NCLAT (2024.07.09) in Rashtriya Polymers & Solvents. Vs. Kanodia Technoplast Ltd. [Company Appeal (AT) (Ins) No. 1140 of 2023] held that;
Notice under Section 8 has nothing to do with the invoices which fall within the period of Section 10A and beyond the period of Section 10A as notice under Section 8 is given by Operational Creditor to the Corporate Debtor so that the Corporate Debtor may either make the payment or raise the issue of pre-existing dispute.
Excerpts of the order;
This order shall dispose of two appeals bearing Company Appeal (AT) (Ins) No. 1680 of 2023 titled as Chemical Suppliers India Pvt. Ltd. Vs. Kanodia Technoplast Ltd. (hereinafter referred to as the first appeal) filed against the order dated 16.10.2023 by which the National Company Law Tribunal, New Delhi, Bench-IV has dismissed the application filed by the appellant under Section 9 of the Insolvency & Bankruptcy Code, 2016 (in short ‘Code’) bearing CP No. (IB)-734 (ND)/2021, inter alia, on the ground that the application is filed under Section 9 for resolution of the amount based upon invoices some of which fall within the period from 23.03.2020 - 24.03.2021 is hit by Section 10A of the code and even if of some invoices which crosses the threshold, provided under Section 4, are beyond the aforesaid period, the segregation is not allowed and the application as a whole has to be dismissed. Company Appeal (AT) (Ins) No. 1140 of 2023 has been filed by Rashtriya Polymers & Solvents vs. Kanodia Technoplast Ltd. (hereinafter referred to as second appeal) against the order dated 12.07.2023 by which application filed by the said appellant under Section 9 of the Code, has been dismissed.
# 2. Both these matters are being taken up together because in both the cases, the Corporate Debtor is the same and in case anyone of the appeal is allowed then the second appeal would become redundant or infructuous because two CIRPs cannot be initiated against the same CD.
# 3. For the sake of convenience, we are taking up the first appeal. The brief facts of this case are that the appellant issued a demand notice dated 30.09.2021 to the respondent demanding payment of outstanding debt of Rs. 6,13,26,856/- along with interest of Rs. 1,71,67,229/- calculated @ 24%, based upon 60 invoices starting from 01.07.2020 to 03.06.2021. The demand notice was replied by the respondent on 08.10.2021.
# 4. Since the amount claimed by the appellant was not resolved by the respondent, therefore, the appellant filed the application under Section 9 of the Code on 02.11.2021 for resolution of the amount of Rs. 7,84,94,085/-.
# 5. This application has been dismissed by the Tribunal on the ground that out of the 60 invoices, 53 invoices are of the period between 01.07.2020 till 23.03.2021 which falls within the period between 23.03.2020-24.03.2021 i.e. the period prescribed under Section 10A of the Code during which if the default is committed, the application under Section 7, 9 & 10 cannot be filed at all.
# 6. The Tribunal has held, relying upon the decision of Hon’ble Supreme Court in the case of Ramesh Kymal Vs. Siemens Gamesa Renewable Power Private Limited (Civil Appeal No. 4050 of 2020) decided on 09.02.2021 and the decision of this Court in Company Appeal (AT) (Ins) No. 387 of 2023 Yatra Online limited Vs Ezeego One Travel & Tours Limited decided on 31.03.2023 that the application under Section 9 was not maintainable because the segregation of the amount of the period falling under Section 10A was not possible.
# 7. Learned Counsel for the appellant has argued that the finding recorded by the Tribunal that the amount cannot be segregated is contrary to the facts noticed by the Tribunal. In this regard, he has referred to paragraph 11 of the impugned order in which the Tribunal itself has made the segregation of the amount based upon Invoices No. 1 to 53, which falls within the period provided under Section 10A and Invoices No. 54 to 60 falls after the period provided under Section 10A. The said chart is reproduced for a quick glance which read as under: . . . . . .
# 8. It is further submitted that the amount arising out of the invoices from 54 to 60 is Rs. 1,65,89,311/- which is more than the amount of threshold provided under Section 4 of Rs. 1 crore, therefore, the application could not have been dismissed by the Ld. Tribunal and deserves to be admitted. In support of his submissions, he has relied upon a decision of this Court in Company Appeal (AT) (Ins) No. 39 of 2023 titled as Naresh Choudhary Vs. Sterling Enamelled Wires Pvt. Ltd. decided on 16.08.2023. It is submitted that in the decided case, notice under Section 8 was given on 14.08.2021 claiming total amount of Rs.2,07,11,209/- which included the amount based upon the NonLC and the LC amount.
# 9. It is further submitted that the Non-LC amount which falls within the period between 23.03.2020-24.03.2021 (as prescribed under Section 10A) do not have any effect on the maintainability of the application under Section 9 if the non LC amount is above the threshold and the application can be maintained on the said amount. In this regard, the observations made by this Tribunal are reproduced as under:
“15. This brings us to the second issue for determination as to whether the debt arising out of the invoices fell during the period which attracts the bar of Section 10A of IBC. It is the case of the Appellant that the Operational Creditor has not provided the date of default either in the Section 8 demand notice or in the Section 9 application. Further, it has been stated that payments were to be made by the Corporate Debtor by way of LC which was to be created within 90 days from each invoice and hence the date of default would be 90 days post the date of each such invoice. Since the Appellant had not created any LC within a period of 90 days the default occurred on the 90th day from the day of invoice. After calculating the 90th day of these invoices, it has been contended that the date of default arises between 01.05.2020 to 29.05.2020 which clearly falls in the ambit of Section 10A and hence barred from being subject to IBC proceedings.
