"NATIONAL COMPANY LAW APPELLATE TRIBUNAL PRINCIPAL BENCH, NEW DELHI Comp. App. (AT) (Ins) No. 375 of 2024 & I.A. No. 1278 of 2024 (Arising out of the Order dated 22.12.2023 passed by the National Company Law Tribunal, Mumbai Bench in C.P. (I.B.) No. 534/MB/2023) IN THE MATTER OF: Present For Appellants: Mr. Sandeep Bajaj, Mr. Mayank Biyani, Mr. Ashish O. Lalpuria, Mr. Gaurav Gdodia, Advocates. For Respondents: Mr. Arnav Kumar & Ms. Gitanjali Vohra, Advocates. J U D G E M E N T (03.07.2025) NARESH SALECHA, MEMBER (TECHNICAL) 1. The present This present Appeal has been filed by the Appellant under Section 61(1) of the Insolvency and Bankruptcy Code, 2016 (“Code”) against the Impugned Order dated 22.12.2023 passed by the National Company Law Tribunal, Mumbai Bench (“Adjudicating Authority”) in C.P. (I.B) No. 534/MB/2023. Mrs. Leena Salot, Proprietor Of Riddhim Textiles Having address at: 108, 1st floor, Panchratna, Near Roxy Cinema, Opera House, M.P. Road, Chami Road- West, Mumbai - 400004 …Appellant Versus Ridham Synthetics Private Limited Having Address at: Shree Mahalaxmi Woolen Mills Compound Dr E Moses Road, Mahalaxmi, Mumbai - 400011 …Respondent Comp. App. (AT) (Ins.) No. 375 of 2024 Page 2 of 43 2. Ridham Synthetics Private Limited, who is the Corporate Debtor, is the Respondent herein. 3. The Appellant/Operational Creditor submitted that a Petition under Section 9 of the Code, was filed for initiation of the Corporate Insolvency Resolution Process (“CIRP”) against the Respondent, on account of the Respondent’s failure to pay the outstanding operational debt amounting to Rs. 1,36,06,646.70. 4. The Appellant submitted that he operates under the Proprietorship Firm “Riddhim Textiles” and is engaged in the trade and supply of diverse textile goods, constituting the core of its commercial operations and the Respondent has been engaged in the business of trading in textiles, including cotton fabric dyeing, polyester fabric dyeing services, and viscose fabric dyeing services. 5. The Appellant submitted that the Respondent had approached the Appellant around the year 2015 with a proposal to purchase various textile materials and the Appellant and the Respondent Debtor mutually agreed to enter into a business relationship for the supply and purchase of such textile goods. The Appellant submitted that, pursuant to the business arrangement, the Respondent placed various purchase orders with the Appellant from the financial year 2015- 16 onwards and made ad hoc payments against the invoices raised. In compliance with the said orders, the Appellant duly sold and delivered the textile goods, which were received by the Respondent without any objection or dispute regarding the quality, quantity, or merchantability of the goods and accordingly, the Appellant raised the requisite tax invoices in respect of the goods supplied. Comp. App. (AT) (Ins.) No. 375 of 2024 Page 3 of 43 6. The Appellant submitted that, upon receipt of the goods duly supplied by the Appellant, the Respondent verified the materials and, in the event of any discrepancy in quantity or rate, raised debit notes, which were duly accounted for by the Appellant in its books of accounts. Subsequent to such adjustments, the Respondent did not raise any further dispute regarding the goods and proceeded to utilize the said goods for its business purposes. Furthermore, the Respondent availed the benefit of Input Tax Credit under the CGST Act, 2017, in respect of the GST paid by the Appellant on the supplied goods. The Respondent also made ad hoc payments towards the invoices raised, thereby clearly indicating its satisfaction with the goods supplied and unequivocally acknowledging its liability to pay the outstanding amounts under the said invoices. 7. The Appellant submitted that no notice of dispute, either with regard to the quality of the products or the invoice amounts, was raised by the Respondent within the stipulated period as per the invoices or at any subsequent time. No valid or specific dispute has ever been raised by the Respondent concerning any particular product or invoice. 8. The Appellant submitted that, after duly adjusting all ad hoc payments made by the Respondent, as well as accounting for all debit notes raised by the Respondent and debit notes pertaining to transportation charges raised by the Appellant, the total outstanding amount due and payable by the Respondent stands at Rs. 1,36,06,646.70 exclusive of interest at the rate of 24% per annum. Comp. App. (AT) (Ins.) No. 375 of 2024 Page 4 of 43 9. The Appellant submitted that the Respondent has made part payments towards its outstanding liabilities subsequent to the last date of sales, i.e., 18/08/2018, on the various dates i.e. 05/08/2018, 30/08/2019, 30/01/2021, 27/04/2022, and 15/10/2022. The Appellant has accordingly taken the date of default as 16/10/2022, being the day immediately following the last ad hoc payment received on 15/10/2022. The Appellant further submitted that the Respondent did not specify the particular invoices against which the said payments were made. In the absence of any such communication or intimation, the payments have been treated as ad hoc payments towards the total outstanding liability. 