Corporate Debtor failed to demonstrate pre-existing dispute u/s 9 of IBC: NCLAT dismisses Appeal [Read Order]

The New Delhi bench of the National Company Law Appellate Tribunal dismissed the appeal as the corporate debtor was unable to prove a pre-existing dispute between the parties.

In this case, the corporate debtor was incorporated on 06/12/2010 under the Companies Act, 1956. Respondent No. 1 and the corporate debtor traded and supplied cotton and manufactured cotton yarn.

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In the month of December in the year 2018, there was news in leading newspapers that a scam of cotton supply based on fake bills was going on, and after noticing the above news, stopped buying cotton yarn and raw materials from respondent no. 1. The appellant contacted their authorized representative, Mr. Naresh Sharma, and to provide all original documents of payment of GST and arranged a meeting with respondent no. 1 to talk about the issue.

As the above efforts were in vain, the appellant stopped the payment to Respondent No. 1, as the purported invoices are under dispute.

A raid was carried out at the factory at the corporate debtor’s office/factory and the GST intelligence officer confiscated and seized all hard and soft records pertaining to sales and purchases, returns, tax payments, and other related matters during the raid.

Later on, the corporate debtor stopped making payments to responden as per the instruction provided by the GST Intelligence Officer. The corporate debtor also deposited Rs. 20,000,000  into the GST Department's electronic credit ledger under their guidance.

The appellant emailed respondent no. 1 to provide the original documents in order to prove the genuineness of payment of GST at the time of supply by the latter ON 28-05-2019. The respondent issued a demand notice on 27-05-2019, claiming Rs. 1,91,51,792 with 18% interest from 13-09-2018. This notice was received by the appellant on May 31, 2019.

Corporate Debtor denied every allegation contained in respondent no. 1's purported demand notice.

The corporate debtor approached the NCLAT for impleadment of the Directorate General of GST Intelligence, R.K. Puram, as a proper and necessary party. The above IA was dismissed.

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The corporate debtor contended that although the adjudicating authority addressed the issue of a pre-existing dispute, it did not consider the corporate debtor’s contention that the GST-related dispute arose before the demand notice was issued.

 The corporate debtor contends that there is a pre-existing dispute with respondent no .1 with respect to the payment of GST dues on the alleged invoices.

The bench observed that the issue relating to the payment of GST is between the Directorate General of GST Intelligence and the Appellant.

The bench, consisting of dismissed the appeal filed by the corporate debtor due to failure to demonstrate a pre-existing dispute as mandated under Section 9 of the IBC.

To Read the full text of the Order CLICK HERE

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