Atul Khandelwal vs M/s Cata Appliances Limited

Date,Payment Details

18.04.2012,"Payment of Rs. 1,00,000/- made through cheque

bearing no.703421 to CD

01.10.2012,"Payment in cash by OC towards fabrication cost of

Rs.1,50,000/- to CD

01.10.2012,"Payment in cash by OC towards cost of display

material of Rs.1,50,000/- to CD

17.10.2012,"Payment of Rs. 2,00,000/- made through cheque

bearing no.518358 to CD

The receipts on letter head of applicant relating to sale of the goods on credit worth Rs.1,89,843/- and outstanding payment of Rs. 1,30,219/- are",

annexed with the reply.,

It is further submitted that Operational Creditor has failed to file an affidavit under Section 65 A and B of the Evidence Act to certify with respect,

to the documents generated from computer and its admissibility.,

In rejoinder of the applicant, the submissions made in the application are reiterated and controverting the assertions in the reply. It is stated that as",

per clause9(III) of the agreement, “Rs. 6,00,000/- was refundable to the Operational Creditor not before 2 months from the date of",

termination of contract being 30.09.2019 and date of refund being due falls on or after 30/11/2015.â€​ Thus, it is submitted that the application",

filed on 16.11.2018 is not time barred by Law of Limitation.,

15 It is further submitted in the rejoinder that the bill no.440 dated 09.03.2015 for Rs. 1,89,843/- has been duly accounted for in the accounts books the",

payment for which has already been made through an account cheque of Rs.2,00,000/-on 13.04.2015. A copy of ledger account is attached along with",

rejoinder, according to which Rs. 1,35,840/- is also recoverable from the Corporate debtor which unfortunately is left out to be claimed while issuing",

demand notice as well as in the present application. Moreover, the Corporate debtor had not provided any account statement to prove its counter claim",

of Rs. 30,219/-.",

16 Further certificate under Section 65B of Evidence Act 1872 is attached as Annexure 2 along with rejoinder.,

17 It is pertinent to note that the Operational Creditor has not produced any documents with respect to the full and final payment of the security,

deposit of Rs. 6,00,000/-, as alleged. The basic question is that, whether the claim made by the applicant is an ‘Operational debt’ as defined",

under Section 5(21) of the Code,2016 as:",

“A claim in respect of the provisions of goods or services including employment or debt in respect of the payment of dues arising under,

any law for time being in force and payable to the Central Government any State Government or any Local Authorityâ€​.,

‘Security deposits’ are not covered under the ambit of ‘Operational debt’ as defined under Section 5 (21) of the Code,2016. Thus, the",

claim made by the applicant that it being ‘Operational creditor’ as defined under Section 5(20) is unacceptable. Therefore, the payment made",

by the applicant to the Respondent as per their commercial understanding and liability to refund the said security deposit on termination of the,

commercial agreement cannot be considered as Operational debt.,

The corporate debtor has further submitted that debt is disputed and not payable as the Operational Creditor has not made payments of,

Rs.1,30,219/- in respect of the goods received by way of credit, which needs to be considered while crystallizing the liability.",

Considering the submission of both parties, the defense of the ‘Corporate Debtor’ to stave off the Insolvency Resolution Process, as sought",

to be unleashed by the Applicant, which primarily rests on the ground of a pre-existing dispute prior to the filing of the application and in order to",

consider the dismissal of application, it is necessary to ascertain the law laid down by Hon’ble Supreme Court of India in Mobilox Innovations",

Private Limited vs. Kirusa Sortware Private limited has observed that-,

“The adjudicating authority, when examining an application under Section 9 of the Act will have to determine:",

(i) Whether there is an “operational debtâ€​ as defined exceeding Rs.1 lakh? (See Section 4 of the Act),

(ii) Whether the documentary evidence furnished with the application shows that the aforesaid debt is due and payable and has not yet been,

paid? and,

(iii) Whether there is existence of a dispute between the parties or the record of the pendency of a suit or arbitration proceeding filed before,

the receipt of the demand notice of the unpaid operational debt in relation to such dispute?,

If any one of the aforesaid conditions is lacking, the application would have to be rejected.",

Apart from the above, the adjudicating authority must follow the mandate of Section 9, as outlined above, and in particular the mandate of",

Section 9(5) of the Act, and admit or reject the application, as the case may be, depending upon the factors mentioned in Section 9(5) of the",

Act.â€​,

The Corporate Debtor in terms of the Section 8 (2) (a) of the Code vide its reply dated 23.10.2018 brought to the notice of the applicant an,

‘existence of dispute’ with respect to the alleged claim of the applicant. As per the reply filed by the Corporate Debtor, it can be inferred &",

concluded that the dispute raised by the corporate debtor falls well within the ambit of dispute as laid down in the judgment of Hon’ble Supreme,

Court in Mobilox case.,

In an application filed under Section 9 of the Code, Tribunal is not supposed to examine the merits of the dispute nor the adequacy of the dispute is",

to be seen. However, in matters under Section 9, the tribunal is only to see that a dispute pre-exists and that the dispute is not vague, got up or raised",

for the first time to evade the liability. It is not a case of subsequent repudiation of claim only in the reply filed by the respondent. The documents on,

record and reply to demand notice clearly shows that the dispute was raised by the respondent prior to the demand notice issued under Section 8 (1),

of the Code. Once there is material to believe that dispute exists in the facts of the case, it is required to have the matter tried out before the axe, in",

the form of corporate insolvency resolution process, falls.",

Section 9 (5) of the Code provides that adjudicating authority shall reject the application if notice of dispute has been received by the operational,

creditor or there is a record of dispute in the information utility. As a sequel to the above discussion, this application fails and the same is hereby",

rejected and dismissed.,

It is made clear that any observations made in this order shall not be construed as an expression of opinion on the merit of the controversy and the,

right of the applicant before any other forum shall not be prejudiced on account of dismissal of the instant application.,

Let the copy of the order be served to the parties,