10. The Appellant submitted that the Respondent had provided account confirmation by sharing its ledger with the Appellant in the years 2019 and 2022. As per the most recent ledger statement shared by the Respondent on 23rd June 2022, the outstanding liability has been duly admitted and acknowledged to the extent of Rs. 1,39,85,901.02. The Appellant further submitted that an ad hoc payment of Rs. 25 lakh was received by the Appellant on 15th October 2022. Accordingly, after deducting the said amount from the previously admitted liability, the outstanding amount due and admitted by the Respondent stands at Rs. 1,14,85,901.02. 11. The Appellant submitted that, despite repeated follow-ups, the Respondent has failed to pay the outstanding balance. The Appellant issued a notice under the Arbitration and Conciliation Act, 1996 seeking recovery of the said dues. The Comp. App. (AT) (Ins.) No. 375 of 2024 Page 5 of 43 Respondent, however, chose to ignore the said notice, failed to respond to the correspondence, and did not make any payment towards the admitted liability. 12. The Appellant submitted that, upon realizing that the Respondent either lacked the capacity to pay or was willfully avoiding payment, the Appellant issued a notice dated 18th April, 2023 under Section 8 of the Code calling upon the Respondent to pay the outstanding dues. The said notice was duly received by the Respondent via email on 18th April, 2023, while the notice sent by post was returned undelivered with the remark “addressee left.” In response to the demand notice, the Respondent sought to raise a frivolous and unsubstantiated dispute regarding the quality of goods supplied, without furnishing any evidence or substantiation in support of such claim. 13. The Appellant submitted that the Adjudicating Authority has erred in holding that there is no crystallized debt in the present case. The Respondent, except for two invoices—namely, Invoice Nos. RT/207/17-18 and RT/228/17-18 dated 01.03.2018 and 31.03.2018 respectively—has admitted all other invoices and transactions, as reflected in the ledger. 14. The Appellant submitted that the Adjudicating Authority has failed to appreciate that the threshold of Rupees One Crore under the Code, is clearly satisfied even without including Invoice Nos. RT/207/17-18 and RT/228/17-18 dated 01.03.2018 and 31.03.2018, respectively, in the total claim. The Appellant further submitted that the Adjudicating Authority did not consider that the Comp. App. (AT) (Ins.) No. 375 of 2024 Page 6 of 43 Respondent is estopped from denying the said invoices, as the Respondent has availed input GST credit on these invoices. 15. The Appellant submitted that the Adjudicating Authority further erred in discrediting Invoice Nos. RT/207/17-18 and RT/228/17-18 dated 01.03.2018 and 31.03.2018, solely on the basis of a mere assertion by the counsel for the Respondent that no delivery was received, without any supporting proof from the Respondent, despite the fact that the Respondent has availed the benefit of Input Tax Credit under Section 16 of the CGST Act, 2017, in respect of all the invoices raised by the Appellant. 16. The Appellant submitted that this Appellate Tribunal, in the matter of Paramjeet Singh vs. Maxim Tubes Company Pvt. Ltd. & Another (Civil Appeal No. 9571 of 2018) has categorically held that any dispute must be raised in response to the demand notice issued under Section 8 of the Code, failing which it shall be deemed that no pre-existing dispute exists. 17. The Appellant submitted that the Adjudicating Authority has failed to appreciate that the Respondent did not raise any objection to the ledger of the Appellant in its reply to the Demand Notice issued under Section 8 of the Code, and therefore could not have belatedly raised such an issue at the stage of reply to the Insolvency Petition. The Appellant further submitted that the Adjudicating Authority erred in treating the WhatsApp message dated 24.07.2018 as a dispute, despite the fact that the said message does not indicate that any material was supplied by the Appellant or specify the invoice to which it pertains. Moreover, Comp. App. (AT) (Ins.) No. 375 of 2024 Page 7 of 43 the Respondent continued to engage in business transactions with the Appellant and made part payments even after the date of the alleged WhatsApp message. 