National Company Law Appellate Tribunal
M/S Gupta Exim (India) Private Limited vs M/S Knitcraft Apparels International ... on 4 July, 2022
1
NATIONAL COMPANY LAW APPELLATE TRIBUNAL
PRINCIPAL BENCH
NEW DLEHI
COMPANY APPEAL (AT(INSOLVENCY) NO.497/2021
(Arising out of Judgement/Order dated 01.04.2021 passed by the National
Company Law Tribunal, Principal Bench, New Delhi in Company Petition
No.(IB)-34(PB)/2021)
In the matter of:
M/s Gupta Exim (India) Pvt Ltd
144, DLF Industrial Area,
Phase I,
Faridabad, Haryana 121003
Through its RP Shri Vivek Raheja Appellant
Vs
M/s Knitcraft Apparels International Pvt Ltd
N-49, Kirti Nagar,
New Delhi-15 Respondent
For Appellant: Mr Harsh Garg and Mr. Pulkit Goyal, Advocates.
For Respondent: Mr Keshri Kumar, Advocate.
JUDGEMENT
VIRTUAL MODE JUSTICE RAKESH KUMAR, MEMBER (JUDICIAL) The present Appeal has been preferred under Section 61 of the Insolvency & Bankruptcy Code, 2016 (hereinafter referred to as 'the IBC) against the order dated 01.04.2021 passed by the Adjudicating Authority, National Company Law Tribunal, Principal Bench, New Delhi in Company Petition No.(IB) 34(PB)/2021. By the said order the Adjudicating Authority has dismissed the petition filed under Section 9 of the IBC Code by the Appellant primarily on the ground that the same did not meet the threshold Company Appeal (AT)(I) No. 497/2021 2 limit of default as set out by notification dated 24.03.2020 issued under Section 4 of the IBC.
2. The Appellant's case is that the Appellant/Operational Creditor is a Company incorporated under the provisions of the Companies Act. The Appeal was filed by Mr. Vivek Raheja, who was earlier appointed as Interim Resolution Professional and now working as Resolution Professional in Corporate Insolvency Resolution Process (CIRP) in the matter of M/s Gupta Exim (India) Pvt Ltd as an application under Section 7 of the IBCO Code bearing CP(IB)No.312/CHD/HRY/2018 was admitted by the National Company Law Tribunal, Chandigarh vide order dated 29.10.2019.
3. That as per the Appellant, both Appellant/operational creditor and Respondent/Corporate Debtor were in trade with each other from a long time, and there was running account between them. For the said job work work/processing of fabric the appellant/operational creditor used to raise invoices to the corporate debtor for which the Corporate Debtor promised to make payment against each invoice soon after the delivery of goods by way of electronic transfer or through cheques. The Appellant claimed that the Corporate Debtor had failed to make payment of 56 invoices ranging from dated 27.07.2019 to 14.10.2019 and as such defaulted in making payment to the tune of Rs. 69,39,771/- towards the appellant/operational creditor. The Appellant further claimed that earlier also 'Demand Notice' was issued on 20.01.2020. However, subsequently it was withdrawn since there were certain defects. The Appellant has specifically pleaded that another Notice dated 12.03.2020 was sent to the Corporate Debtor/Respondent demanding Rs.69,39,771/-. In paragraph 7.6 of the Memo of Appeal it has been Company Appeal (AT)(I) No. 497/2021 3 categorically stated that the 'Demand Notice' dated 12.03.2020 demanding an amount of rs.69,39,771/- was sent by Registered Post on 14.03.2020 at the registered Address of the Corporate Debtor available on the master date of the Company which was delivered to the Corporate Debtor on 17.03.2020.
4. That it is further case of the Appellant that the Respondent/Corporate Debtor never raised any dispute within the stipulated period nor did it raise any dispute qua outstanding amount, nor did it deposit the outstanding dues. In the meanwhile, on 24.03.2020 the Central Government through Notification enhanced quantum of default for the purpose of IBC from Rs.1 lakh to Rs. 1 Crore. It is further admitted by the Appellant that the Appellant/Operational Creditor i.e. M/s Gupta Exim (India) Pvt Ltd (appellant) filed an application under Section 9 of IBC read with Rule 4 of Insolvency & Bankruptcy (Application to Adjudicating Authority) Rules, 2016 (hereinafter referred to as Rule, 2016) vide E-Diary No.0710102036282020 dated 28.04.2020 for initiation of CIRP against the Respondent/M/s Knitcraft Apparels International Pvt Ltd -Corporate Debtor for default of an amount of Rs.69,39,771/-
5. The Application under Section 9 of the IBC filed by the Appellant was heard by the Adjudicating Authority and order was reserved. Subsequently the impugned order was pronounced on 01.04.2021 and the same was dismissed since the default amount did not meet the threshold limit of default as per Notification dated 24.03.2020.