16. Refuting the above, it has been submitted by the Learned Counsel for the Respondent No.1 that the Corporate Debtor had placed four purchase orders which find place at pages 272-275 of APB. Of the four purchase orders, only two purchase orders (3rd and 4th purchase orders) make reference to the creation of LC of 90 days. As regards the other two purchase orders (1st and 2nd purchase orders), there was no such stipulation of 90-day LC. Hence in respect of these two purchase orders, the date of default was the date of invoice. It was stated that the invoices raised under the 4th purchase order were anyways already excluded. It was further submitted that even if the 3rd and 4th purchase orders are excluded, the first two purchase orders cumulatively amount to default which is above the threshold limit of Rs.1 crore necessary for filing an insolvency application. We are satisfied with the reasoning offered by the Operational Creditor and do not find any force in the contention of the Appellant.
17. We have no hesitation in observing that in the present case, all requisite conditions necessary to trigger CIRP under Section 9 stands fulfilled with operational debt having been acknowledged and default committed thereto and there being no real pre-existing disputes discernible from given facts. For the foregoing reasons, we are of the view that the Adjudicating Authority has rightly admitted the application of the Operational Creditor filed under Section 9 of IBC. We are satisfied that the impugned order does not warrant any interference. There is no merit in the Appeal. The Appeal is dismissed. No order as to costs.”
# 10. In reply, counsel appearing for the respondent has vehemently argued that the issuance of notice under Section 8 of the Code is sine qua non for the purpose of maintainability of an application under Section 9. He has further submitted that if the invoices falling between the dates 23.03.2020-24.03.2021 are also a part of the said notice then the application under Section 9 on that basis is not maintainable. He has relied upon the decision of Hon’ble Supreme Court in Ramesh Kymal Vs. Siemens Gamesa Renewable Power Private Limited (supra) and the decision of this Court in Yatra Online Limited Vs Ezeego One Travel & Tours Limited (supra) in support of his contention.
# 11. We have heard both the counsel for the parties and perused the record with their able assistance.
# 12. The issue involved in this case travels in a narrow compass, as to whether an application under Section 9, filed on the basis of invoices which fall within the period of Section 10A and also beyond the said period is maintainable in case the invoices of period beyond of Section 10A are sufficient to cross the threshold?
# 13. The answer of this question lies in the decision by this Court in the case of Naresh Choudhary Vs. Sterling Enamelled Wires Pvt. Ltd. (supra) in which the same issue was involved. Notice under Section 8 has nothing to do with the invoices which fall within the period of Section 10A and beyond the period of Section 10A as notice under Section 8 is given by Operational Creditor to the Corporate Debtor so that the Corporate Debtor may either make the payment or raise the issue of pre-existing dispute.
# 14. All that has to be seen by Ld. Tribunal is that the invoices relied upon by the Operational Creditor beyond the period of Section 10A crosses the threshold of Rs. 1 crore for the purpose of maintaining the application. The Judgment in the case of Ramesh Kymal Vs.Siemens Gamesa Renewable Power Private Limited (supra) of the Hon’ble Supreme Court as well as the decision of this Court in the case of Yatra Online Ltd Vs Ezeego One Travel & Tours Limited are not applicable to the facts of this case. The relevant para of Yatra Online Limited Vs Ezeego One Travel & Tours Limited which has been strongly relied upon by the respondent is reproduced as under:
“15. Admittedly, the application under Section 9 has to be filed after a notice under Section 8 of the Code is delivered. Meaning thereby notice under Section 8 of the Code is a sine qua non to maintain an application under Section 9 of the Code. Section 8 of the Code provides that the Operational Creditor shall deliver a demand notice upon the Corporate Debtor who may within a period of 10 days of the receipt of the demand notice either raise the issue of an existing dispute or bring to notice of the Operational Creditor that the payments have been made / paid of operational debt and an application under Section 9 of the Code could be filed only after the expiry of period of 10 days from the date of delivery of notice. The Resolution Professional who was appointed on 09.03.2021 and is familiar with the provisions of the Code mentioned the date of default as 30.10.2020 in the notice and after the notice, the application under Section 9 of the Code too contained the date of default as 30.10.2020. Thus, the positive case before the Adjudicating Authority, at the instance of the Resolution Professional, was that the date of default is 30.10.2020 and not July 2019 but while contesting the application filed under Section 10A the RP conveniently changed the date of default from 30.10.2020 to July, 2019 in order to wriggle out of the rigorus of Section 10A of the Code.
16. In the background of the aforesaid facts and circumstances of the case, the question thus would arise as to whether the date of default, mentioned in the demand notice as well as in the application filed under Section 9 of the Code, which has not been amended even if it was allegedly wrongly mentioned, can be changed in the litigation which arises from a miscellaneous application?”
# 15. In view of the aforesaid discussion, we find merit in the present appeal, therefore, the same is hereby allowed and the impugned order is set aside. The application bearing CP No. (IB) 734/ND/2021 is hereby restored. The matter is remanded back to the Ld. National Company Law Tribunal to proceed further in accordance with law. The Parties are directed to appear before the Tribunal on 26.07.2024.
# 16. In so far as the second appeal is concerned, we have not gone into the merits of the said appeal because the first appeal has since been allowed. Therefore, the second appeal is hereby dismissed as redundant and infructuous. No Costs.
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