18. The Appellant submitted that the Adjudicating Authority has failed to consider that the alleged WhatsApp message dated 24.07.2018 was not sent by any Director of the Respondent, nor has any averment been made regarding the authority or designation of the individual who sent the said message. In the absence of proof of authority of the sender, the Tribunal ought not to have treated the said message as constituting a dispute in relation to the goods supplied in the present case. The Appellant further submitted that the Adjudicating Authority erred in not providing any cogent reasons to disbelieve the case of the Appellant, while accepting the Respondent’s contentions regarding the validity and effect of the WhatsApp message as evidence of a pre-existing dispute. 19. The Appellant submitted that the Adjudicating Authority has erred in relying upon Delivery Challan No. G S04 dated 24.08.2022, as the said delivery challan pertains to a different entity, namely “Virchand Gowerdhan LLP,” which is clearly indicated on the face of the challan. Moreover, the date of the delivery challan is 24th August 2022, whereas the outstanding amount claimed by the Appellant relates to a period approximately four years prior to this date. The Appellant pointed that there were no transactions between the parties during the intervening period, with the last invoice, being Invoice No. RT/054/18-19, having been raised on 18th August 2018 at least four years before the date of the said delivery challan. Comp. App. (AT) (Ins.) No. 375 of 2024 Page 8 of 43 20. The Appellant submitted that, in the present case, the Respondent has merely made a general and unsubstantiated assertion regarding the alleged unsatisfactory quality of goods, attempting to establish a frivolous dispute through a WhatsApp message that is vague and does not specify the exact invoice or product to which the purported dispute pertains. Furthermore, in its pleadings before the Adjudicating Authority, the Respondent has failed to identify the specific invoice(s) or product(s) in relation to which the alleged dispute is raised. 21. The Appellant submitted that the Adjudicating Authority, having concluded that any dispute pertained only to Invoice No. RT044, failed to recalculate the total admitted and undisputed default amount, which remains well above the statutory threshold of Rupees One Crore. Even after excluding the sum of Rs. 85,285/- (allegedly disputed), the admitted default stands at Rs. 1,14,00,616.02, as acknowledged by the Respondent in its e-mail dated 23rd June 2022. This figure is further substantiated by the subsequent payment of Rs. 25,00,000/- on 25th October 2022, reducing the admitted liability to Rs. 1,14,85,901.02. The Adjudicating Authority has erroneously disregarded this clear e-mail acknowledgment of debt and instead relied on an earlier WhatsApp message dated 24th July 2018, which is neither relevant nor substantiated. 22. The Appellant submitted that the Respondent has clearly acknowledged a debt exceeding Rupees One Crore, and as per Form 5A, the defaulted amount remained unpaid as of the petition date. The Adjudicating Authority erred in concluding that the debt was not crystallized, despite its limited role under Comp. App. (AT) (Ins.) No. 375 of 2024 Page 9 of 43 Section 9 of the Code, which is not to adjudicate the quantum of debt but to assess whether the default exceeds the statutory threshold. Upon being satisfied that the default was above Rupees One Crore, the Adjudicating Authority ought to have admitted the matter into CIRP. The Appellant submitted that the Adjudicating Authority also failed to provide the Appellant an opportunity to rectify any authorization defect in accordance with the proviso to Section 9(5)(ii) of the Code, which mandates granting seven days to cure such defects before passing an order. 23. Concluding his arguments, the Appellant requested this Appellate Tribunal to set aside the Impugned Order and allow his appeal. 24. Per contra, the Respondent denied all averments made by the Appellants as misleading and baseless. 