J U D G M E N T

(Hybrid Mode)

[Per: Arun Baroka, Member (Technical)]

1.This is an appeal filed by Rakesh Dalpatram Panchal who is the Ex-Director of M/s Gemini Engi. Fab. Private Limited – the Corporate Debtor against admission of Section 9 application, which was filed by Respondent No.1 – Kisaan Steels Pvt. Ltd. The Corporate Debtor – M/s Gemini Engi. Fab. Private Limited and Respondent No.1 – Kisaan Steels Pvt. Ltd. had entered into several purchase orders between December 2021 and June 2022 for the supply of forgings and other materials. It is claimed by the Appellant that R1 failed to adhere to the agreed delivery timelines and supplied defective goods, which led to multiple disputes between the parties. Numerous correspondences were exchanged between the parties which shows pre-existing dispute regarding quality, penalties and financial reconciliation. Appellant – Corporate Debtor had also imposed penalties on R1 for its breaches and reconciliation of accounts was going on. Respondent No.1 – Kisaan Steels Pvt. Ltd. had issued a demand notice under Rule 5 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 claiming an outstanding amount of Rs.6,13,53,270/-. Appellant – Corporate Debtor in its rely on 14.07.2023, denied the liability and cited existence of pre-existing dispute and defective supplies. But despite this evidence of ongoing disputes NCLT admitted under Section 9 application relying on an email dated 01.11.2023, which was misinterpreted as an admission of liability, whereas it was conditional upon the acceptance of the consequences sheet.

Submissions of Appellant

2. Between June 2021 to December 2021, the Appellant – Corporate Debtor placed several Purchase Orders ("PO") for delivery of Tube sheets and Forgings to be delivered within the timeline stipulated in such POs. Notwithstanding the aforesaid, and more particularly the fact that time was of the essence under the POs, Respondent No.1 – Kisaan Steels Pvt. Ltd. failed and neglected to supply the goods within the stipulated timeline. Accordingly, supply by the Appellant – Corporate Debtor to the end-user/ customer suffered massive delays which affected completion of equipment and end-user's project and occasioned commercial loss and injury to the Corporate Debtor. Respondent No. 1 has also acknowledged delay in supply of goods as per contractual timeline vide letter dated 16th May 2017.

3. Such delays were not isolated incidents, but rather a recurring pattern across multiple purchase orders. Respondent No. 1 not only failed to respond to reminders addressed by the Corporate Debtor but miserably failed to meet the agreed timelines, demonstrating a persistent and negligent approach towards its contractual obligations. Due to Respondent No. 1's inaction, the Corporate Debtor was compelled to incur extra costs towards workforce, contractors, and bank interest. This was repeatedly informed to Respondent No. 1, however, Respondent No.1 failed to deliver the goods within the stipulated timeline. Respondent No. 1's failure to comply with the agreed delivery timelines has been duly established through a consistent chain of correspondence, including its own admissions of delay, and contemporaneous communications demonstrating the direct financial and operational impact suffered by the Corporate Debtor. The said delays not only caused severe disruption in the project schedule but also led to reputational and monetary losses to the Corporate Debtor in its dealings with IOCL and other clients.

4. The Corporate Debtor had raised concerns with respect to defects in the goods supplied by Respondent No. 1 on several occasions. In fact, the Corporate Debtor even shared with Respondent No. 1, the communications received by the end-user inter alia highlighting deficiencies in the goods supplied. However, Respondent No. 1 failed to rectify such defects, thereby placing the Respondent in major financial distress. In fact, the Petitioner has acknowledged