6. In the present Appeal, the Respondent/Corporate Debtor appeared and filed Notes of Written Submissions. In the Notes of Written Submissions, the Respondent has denied any outstanding amount as claimed by the Appellant Company Appeal (AT)(I) No. 497/2021 4 and he has also in categorical term denied even service of 'Demand Notice' either by registered post or through email.
7. We have heard in detail Mr. Harsh Garg, learned counsel who appeared alongwith Mr. Pulkit Goyal, Learned Counsel for the Appellant and Mr. Keshri Kumar, Learned Counsel for the Respondent. Learned Counsel for the appellant assailing the impugned order has emphatically argued that the cut off date for consideration of the pecuniary jurisdiction was the date on which for the first time he issued 'Demand Notice' under Section 8 of IBC read with Rule 6 of IBC Rules, 2016. It was argued that regarding the outstanding undisputed dues the Appellant had initially issued Notice in the year 2020, however, there were certain technical error, therefore, it was subsequently withdrawn and finally on 12.03.2020 Demand Notice was issued and served validly on Respondent/Corporate Debtor. According to the Learned Counsel for the Appellant since the 'Demand Notice' was already issued for its service on Respondent/Corporate Debtor prior to amendment in Section 4 of the IBC Code whereby limit for Demand was fixed as Rs.1 crore instead of Rs.1 lakh, the date of Demand Notice was required to be treated as date for filing of the application under Section 9 of the IBC and as such the Adjudicating Authority has grossly erred in rejecting the application under Section 9 of the IBC filed by the Appellant. He submits that the order is liable to be set aside.
8. Heard Mr. Pulkit Goyal, learned counsel for the Respondent/Corporate Debtor opposing the Appeal has argued that the Application under Section 9 of the IBC filed by the Appellant was required to be outrightly rejected on the ground that the application under Section 9 was filed on behalf of the Appellant by Shri Vivek Raheja who has admitted in his affidavit at running Company Appeal (AT)(I) No. 497/2021 5 page 145 of the Appeal that he was Resolution Professional/Authorised Representative of M/s Gupta Exim (India) Pvt Ltd which is Appellant and Operational Creditor. By way of referring to Section 11(a) of IBC, the Learned Counsel for the Respondent has argued that the Application filed under Section 9 of the IBC by the Appellant was required to be rejected on this sole ground.
9. Learned Counsel for the Respondent has further placed reliance on an order passed by a Coordinate Bench of NCLAT, Principal Bench, New Delhi in Company Appeal (AT)(Ins) No.813 of 2021 -Jumbo Paper Products Vs Hansraj Agrofresh Pvt Ltd which is quoted hereinbelow:
"It is seen that notification dated 24.03.2020 (supra) makes it umambiguously clear that the threshold limit to be considered for Section 9 application will be Rs. 1 crore. This threshold limit will be applicable for application filed under section 7 or 9 on or after 24.03.2020 even if debt is of a date earlier than 24.03.2020."
10. According to the Learned Counsel for the Respondent there is no error in the order impugned warranting interference by this Appellate Tribunal.
11. Besides hearing learned counsel for the parties we have minutely examined the facts, rules, provision of the Code and order passed in Jumbo Paper Products case (supra). It is admitted case of the Appellant that he issued Demand Notice dated 12.03.2020 under Section 8 of the IBC which was sent through registered post on 14.03.2020, as per statement made in para 7.6 of the Memo of appeal. The appellant admits that the said Demand Notice was delivered on the Corporate Debtor on 17.03.2020.
Company Appeal (AT)(I) No. 497/2021 6
12. Keeping in view the fact that the Appellant has admitted that Demand Notice sent under Section 8 of the IBC was sent through registered post on 14.3.2020 and delivered on 17.03.2020, ten (10) days' time was thereafter available to the Corporate Debtor to respond to the Notice either by way of disputing the claim or making payment. Before proceeding on aforesaid issue it would be profitable to reproduce Section 8, 9.1 and Rule 5 of IBC as follows:
8.Insolveny resolution by operational creditor (1) An operational creditor may, on the occurrence of a default, deliver a demand notice of unpaid operational debtor copy of an invoice demanding payment of the amount involved in the default to the corporate debtor in such form and manner as may be prescribed.
(2) The corporate debtor shall, within a period of ten days of the receipt of the demand notice or copy of the invoice mentioned in sub-section (1) bring to the notice of the operational creditor--
(a) existence of a dispute, if any, and record of the pendency of the suit or arbitration proceedings filed before the receipt of such notice or invoice in relation to such dispute;
(b) the repayment of unpaid operational debt--
(i) by sending an attested copy of the record of electronic transfer of the unpaid amount from the bank account of the corporate debtor; or
(ii) by sending an attested copy of record that the operational creditor has encashed a cheque issued by the corporate debtor.