25. The Respondent submitted that, in several instances, the Appellant raised invoices without actually supplying any goods against the corresponding Purchase Orders, as evidenced by invoices RT/207/17-18 and RT/228/17-18 dated 01.03.2019 and 31.03.2018, for which no goods were delivered. The Appellant has failed to provide any proof of supply in support of its claims for payment in its Section 9 application. Additionally, in cases where goods were supplied, some consignments were found to be defective, as demonstrated by the Respondent’s Quality Test Reports, and therefore, the Appellant is not entitled to payment for such defective goods. Comp. App. (AT) (Ins.) No. 375 of 2024 Page 10 of 43 26. The Respondent submitted that the issue of defective goods supplied by the Appellant was promptly brought to the Appellant’s attention, including through text messages sent on 24.07.2018, wherein the Respondent specifically highlighted the inferior quality of the goods received. The Respondent also communicated multiple customer complaints regarding the substandard goods on several other occasions. In response, the Appellant assured the Respondent that it would either rectify the defects or replace the faulty goods; however, despite these assurances, the Appellant failed to take any remedial action. 27. The Respondent submitted that the Appellant attempted to deliver a batch of goods on 24.08.2022 through its sister concern, Virchand Govardhan LLP,; however, these goods were rejected due to the presence of iron particles, rendering them unsuitable for textile processing. Furthermore, the Respondent independently sold processed textile goods to the Appellant and its affiliates, for which the Appellant has not made full payment to date. Accordingly, a proper reconciliation of all mutual transactions would reveal that it is, in fact, the Appellant who owes money to the Respondent, and not vice versa, with the Respondent having already paid for all defect-free materials supplied by the Appellant. 28. The Respondent submitted that, notwithstanding the factual position outlined above, the Appellant, by letter dated 24.03.2023, unexpectedly demanded a sum of Rs. 1,13,91,147/- from the Respondent and sought reference of the alleged disputes to arbitration under the Rules of the Mumbai Textile Comp. App. (AT) (Ins.) No. 375 of 2024 Page 11 of 43 Merchants’ Mahajan, thereby acknowledging the existence of genuine pre- existing disputes regarding the goods in question. Despite having already invoked arbitration, the Appellant subsequently, on 18.04.2023, issued a fresh and malafide Demand Notice under Section 8 of the Code, claiming an increased and unsubstantiated amount of Rs. 1,36,06,646/-. The Respondent submitted that he replied to the Appellant’s Demand Notice on 26.04.2023, denying the alleged claims and reiterating the existence of pre-existing disputes regarding the goods supplied, for which arbitration had already been invoked by the Appellant. Despite this, in June 2023, the Appellant filed an application under Section 9 of the Code seeking initiation of CIRP against the Respondent, disregarding the settled legal principle that such proceedings are not maintainable where genuine disputes and ongoing arbitration exist. 29. The Respondent submitted that the Appellant’s reliance on the Respondent’s emails dated 21.11.2019 and 23.06.2022, as well as the GSTR-1 returns, to allege an admission of debt is wholly misplaced and erroneous. It is well established that the filing of GSTR-1 returns is a statutory requirement under the CGST Act and does not constitute an admission of liability or acknowledgment of a jural relationship between the parties. Similarly, the sharing of ledgers via the referenced emails cannot be construed as confirmation of balances or accounts, as these ledgers merely reflect orders placed and invoices raised, without accounting for critical factors such as defective goods sold as scrap, amounts due from the Appellant for processed goods supplied by the Comp. App. (AT) (Ins.) No. 375 of 2024 Page 12 of 43 Respondent, instances of non-supply, and various credit/debit notes issued by the Appellant. The ledgers were expressly subject to verification, reconciliation, and adjudication, which is precisely why the Appellant invoked arbitration to resolve the disputes. Accordingly, there is no admission of liability in the said emails or GST returns. 30. The Respondent submitted that the ledger account relied upon by the Appellant, being unsigned and undated by the Respondent Company, cannot serve as strict proof of the transactions in question, and no liability can be imposed solely on the basis of such ledger entries without corroborating evidence. 31. The Respondent denied that the date of default is 16.10.2022 and further denied having made ad hoc payments towards any outstanding liabilities. The Respondent reiterated that all payments have been duly made for defect-free goods received, and no amount is due or outstanding. The Respondent denied that there was no communication regarding the invoices for which payments were made, or that payments were made on an ad hoc basis. The Respondent stated that the parties maintained a running account is also false and is contradicted by the Appellant’s own letter dated 24.03.2023, wherein interest was claimed from seven days after receipt of invoice or goods. 