IBC threshold limit of Rs.1 Crore for Section 9 petitions determined on filing date (initiation date), not demand notice date; post-notice payments reduce debt validly; pre-existing disputes bar admission. (28 words)

JUDGMENT

(Hybrid Mode)

[Per: Arun Baroka, Member (Technical)]

This Appeal is filed under Section 61 of the Insolvency and Bankruptcy Code, 2016 (“Code”) by Mosco International Commodities Private Limited (‘OC/ Operational Creditor’) against the Impugned Order dated 02.02.2024 passed by the AA wherein Section 9 petition preferred by the OC against SBEC Sugar Limited (‘CD/ Corporate Debtor’) was dismissed for not meeting the threshold limit as prescribed under Section 4 of the Code.

Appellant’s Case

2. On 14.12.2020, the OC sent a ‘Letter of Interest’ to the CD for procuring 55,000 quintals Molasses for the season 2019 – 20 & 2020 – 21 from the sugar mill of the CD. The said procurement was to take place in two tranches i.e., 27,500 quintals for the season 2019 – 20 @ Rs./- 450 per quintal + GST and 27,500 quintals for the season 2020 – 21 @ Rs./- 555 per quintal + GST. 3. Thereafter on 15.12.2020, CD issued a sale order confirming the procurement and requested the OC to issue the purchase order (Page 32 of the Appeal). Thereafter, the Appellant issued a Purchase Order No. 4500015 to the CD whereby the CD was asked to supply the said quantity of molasses. It is to be noted here that in terms of the purchase order, an ad-hoc advance payment of Rs. 2,02,63,750 was made to the CD.

4. On 06.03.2021, the sale order was unilaterally cancelled by the CD and till then only 18,771.35 quintal molasses were supplied to the OC. As the balance quantity was not supplied, the CD was to refund an amount of Rs.1,08,02,731/- to the OC. (Page 34 of the Appeal). But after several reminders, the CD failed to pay the advance amount back to the OC. Around 19 reminders were sent by the OC to the CD demanding the refund of amount in default, however, the CD didn’t respond or acknowledged any of the said correspondences. Consequently, on 31.05.2022 the OC was constrained to send a demand notice u/s 8 of the IBC to the CD (Page 36 of the Appeal). The CD sent a reply to the said demand notice issued by the OC on 11.06.2022 (Page 36 of the Appeal). Thereafter, the OC sent a response to the reply to the demand notice (Pages 41 – 42 of the Appeal. However, the CD failed to repay the unpaid operational debt. Therefore, an application u/s 9 of the IBC was filed by the OC before the Hon’ble NCLT Allahabad which was dismissed vide an order dated 02.02.2024.

5. Pursuant to the issuance of Demand Notice, the CD apart from sending a reply dated 11.06.2022 to Demand Notice also transferred an amount of Rs.13,13, 886/- (alleging it to be payment for the entire operational debt i.e., Rs. 1,08,02,731/-) on the pretext that there was a “spontaneous combustion” at the plant of the Corporate Debtor on 22.07.2021 due to which certain quantities of molasses were damaged which included the balance quantity of molasses that was allegedly earmarked for the OC. In the said reply, the CD also alleged that the said damaged molasses has been auctioned, an approval letter has been issued by CD to the alleged buyer on 14.02.2022 and the salvage value of the balance quantity of Molasses of the OC was Rs.13,13,886/-. It is submitted that the aforesaid narrative was never even mentioned to the OC until the issuance of Demand Notice despite the said notice being preceded by 19