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Agarwal Coal Corporation Pvt. Ltd. v. Sun Paper Mill Ltd. And Another
Factual and Procedural Background
The Appellant, Agarwal Coal Corporation Private Limited (Operational Creditor), filed a claim before the Interim Resolution Professional / Resolution Professional relating to the supply of coal from November 2013 to February 2014, with a claimed amount of Rs. 2,39,33,935. The Corporate Debtor, a Micro, Small & Medium Enterprise, submitted a resolution plan approved on 16th October 2018, which allowed a sum of Rs. 2,173 in favor of the Appellant. The Adjudicating Authority (National Company Law Tribunal), Division Bench, Chennai, passed an interim order dated 14th March 2019, which the Appellant challenged in Company Appeal (AT) (Insolvency) No. 412 of 2019.
Legal Issues Presented
- Whether the application under Section 9 of the Insolvency and Bankruptcy Code was rightly admitted despite the claim amount eventually being found to be Rs. 2,173, which is below the statutory threshold of Rs. One Lakh.
Arguments of the Parties
Appellant's Arguments
- The total claim amount was Rs. 2,39,33,935 as filed before the Resolution Professional, supported by invoices and agreements.
- The Corporate Insolvency Resolution Process was initiated based on this claim amount as shown in Form 5 under Section 9.
- The Adjudicating Authority admitted the application under Section 9 because the claim exceeded Rs. One Lakh, and therefore it was improper for the Resolution Professional or Corporate Debtor to suggest the amount payable was only Rs. 2,173.
- Relied on an e-mail dated 2nd November 2018 from the Resolution Professional indicating that the claim amount was collated and validated by the Resolution Applicant.
Resolution Professional and Corporate Debtor's Arguments
- The claim amount collated and validated by an independent Chartered Accountant was Rs. 2,173, as per a report dated 1st November 2018.
- The invoices were verified and found to have been paid through RTGS or other modes, leaving only Rs. 2,173 payable.
- The same plea was taken by the Corporate Debtor / Resolution Applicant.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| M/S. Innoventive Industries Ltd. v. ICICI Bank & Anr. (2018) 1 SCC 407 | The Adjudicating Authority at the admission stage under Section 9 must ensure the record is complete and there is a debt and default; it is not required to verify the claim amount in detail. | The court applied this principle to hold that even if the claim amount is disputed and later found to be less than Rs. One Lakh, the application under Section 9 was correctly admitted based on the initial claim exceeding the threshold. |
Court's Reasoning and Analysis
The court noted that the Resolution Professional produced a report from an independent Chartered Accountant dated 1st November 2018, verifying the Operational Creditor's ledger, invoices, and Corporate Debtor's records. This report concluded that the invoices under consideration had been paid, leaving only Rs. 2,173 payable. The bank statement corroborated this position. The court then addressed the key legal issue of how the Section 9 application was admitted despite the payable amount being below Rs. One Lakh. Referring to the Supreme Court precedent in M/S. Innoventive Industries Ltd., the court explained that at the admission stage, the Adjudicating Authority must verify the completeness of the record and existence of debt and default, but is not required to verify the claim amount in detail. The verification of actual claim amounts is the responsibility of the Resolution Professional during the resolution process. Therefore, the admission of the application based on the original claim exceeding Rs. One Lakh was appropriate, even if subsequent verification revealed a lower payable amount.
Holding and Implications
The court dismissed the appeal, upholding the impugned order dated 14th March 2019. The direct effect is that the admission of the Section 9 application stands despite the claim amount ultimately being found to be Rs. 2,173. No costs were imposed. The decision does not establish a new precedent but reaffirms the established principle that the Adjudicating Authority's role at the admission stage is limited to checking the completeness of the record and existence of debt and default, without detailed claim verification.