32. The Respondent submitted that the issue of inferior quality material supplied under Invoice No. RT044 was promptly disputed by the Respondent through a WhatsApp message dated 24.07.2018, immediately notifying the Appellant of the defect. Rather than addressing the concern, the Appellant, on Comp. App. (AT) (Ins.) No. 375 of 2024 Page 13 of 43 24.08.2022, attempted to supply a test batch of goods, which the Respondent rejected, specifically noting that the goods contained iron particles and were therefore unsuitable for use in clothing. 33. The Respondent submitted that the statutory threshold of Rupees One Crore is not met when the accounts are properly reconciled and adjudicated, as the Appellant has failed to consider the value of defective goods and amounts owed by the Appellant to the Respondent for goods sold by the Respondent. 34. The Respondent submitted that it is incorrect and misleading for the Appellant to dispute the authenticity and relevance of the WhatsApp messages dated 24.07.2018, which clearly evidence the Respondent’s objection to the quality of materials supplied. The Respondent has consistently disputed the alleged claim amount, and the Adjudicating Authority rightly dismissed the Section 9 Application, finding no crystallized debt between the parties in light of the pre-existing dispute. The assertion that the Tribunal could not consider the WhatsApp message as evidence of a dispute is unfounded, as WhatsApp is a valid mode of communicating such objections. The Respondent also denied that the Adjudicating Authority failed to provide reasons for its decision; on the contrary, it correctly applied the legal principle that the Code cannot be invoked where a pre-existing dispute exists, and thus properly dismissed the Appellant’s application. 35. Concluding his pleadings, the Respondent requested this Appellate Tribunal to dismiss the present appeal with cost Comp. App. (AT) (Ins.) No. 375 of 2024 Page 14 of 43 Findings 36. Heard Counsel for the parties and perused the records made available. 37. We note that the Adjudicating Authority has rejected the section 9 application on the ground that there has been pre-existing dispute. 38. At this stage, we would like to go into the reasoning given by the Adjudicating Authority as contained in the Impugned Order which are evident from para 5 onwards which reads as under :- “5. We have taken into consideration the invoices No RT /207 / 17- 18 and RT/228/17-18, dated 1.03.2018 and 31.03.2018 respectively placed on record. As per the contention of the Respondent, material was never supplied by the Operational Creditor against these invoices but the amounts of these invoices have been added in the claim amount by the Petitioner. Additionally, the goods supplied against the invoice no. RT044 dated 21.05.2018 by the Operational Creditor was of inferior quality and the same was conveyed to the Operational Creditor via whatsaap messages dated 24.07.2018. The Operational Creditor rather than taking ... remedial action tried to deliver test products, the same was rejected by the Respondent with specific mark on Delivery Challan No. G S04 dated 24.08.2022. The challan is reproduced below: - Comp. App. (AT) (Ins.) No. 375 of 2024 Page 15 of 43 Hence, this bench is of considered view that there exists a preexisting dispute with regards to the due amount and otherwise also there is no proper crystallization of the debt as the respondent have disputed the amount claimed in the present petition. Comp. App. (AT) (Ins.) No. 375 of 2024 Page 16 of 43 6. In addition, the counsel for the Corporate Debtor also submitted that the petition is not filed by duly authorized person and the authority placed on record is not a proper and legal authorization of Mr. Jaisukh Salot. By taking into view the above submission and the fact that the submitted Authority letter is neither properly attested nor notarized makes it clear that there is no proper authorization given to the Operational Creditor to file this petition. Hence, this petition deserves dismissal on this ground as well. 7. Further this Tribunal has thoughtfully considered the fact that the Corporate Debtor is a Financially Solvent Company with the ability to discharge its lawful debt. The Hon’ble Supreme Court in M/S S.S. Engineers V. Hindustan Petroleum Corporation Ltd & Ors., Civil Appeal No. 4583/2022 has held \"The NCLT, exercising powers under Section 7 or Section 9 of IBC, is not a debt collection forum. The IBC tackles and/ or deals with the insolvency and bankruptcy. It is not the object of the IBC that CIRP should be initiated to penalize solvent companies for non-payment of disputed dues claimed by an operational creditor\" 8. In the view