JUDGEMENT

[Per: Barun Mitra, Member (Technical)] The present appeal filed under Section 61 of Insolvency and Bankruptcy Code 2016 (‘IBC’ in short) by the Appellant arises out of the Order dated 19.04.2022 (hereinafter referred to as ‘Impugned Order’) passed by the Adjudicating Authority (National Company Law Tribunal, Mumbai Bench, Court III) in CP(IB) No.3123(MB)/2019. By the Impugned Order, the Adjudicating Authority has dismissed the Section 9 petition filed by the Appellant seeking to bring the Corporate Debtor under the rigours of Corporate Insolvency Resolution Proceedings (‘CIRP’ in short). Aggrieved by this impugned order, the present appeal has been preferred.

2. The Learned Counsel for the Appellant/Operational Creditor, submitting the facts necessitating the filing of this appeal has submitted that they supplied garments to the Corporate Debtor, Kiaasa Retail LLP on the basis of orders received from the Corporate Debtor for the period October 2018 to February 2019. Goods were delivered within the given time-frame and no disputes or complaints was raised by the Corporate Debtor before or after the supply of goods and not even before the Adjudicating Authority. It has also been submitted that after some initial denial, the invoices raised have been acknowledged by the Corporate Debtor and that there has been no denial with regard to receipt of the goods delivered by the Operational Creditor. It is further submitted that the confirmation of accounts by the Corporate Debtor duly signed and sealed clearly indicates that debt has been established. It has also been claimed that the audited balance sheet of the Corporate Debtor for the year ending March 2020 acknowledges the debt.

3. Further adding that payment for the garments having become due from the Corporate Debtor and having remained unpaid, the Appellant/Operational Creditor left with no other choice but to take legal recourse issued demand notice on 09.05.2019 claiming a total due amount of Rs.1,30,67,415.26 including an interest amount of Rs.7,21,935.26 and thereafter filed a Section 9 application on 01.08.2019 before the Adjudicating Authority. It was further submitted that though the Adjudicating Authority in the impugned order noted the acknowledgment of debt by the Corporate Debtor but it erred in concluding that there was no specific admission of liability made in the said acknowledgement. Furthermore, there being no dispute in existence before the issue of the demand notice, the Adjudicating Authority by rejecting the Section 9 petition failed to appreciate the facts in the correct perspective that the defence raised by the Corporate Debtor is a sham based on concocted documents.

4. The Learned Counsel for the Respondent while making his submissions admitted that they received the demand notice dated 09.05.2019 and that reply to the said notice was sent on 20.05.2019. Going into the background of their relationship with the Operational Creditor, it is submitted that as the loan account of Parimal Vakharia Couture, the Operational Creditor was to be declared Non-Performing Asset, it sought help from the Corporate Debtor through a property broker, one Naveen Dalal. The said broker arranged a deal between the Operational Creditor and the Corporate Debtor. The terms and conditions of this business arrangement in the form of a draft Memorandum of Understanding (‘MoU’ in short) was exchanged with the Operational Creditor vide email dated 18.10.2018 with the intervention of the said Naveen Dalal. While admitting that the draft MoU was not signed between the two parties, it was asserted that there was a clear intention to abide by the terms and conditions set therein by both the parties on how to move ahead with the business arrangement.

5. Elaborating further that Clause 1 of this draft MoU entailed that the Operational Creditor was to supply goods to the Corporate Debtor on Sale or Return basis with the brand name of the Corporate Debtor, it