16.10.2019 The Appellant Agarwal Coal Corporation Private Limited (Operational Creditor) filed a claim before the Interim Resolution Professional / Resolution Professional. However, in the resolution plan submitted by the Corporate Debtor, which is a Micro, Small & Medium Enterprises, allowed a sum of Rs. 2173 in favour of the Appellant. The said resolution plan was filed on 16th October, 2018 and approved. This appeal Company Appeal (AT) (Insolvency) No. 412 of 2019 is in subsequent M.A. No. 677/2018 filed later and Interim Order dated 14th March, 2019 passed by the Adjudicating Authority (National Company Law Tribunal), Division Bench, Chennai, the Appellant (Operational Creditor) has challenged the same.
2. According to the Appellant, the total claim amount as was Rs, 2,39,33,,935 which was filed before the Resolution Professional related to the supply of coal from November, 2013 to February, 2014. Learned counsel for the Appellant submitted that the related invoices and agreements were also enclosed along with the claim.
3. Further, according to the learned counsel for the Appellant, in view of the claim amount of Rs. 2,39,33,935 shown in the Form 5 (Application under Section 9), the Corporate Insolvency Resolution Process was initiated against the Corporate Debtor at the instance of the Appellant.
4. It is submitted that the claim amount being more than Rupees One Lakh, the Adjudicating Authority admitted the application under Section 9 and therefore, it is not open to the Resolution Professional or the Corporate Debtor to suggest that the amount is Rs. 2173.
5. Reliance has been placed on the e-mail dated 2nd November, 2018 issued by the Resolution Professional to the Appellant to suggest that the aforesaid claim amount was collated and validated by the Resolution Applicant, which reads as under: Company Appeal (AT) (Insolvency) No. 412 of 2019
6. Learned counsel appearing on behalf of the Resolution Professional submitted that the claim amount collated was Rs 2173 as per report obtained from one independent Chartered Accountant, which was sent with the E-mail relied on by the Appellant. On validation of the same, the invoices were sent to the Corporate Debtor / Resolution Applicant. As per the said Report, the total amount as shown have been paid through RTGS or through other mode in the account of the Corporate Debtor and only a sum of Rs. 2173 was found to be payable. Company Appeal (AT) (Insolvency) No. 412 of 2019
7. Same plea has been taken by the learned counsel for the Corporate Debtor / Resolution Applicant.
8. The Resolution Professional has brought on record a Report of independent Chartered Accountant dated 1st November, 2018, who on verification of the ledger of the Operational Creditor, invoices and the records of the Corporate Debtor by letter dated 1st November, 2018 concluded that both the invoices under consideration are paid giving the balance of Rs. 2173 payable. The copy of the letter dated 1st November, 2018, which reads as follows: Company Appeal (AT) (Insolvency) No. 412 of 2019 Company Appeal (AT) (Insolvency) No. 412 of 2019
9. The Bank statement has also been enclosed with the reply-affidavit filed by the Resolution Professional in support of the stand taken.
10. The only question arises for consideration is as to how Section 9 application was admitted if the amount is found to be Rs. 2173 which is much less than Rupees One Lakh.
11. In this regard we may only mention that at the stage of admission of application under Section 9, the Adjudicating Authority is required to notice whether the record is complete and there is a debt and default as per decision of the Honble Supreme Court in M/S. Innoventive Industries Ltd. v. Icici Bank & Anr. S, (2018) 1 SCC 407]. Even if the claim amount is disputed and is more than Rupees One Lakh, it is to be admitted, the Adjudicating Authority is not required to go into the details of verification of the claim which is required to be made by the Resolution Professional and, therefore, even if some record shows that claim amount is Rupees One Lakh, it is always open to the Resolution Professional to collate the claim. Company Appeal (AT) (Insolvency) No. 412 of 2019
12. In view of the facts as narrated above, we are not inclined to interfere with the impugned order dated 14th March, 2019. The appeal is accordingly dismissed. No costs. [Justice S.J. Mukhopadhaya] Chairperson [ Justice A.I.S. Cheema ] Member (Judicial) [ Kanthi Narahari ] Member (Technical) /ns/gc
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