of the above stated C.P. No. 534/MB/2023 deserves to be dismissed.” (Emphasis Supplied) 39. From para 5 of the Impugned Order, we note that the Adjudicating Authority has taken into account invoice No. RT/207/17-18 dated 01.03.2018 and RT/228/17-18 dated 31.03.2018, according to which, the goods were never supplied by the Appellant but the amount was claimed by the Appellant. Comp. App. (AT) (Ins.) No. 375 of 2024 Page 17 of 43 Similarly, the Adjudicating Authority has mentioned invoice No. RT/044/18-19 against which the material supplied by the Appellant is stated to be inferior quality and the same was communicated by the Respondent to the Appellant via watsapp message dated 14.07.2018. Based on above three invoices, the Adjudicating Authority concluded that the debt has not been crystalized and there has been pre-existing dispute. In Para 7, the Adjudicating Authority has recorded that the Respondent is financial solvent company and referred to judgment of the Hon’ble Supreme Court of India in the matter of M/s S.S. Engineers & Ors. vs. Hindustan Petroleum Corporation Limited passed in Civil Appeal No. 4583 of 2022. Thus, based on the three invoices detailed in Impugned Order as alleged by the Respondent/ Corporate Debtor and that the Corporate Debtor is treated as financially solvent company, the Adjudicating Authority dismissed the Section 9 application of the Appellant. 40. Since three invoices has been referred to in the Impugned Order, which according to the Adjudicating Authority becomes root for the pre-existing dispute, we will go into these three invoices. The first two invoices are with reference to non-delivery of goods and third invoice is with relation to inferior quality. Comp. App. (AT) (Ins.) No. 375 of 2024 Page 18 of 43 The first two invoices reads as under :- Invoice No. RT/207/17-18 dated 01.03.2018 (related to non delivery of goods) Comp. App. (AT) (Ins.) No. 375 of 2024 Page 19 of 43 Comp. App. (AT) (Ins.) No. 375 of 2024 Page 20 of 43 Invoice No. RT/228/17-18 dated 31.03.2018 (related to non delivery of goods) Comp. App. (AT) (Ins.) No. 375 of 2024 Page 21 of 43 Comp. App. (AT) (Ins.) No. 375 of 2024 Page 22 of 43 From these two above invoices, we note that the amount of these invoices is Rs. 7,63,374/- and Rs. 8,42,541/- respectively i.e., totally Rs. 16,05,915/- 41. The third invoice according to which the material was inferior quality which reads as under :- Comp. App. (AT) (Ins.) No. 375 of 2024 Page 23 of 43 From above invoice, it indicates that the total amount of the goods is Rs. 3,96,033/-. 42. We note that the same has been stated to have been brought to the notice of the Appellant by the Respondent vide watsapp message dated 24.07.2018 which reads as under :- From above watsapp message, we note that no details of the specific invoices against which the above watsapp message has been sent containing some generic point as mentioned in watsapp messages, without even referring to any Comp. App. (AT) (Ins.) No. 375 of 2024 Page 24 of 43 specific invoices dates. Be that as it may, we note that the amount of this invoice is Rs. 3,96,033/-. 43. At this stage, we would like to take into consideration, the demand notice issued by the Appellant under Section 8 of the Code to the Respondent dated 18.04.2023, which reads as under :- Comp. App. (AT) (Ins.) No. 375 of 2024 Page 25 of 43 Comp. App. (AT) (Ins.) No. 375 of 2024 Page 26 of 43 Comp. App. (AT) (Ins.) No. 375 of 2024 Page 27 of 43 44. From above demand notice, we note that the amount claimed to be in default is Rs. 1,36,06,646.70/- excluding interest @ 24% per annum. Further, the demand notice as enclosed the documents in order to proof the existence of operational debt and default. These documents includes :- (a) ledgers accounts of the Operational Creditor showing outstanding amount till 31.03.2023, (b) e- mail dated 23.06.2022 sent by the Corporate Debtor containing ledger confirmation for the period 2018-19 to 2022-23 and (c) pending tax invoices. From above, it is clear that the Appellant has mentioned the specific amount of default as well as the documents relied upon. 45. Now, we will look into the reply sent by the Respondent to above demand notice which is dated 26.04.2023 and reads as under :- Comp. App. (AT) (Ins.) No. 375 of 2024 Page 28 of 43 Comp. App. (AT) (Ins.) No. 375 of 2024 Page 29 of 43 Comp. App. (AT) (Ins.) No. 375 of 2024 Page 30 of 43 Comp. App. (AT) (Ins.) No. 375 of 2024 Page 31 of 43 Comp. App. (AT) (Ins.) No. 375 of 2024 Page 32 of 43 Comp. App. (AT) (Ins.) No. 375 of 2024 Page 33 of 43 Comp. App. (AT) (Ins.) No. 375 of 2024 Page 34 of 43 Comp. App. (AT) (Ins.) No. 375 of 2024 Page 35 of 43 Comp. App. (AT) (Ins.) No. 375 of 2024 Page 36 of 43 46. From above reply dated 26.04.2023 to the demand notice dated 18.04.2023, we note that no reference to any of three disputed invoices have been referred at all. The reply is in general tone, denying averments made by the Appellant in the demand notice dated 18.04.2023. The reply also mentioned that since the Appellant has raised arbitration it tantamount to pre-existing disputes. 