Minor clerical mistakes do not affect maintainability of an IBC petition, When Identity of Parties is not in dispute: NCLT Admits Petition u/s 9 [Read Order]

In a recent case, the Mumbai bench of the National Company Law Tribunal ( NCLT ) held that minor clerical mistakes do not affect maintainability of an Insolvency Bankruptcy Code (IBC) petition when the identity of the parties is not in dispute and admitted the petition filed under section 9 of the code, 2016.

The application was filed by Mr. Pramod Anandrao Gawade, Sole Proprietor of M/s Gagandeep Dudh Sankalan Kendra, the Operational Creditor (OC) under Section 9 of the Insolvency and Bankruptcy Code, 2016 (IBC), read with Rule 6 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016, seeking initiation of Corporate Insolvency Resolution Process (CIRP) against M/s Kute Sons Dairys Limited, the Corporate Debtor (CD).

The amount claimed to be in default is Rs.1,55,84,847/- (Rupees One Crore Fifty-Five Lakhs Eighty-Four Thousand Eight Hundred Forty-Seven) and the date of default is 03.05.2024. The Applicant has proposed one Kunal Jayant Waje, to act as the Interim Resolution Professional (IRP).

The Applicant is engaged in the business of supplying milk, whereas the CD is involved in the processing and manufacture of various dairy products such as skimmed milk powder, whole milk powder, butter, clarified butter, pouch milk, bulk milk, cheese, cottage cheese, and flavoured milk. The Applicant has maintained a running account with the CD and has been regularly supplying milk to the CD from August 2019 to January 2024.

To secure payment for the supplied goods, the Applicant was in possession of 26 post-dated cheques, each amounting to Rs.5,00,000/-, dated between 15.01.2024 and 26.03.2024. The Applicant claims that these cheques were issued by the CD but the same have never been honoured. Despite the cheques remaining dishonoured, the CD’s ledger erroneously reflects these instruments as cleared and the corresponding amounts as paid, whereas, as claimed by the Applicant, no such amounts have been credited to the Applicant's account.

The CD has been issuing Milk Supply Bills for the goods delivered by the Applicant. However, these bills incorrectly record full payments against the supplies, even though the Applicant has only received part-payments.

Furthermore, certain entries in the CD’s ledger show payment entries that were never actually received. The Applicant relies on its own Bank Statements to demonstrate that these ledger entries do not reflect the actual financial transactions that occurred.

The CD, through its letter dated 18.04.2024, has acknowledged the outstanding debt and assured the Applicant of payment within 15 days. Despite repeated verbal reminders from the Applicant to settle the outstanding dues, the CD has failed to make any payment of the acknowledged debt. Consequently, a Demand Notice under Form 3 dated 23.10.2024, bearing India Post Consignment No. EM067314448IN was issued and delivered to the CD on 29.10.2024. However, the CD refused to accept the notice and failed to repay the dues within the prescribed statutory period.

The Applicant stated that there are typographical errors in Form 5 of the present Application, including an inadvertent mistake in the recording of the date of default. The date of default has been incorrectly stated as 09.11.2024, whereas the correct date of default is 03.05.2024. Through this Additional Affidavit, the Applicant seeks to clarify and rectify this error.

Cheques were issued by the CD group in favour of the Applicant as a means to secure payment and to acknowledge the existing liability. However, the CD had specifically instructed the Applicant not to deposit these cheques, and accordingly, they were never presented for clearance. Despite this, the CD’s ledger erroneously records these cheques as having been honoured and reflects the corresponding amounts as paid, even though no such credit was actually received by the Applicant.

Further, the Milk Supply Bills issued by the CD, as well as its books of accounts, incorrectly record that full payments have been made. In reality, only part payments were made by the CD. This is supported by the Applicant’s bank statements, which clearly reflect partial receipts and not full settlement of dues.

Chartered Accountant's certificate further corroborates this position. It states that the CD does not follow a bill-to-bill settlement system with the Applicant. Payments are made on an ad-hoc basis, without being linked to specific invoices or transactions. This certificate is based on a review of the Applicant’s books of accounts and corresponding bank statement extracts.

The CD argues that default cannot be established in the absence of invoices and due dates. However, the Applicant has maintained a running account, which is well-supported by Milk Supply Bills, a Chartered Accountant's certificate, and bank statements. The date of default has been consistently clarified through affidavits and rectified Form 5, and is established as 03.05.2024, being 15 days from the acknowledged promise to pay (vide letter dated 18.04.2024). A default can be inferred from a consistent course of dealings and absence of payment, even in the absence of formal invoices.

The CD’s argument that the Applicant failed to file purchase orders, delivery notes, or proof of delivery is untenable in the context of a longstanding relationship based on mutual trust, involving regular supply of perishable goods (milk). The nature of the transaction, along with supporting documents such as Milk Supply Bills, bank entries, and a CA certificate, demonstrates actual delivery and partial payments.

A strict proof like delivery challans may not be necessary when the transaction pattern is established through a running account and financial records. Moreover, as per trade practices, small milk suppliers don’t raise bills/invoices. Hence, there are no proper work orders in a small-scale milk supply business. The CD, upon receipt of milk supplies, issued ‘goods received’ note. Entries in the Milk Supply Bills generated by the CD are false and unreliable as to the payment made to the Applicant. Further, no Bank Statement was presented by the CD to prove successful payment to the Applicant.

A two member bench of Shri Sameer Kakar, Member (Technical) and Shri Nilesh Sharma, Member (Judicial) observed that the contention that the Application is defective because the name of the CD is mentioned as “Kute Sons Dairy Ltd.” instead of “Kute Sons Dairys Ltd.” is hyper-technical and not fatal to the Application. The CD has participated in the proceedings without raising any confusion about its identity.

The courts have repeatedly held that substantive justice cannot be denied on mere typographical errors. Minor clerical mistakes do not affect the maintainability of an IBC petition, provided the identity of the parties is not in dispute.

The tribunal admitted the application filed under Section 9 of IBC, 2016 by Gagandeep Dudh Sankalan Kendra, the OC, for initiating CIRP in respect of Kute Sons Dairys Limited, the CD.

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