawn our attention to Page 25 and 26 of its reply to show that even the Corporate Debtor by making interpolation/forgery had brought a document before the Adjudicating Authority as if after unloading it was stated for replacing the materials. By way of drawing our attention to Page 25 and 26 it was argued that Page 26 was Company Appeal (AT)(Ins) No.1019 of 2022 20 genuine one in respect of receipt of materials whereas page 25 is the same document but subsequently interpolation was made as if the slabs were between 14 ½ and 15 mm. We may not do better than to reproduce both the documents by scanning as follows: Company Appeal (AT)(Ins) No.1019 of 2022 21 Company Appeal (AT)(Ins) No.1019 of 2022 22
11. Accordingly it has been argued that after filing of the reply before the Adjudicating Authority a separate application under Section 340 of Cr PC was also filed making allegation of bringing and using forged documents in a court proceeding. In sum and substance it has been argued that there was no plausible pre- existing dispute and as such learned Adjudicating Authority has rightly rejected the plea of Corporate Debtor and initiated CIRP.
12. Mr. Pushpendra Singh Bhadoriya, learned counsel for R1 supports the impugned order.
13. Besides hearing learned counsel for the parties we have perused the entire material available on record. It is not in dispute that on the date of filing of application under Section 9 of the Code by the Operational Creditor there were outstanding debt amounting to Rs.11,95,447/- (Rupees Eleven lakhs Ninety Five thousand four hundred forty seven only) against the Corporate Debtor. Only objection in respect of pre-existing dispute which was asserted by the Corporate Debtor was thoroughly examined and satisfied by the Adjudicating Authority. It is true that under the provisions of Code if Adjudicating Authority is satisfied with pre existing dispute at the time of entertaining an application filed under Section 9 of the Code there is no reason to initiate the same Company Appeal (AT)(Ins) No.1019 of 2022 23 or admit the application. However, law is settled on the point that there must be pure pre-existing dispute. Meaning thereby that genuine pre-existing dispute must exist in rejecting an application Section 9 of the code. In the present case it is reflected from inspection report of SGB Infra Ltd dated 16.12.2019 which is at page 147 that the Corporate Debtor was asked by the SGB Infra Ltd to remove the flooring. This fact is itself enough to draw an inference that the Corporate Debtor had accepted the delivery of granite slabs made by the Operational Creditor without raising any dispute or objection. Otherwise the Corporation Debtor would have rejected the entire materials at the time of unloading of the same. However, it is clear that the granite slabs supplied by the Operational Creditor were utilised by the Corporate Debtor and had placed the same in the premises of Airport Authority of Jaipur. There may be plausible reasons for SGB Infra Ltd to ask the Corporate Debtor to remove the flooring but fact remains that the Corporate Debtor had accepted the granite slabs supplied by the Operational Creditor without raising any dispute or objection. On this score itself we are of the opinion that such plea of the Corporate Debtor regarding dispute can be termed as moon shine defence. On this plea there is no reason to accept as if there was Company Appeal (AT)(Ins) No.1019 of 2022 24 pre-existing dispute in between the Operational Creditor and Corporate Debtor. Besides this the Operational Creditor before the Adjudicating Authority has already taken a plea that he has filed an application under section 340 of Cr PC in respect of placing and using a document by committing forgery and interpolation and as such we do not find any ground to interfere with the impugned order nor we find any defect in the said impugned order. Accordingly the appeal having no merit is fit to be rejected and it is dismissed without cost.
(Justice Rakesh Kumar) Member (Judicial) (Dr. Alok Srivastava) Member (Technical) bm Company Appeal (AT)(Ins) No.1019 of 2022