47. After recording all facts and taking into consideration the reasoning of the Adjudicating Authority dismissing the Section 9 application as well as taking into consideration the demand notice dated 18.04.2023, Respondent’s reply dated 26.04.2023, the relevant three invoices along with alleged watsapp message, we shall examine the issues in detail. 48. We note that in Para 7 of the Impugned Order, the Adjudicating Authority has treated Corporate Debtor as financial solvent company, however we also take note of the fact that no details, whatsoever, has been recorded by the Adjudicating Authority for concluding the same based on the ratio of S.S. Engineers & Ors. (Supra). In this regard, we would take into consideration, other judgement of the Hon’ble Supreme Court of India passed in HPCL Bio Fuels Ltd. Vs. Shahji Bhanudas Bhad, [(2024) SCC OnLine SC 3190], where the Hon’ble Supreme Court of India has categorically differentiated from proceedings of recovery of debt vis-à-vis resolution of Corporate Debtor. The present case falls more in ratio of HPCL Bio Fuels (Supra) rather than S.S. Engineers & Ors. (Supra). Comp. App. (AT) (Ins.) No. 375 of 2024 Page 37 of 43 49. We also would like to refer to another judgment of Hon’ble Supreme Court of India as given in the matter of Vidarbha Industries Power Limited vs. Axis Bank Limited [(2022) SCC OnLine SC 841], where the Hon’ble Supreme Court of India has given in details, the principals where the financial solvency of the Corporate Debtor can be treated as a valid ground to reject application for CIRP of the Corporate Debtor under the Code. Since, the facts and the ratio of the Vidarbha Industries Power Limited (Supra) are well known, we shall not repeat here for sake of brevity. It is sufficient to note that in Vidarbha Industries Power Limited (Supra), clear principles were laid down and the facts in that case were tested against such principles before dismissing application filed for CIRP against the Corporate Debtor. None of such elements have been discussed or analysed by the Adjudicating Authority in the Impugned Order and thus on this aspect at least, the Impugned Order is found to be a non-speaking order and cannot be allowed to be sustained. 50. Now, we shall take up other point of pre-existing dispute discussed by the Adjudicating Authority in the Impugned Order while dismissing Section 9 application of the Appellant which are based on three invoices i.e., two invoices relating to non delivery of goods and third invoice regarding alleged inferior quality. 51. It may be noted that the Adjudicating Authority is required to admit Section 9 application if debt and default is established and there is no pre-existing dispute. In the present case, debt and default has been established to the extent that the Comp. App. (AT) (Ins.) No. 375 of 2024 Page 38 of 43 same has been acknowledged in the ledgers accounts. The fact of the debt and default is further strengthened taking into consideration the fact that both the parties have factored into consideration the GST benefits in their respective entities based on the goods supplied by the Appellant to the Respondent. 52. For the pre-existing dispute, the Hon’ble Supreme Court of India has laid down clear guidelines in the case of Mobilox Innovations Pvt. Ltd. vs. Kirusa Software Pvt. Ltd. [(2018 1 SCC 353] where the disputes under Section 8(2)(a) of the Code has been elaborated. The Hon’ble Supreme Court of India has categorically mentioned that it is not for the Tribunal to go into details of the pre- existing dispute however at the same time the pre-existing disputes should not be Moon Shine defence. 53. We observe that pre-existing dispute, can relate to quality of goods or quantity of goods or counter claims by the Corporate Debtor which have been raised by the Corporate Debtor prior to demand notice has been issued by the Operational Creditor, like the Appellant in the present case. 54. We need to appreciate that the admission of an application filed under Section 9 of the Code may sometimes containing some minor or illusionary disputes in the view of the Corporate Debtor, however a significant portion of debt may remain undisputed. In Mobilox Innovations Pvt. Ltd. (Supra) the Hon’ble Supreme Court has stated that dispute must be “plausible contention which requires further investigation and not patently feeble legal argument