The operational creditor can only initiate CIRP under IBC if there is an undisputed debt; if a dispute exists, the application must be dismissed.

JUDGMENT

(13th March, 2024) Ashok Bhushan, J.

This Appeal by Suspended Director of the Corporate Debtor has been filed challenging the order dated 06.12.2023 passed by the Adjudicating Authority (National Company Law Tribunal), Mumbai Bench-IV admitting Section 9 Application filed by the Respondent- Operational Creditor.

2. Brief facts of the case necessary to be noticed for deciding the Appeal are:-

2.1. The Corporate Debtor- ‘Dhanlaxmi Electricals Private Limited’ is a license contractor and engineer for carrying out various contract works awarded to the Corporate Debtor. It has issued purchase order to the Operational Creditor for supply of AB Cables for its different projects. The Operational Creditor sold wires and cables of the Corporate Debtor and raised invoices from 29.09.2019 to 06.10.2019. Account Manager of the Corporate Debtor issued an e-mail dated 04.08.2021 forwarding the ledger pointing out certain differences in the ledger in the account of the Operational Creditor and the account of the Corporate Debtor. As per e-mail dated 04.08.2021, ledger from 01.04.2020 to 30.03.2022 reflected as closing balance of Rs.1,79,93,690/-. Operational Creditor issued a demand notice dated 25.08.2021 to the Corporate Debtor claiming an amount of Rs.1,79,93,691/- + interest of Rs.85,27,110/- totalling Rs.2,85,20,800/-. Advance copy of Section 9 application was also forwarded to the Corporate Debtor vide letter dated 09.11.2021. Corporate Debtor after receiving demand notice dated 25.08.2021 as well as letter dated 15.11.2021 regarding the demand notice sent notice of dispute declining the demand in the letter dated 20.11.2021. Corporate Debtor raised various issues and issued debit notes for amount of Rs.67,96,800/- for 80 K.M faulty cable as well as amount of Rs.50 lacs for non-supply of G.I Pipe for Bill no.203. After receipt of the notice of demand, the Operational Creditor did not proceed to file application. Corporate Debtor after receiving of the demand notice paid an amount of Rs.61 Lakhs between 30.08.2021 to 31.03.2022. Operational Creditor after receipt of the aforesaid amount of 61 Lakhs after sending the demand notice proceeded to file an application under on 18.02.2023 claiming an amount of Rs.1,79,93,691 + interest of Rs.85,27,110/- totalling Rs.2,85,20,800/-. In application, the Operational Creditor has brought the copy of the reply to the demand notice dated 20.11.2021 as well as the details of the payments made after issuance of demand notice.

2.2. Adjudicating Authority issued notice in Section 9 application. Corporate Debtor did not file any reply and section 9 application proceeded ex parte and by order dated 06.12.2023 application has been admitted.

3. We have heard Shri Sangram Patnaik, Learned Counsel for the Appellant, Shri Akshay Sapre, Learned Counsel for the Respondent No.1 and Shri Ankur Khandelwal, Learned Counsel appearing for the IRP.

4. Learned Counsel for the Appellant challenging the impugned order submits that even though no reply of Section 9 application could be filed but reply to demand notice contains specific details by which Corporate Debtor has given notice of dispute. There being pre-existing dispute between the parties, the Adjudicating Authority ought not to have admitted application. It is submitted that it was not only by reply to demand notice that Corporate Debtor has pointed out deficiency and faulty cable supplied by the Operational Creditor but there were correspondence materials including the e-mail sent by Corporate Debtor on 24.12.2018, 03.07.2019 and 19.11.2021. It is submitted that joint inspection was held where faulty cables were identified jointly by Operational Creditor and the Corporate Debtor and faulty cables were never replaced as was initially communicated by the Operational Creditor. Corporate Debtor has suffered due to faulty cables supplied and extra cables were used by the Corporate Debtor. It is submitted that with regard to Invoice Nos. 203 and