For initiation of CIRP under Section 9 of the IBC, a genuine pre-existing dispute must exist; the Appellant failed to demonstrate such a dispute.

JUDGMENT

(Hybrid Mode)

[Per: Arun Baroka, Member (Technical)]

The present Appeal is being filed by the Appellant / Corporate Debtor, a member of the suspended board of directors of the Corporate Debtor under Section 61 of the Code against the Impugned Order, passed in C.P. (IB) 657/CHD/PB/2019 by the Hon’ble Adjudicating Authority, wherein the Hon’ble Adjudicating Authority admitted the application filed by Respondent No.1 under Section 9 Code and initiated the Corporate Insolvency Resolution Process (“CIRP”) of the Corporate Debtor.

Brief Background of the case

2. The Corporate Debtor was incorporated on 06/12/2010 under the provisions of the Companies Act, 1956 with CIN No. U17119PB2010PTC034482, with its registered office at B-VI-I, Kucha No.1, Madhopuri, Ludhiana, Ludhiana, Punjab, India, 141008. The Appellant / Corporate Debtor, Mr. Gulshan Kumar Ahuja, is a member of the suspended Board of Directors of the Corporate Debtor.

3. The Respondent No. 1 / Operational Creditor is a sole proprietor of Aggarwal Enterprises and is engaged in the business of trading and supplying cotton and the same is registered with the GST Department vide GSTIN 03AAJCA0093R1ZF.

4. The Respondent 2 is the Interim Resolution Professional (“IRP”) of the Corporate Debtor appointed by the Hon’ble Adjudicating Authority vide Impugned Judgment dated 12/06/2024 passed in C.P. (IB) 410/CHD/PB/2019.

5. Respondent No.1 and Corporate Debtor were involved in the business of trading and supplying cotton and manufacturing cotton yarn respectively. From 13/08/2018 to 16/09/2018, Respondent No.1 raised various purported invoices upon the Corporate Debtor in respect of goods supplied.

6. In December 2018 there was news in the market as well as published in leading newspapers that a scam of cotton supply based on fake bills was going on and some agents of Haryana were involved therein in supplying materials to cotton yarn manufacturers. The said news made the Appellant / Corporate Debtor vigilant and as a result they stopped purchasing raw materials for manufacturing of cotton yarn from Respondent No.1 and their sister concern and called their authorized agent Mr. Naresh Sharma to provide all original documents of payment of GST and arranged a meeting with Respondent No.1 to discuss the issue. However, the effort of the Appellant / Corporate Debtor has gone in vain as Respondent No.1 failed to meet the Appellant / Corporate Debtor. As a result, thereof, with the consent of Mr. Naresh Sharma, the Appellant / Corporate Debtor was forced to stop the payment to Respondent No.1, since then those purported invoices are under dispute.

7. The Appellant / Corporate Debtor further contends on 15/02/2019 and 25/02/2019 respectively, the Intelligence Officer, Directorate General of GST Intelligence (DGGI), Chandigarh Zonal Unit raided/searched at the Appellant / Corporate Debtor factories/offices to check the cotton purchased by the Appellant / Corporate Debtor from suppliers including from Respondent No.1 who had supplied cotton to the Appellant / Corporate Debtor without payment of Goods and Servies Tax (“GST”) to the GST Authorities.

8. During the raid, the GST Intelligence Officer took into custody and seized all hard and soft records relating to sales/purchases, returns, payments of taxes, etc. Not only this but the said GST Intelligence Officer also forced the Appellant / Corporate Debtor to debit the GST Credit standing in the books of accounts as well as to deposit the amount in the electronic credit ledger. Moreover, the App