Explanation.--For the purposes of this section, a "demand notice" means a notice served by an operational creditor to the corporate debtor Company Appeal (AT)(I) No. 497/2021 7 demanding repayment of the operational debt in respect of which the default has occurred.
9. Application for initiation of corporate insolvency resolution process by operational creditor-(1) After the expiry of the period of ten days from the date of delivery of the notice or invoice demanding payment under sub-section (1) of section 8, if the operational creditor does not receive payment from the corporate debtor or notice of the dispute under sub-section (2) of section 8, the operational creditor may file an application before the Adjudicating Authority for initiating a corporate insolvency resolution process.
Rule 5:
5. Demand notice by operational creditor-(1) An operational creditor shall deliver to the corporate debtor, the following documents namely:
a) a demand notice in Form 3; or
b) a copy of an invoice attached with a notice in Form 4. (2) The demand notice or the copy of the invoice demanding payment referred to in sub-section (2) of section 8 of the Code, may be delivered to the corporate debtor;-
a) at the registered office by hand, registered post or speed post with acknowledgement due; or
b) by electronic mail service to a whole time director or designated partner or key managerial personnel, if any, of the corporate debtor.
Company Appeal (AT)(I) No. 497/2021 8 (3) a copy of the demand notice or invoice demanding payment served under the rule by an operational creditor shall also be filed with an information utility, if any.
13. On examination of aforesaid provisions in context with undisputed fact of the present case it is evident that 'Demand Notice' issued under Section 8 of the IBC was claimed to be delivered on 17.03.2020. Thereafter within 10 days from the date of receipt of Demand Notice, the Corporate Debtor was having time either to explain regarding existing dispute or payment of the amount etc. Counting date from the alleged date of delivery of Notice, 10 days time was going to expire on 27.03.2020. However, before the expiry of 10 days for responding by the Corporate Debtor on the Demand Notice, on 24.03.2020 in exercise of powers conferred under Section 4 of the IBC the Central Government on 24.03.2020 issued notification whereby the minimum default amount for filing cases under Section 7, 9 and 10 of the IBC was enhanced from Rs.1 lakh to Rs. 1 crore. In the present case it is admitted case of the Appellant as mentioned in para 7.9 of the Memo of Appeal that the Appellant filed application under Section 9 of the Code read with Rule 4 of Rules, 2016 vide E Diary No.0710102036282020 dated 28.04.2020. Meaning thereby that the said application was filed much after the issuance of notification dated 24.03.2020 and as such the Adjudicating Authority has rightly rejected the application filed under Section 9 of the IBC by the appellant. Section 9 of the IBC further makes it clear that after the expiry of 10 days from the date of receipt of Notice under Section 8 of the IBC the said Application can be filed. Meaning thereby that before expiry of 10 days' time of service of Demand Company Appeal (AT)(I) No. 497/2021 9 Notice the Appellant was not having any cause of action for filing application under Section 9 of the IBC. Since the appellant in the present case had filed application under Section 9 after enhancement of the pecuniary jurisdiction there was no reason to entertain such application by the Adjudicating Authority and same has rightly been rejected.
14. Of course, by the impugned order the application under Section 9 was dismissed only on the ground of enhancement of pecuniary jurisdiction, this Tribunal is of the opinion that the Learned Counsel for the Respondent was right in making submission that the application filed before the Adjudicating Authority by the Appellant which was filed for initiation of CIRP was not to be entertained in view of rider incorporated in Section 11(a) of the IBC. The provisions contained in Section 11 is reproduced hereinbelow:-
"11. The following persons shall not be entitled to make an application to initiate corporate insolvency resolution process under this Chapter, namely:--
(a) a corporate debtor undergoing a corporate insolvency resolution process; or Xxx"
15. On examination of the aforesaid provisions certainly the Appellant was not entitled to file Application under Section 9 of the IBC since the Appellant was already under CIRP. However, we are refraining to record any specific finding on the present issue considering the fact that the application filed by the Appellant/Operational Creditor was primarily rejected on the ground that it did not meet the threshold limit of default as set out by the Notification dated 24.03.2020. Moreover, the issued decided by the Adjudicating Company Appeal (AT)(I) No. 497/2021 10 Authority by the impugned order has already been set at rest by a Coordinate Bench of this Tribunal in Company Appeal (AT)(Ins) No.813 of 2021 in the matter of Jumbo Paper Products Vs Hansraj Agrofresh Pvt Ltd (Supra). We donot find any ground for interference. The Appeal stands dismissed. No order as to costs.
(Justice Rakesh Kumar) Member (Judicial) (Dr. Ashok Kumar Mishra) Member (Technical) 4th July, 2022 Bm Company Appeal (AT)(I) No. 497/2021