or Comp. App. (AT) (Ins.) No. 375 of 2024 Page 39 of 43 assertion of fact unsupported by evidence”. The relevant extract of the judgement is below: “…It is clear that such notice must bring to the notice of the operational creditor the “existence” of a dispute or the fact that a suit or arbitration proceeding relating to a dispute is pending between the parties. Therefore, all that the adjudicating authority is to see at this stage is whether there is a plausible contention which requires further investigation and that the “dispute” is not a patently feeble legal argument or an assertion of fact unsupported by evidence.” In the present case, we have seen that demand notice dated 18.04.2023 has categorically stated the default amount and the supporting documents, however, the reply of the Respondent dated 26.04.2023 does not negate the same nor the reply to demand notice dated 26.04.2023 mention to any specific invoices relating to any pre-existing disputes. As such, we may be inclined to treat the defence taken by the Respondent in his reply dated 26.04.2023 as Moon Shine defence. 55. We note that the Respondent/Corporate Debtor vide its Email dated 21.11.2019 acknowledged the Operational Debt to the tune of Rs.1,76,35,029/-. We further note that the Respondent vide e-mail dated 23.06.2022 once again shared Ledger while admitting and acknowledging the outstanding liability of an amount of Rs.1,39,85,901/-. Both these acknowledgements were exclusive of the 2 Invoices, being Invoice No.207 and 228, which were subsequently disputed by the Corporate Debtor. Therefore, admittedly, in any case, the total admitted outstanding was above the threshold limits of Rs.1,00,00,000/- Comp. App. (AT) (Ins.) No. 375 of 2024 Page 40 of 43 Thus, we hold that the Respondent, indeed has acknowledged the debt. 56. We take into consideration that the Corporate Debtor made ad-hoc payments from time to time on 05.08.2018, 30.08.2019, 30.01.2021, 27.04.2022, 15.10.2022 and on 15.10.2022, the Respondent made last of the part payments of Rs.25,00,000/-. Thus, total outstanding remained of Rs. 1,14,85,901/- above the requisite threshold limits excluding the Invoice No. 207 and 228 which the Respondent disputed during the Original Petition. 57. We find merit in the arguments of the Appellant that the defence of pre- existing dispute dating back to Year 2018, as raised by Respondent however that the Respondent himself has not only Acknowledged its Debt in Year 2019 and Year 2022 but has also made Part Payments to the Appellant/Operational Creditor on 05.08.2018, 30.08.2019, 30.01.2021, 27.04.2022 and lastly on 15.10.2022. Thus, we find arguments of the Respondent as not convincing on these grounds. 58. Now, we shall also look into to alleged pre-existing dispute for inferior quality of the goods as stated to be pointed out by the Respondent to the Appellant through a watsapp message dated 24.07.2018. We have already noted the watsapp message in earlier discussion. We reiterate that this watsapp message does not reflect any details as to invoices for which the dispute was raised or the amount thereof and the name of the party against which dispute has been raised. We have seen the various invoices brought to our notice in the appeal and the foot note no. 5 stipulates “if you have any discripency, it has to be intimated within 72 hours of receipt failing which no discussion will be entertained”. It has Comp. App. (AT) (Ins.) No. 375 of 2024 Page 41 of 43 been brought to our notice that no such dispute was raised by the Respondent within the stipulated period and even the watsapp message is vague. We also observe that only one watsapp message pertain to period 2018 which cannot create a foundation for treating whole series of transactions as pre-existing disputes. Thus, we are not inclined to accept the reasoning of the Respondent as well as the Adjudicating Authority as contained in the Impugned Order on this account of alleged watsapp message. 59. We have noted from submissions of the Appellant that though the Appellant had issued the Arbitration Invocation Notice, however, the same was never proceeded with Adjudicating Authority has observed in the Impugned Order. As such, we find that this cannot be treated as pre-existing dispute. We observe that the Adjudicating Authority also has not adjudicated on this issue. 60. We need to emphasis that while general rule is that any genuine dispute can and should lead to rejection of Section 9 application, however, if the undisputed portion of the debt is significantly above the minimum threshold limit of Rs. 1 Crore and the dispute pertains to a very relatively non-significant part of the claim, the Tribunal ought to have admitted the application of the Appellant under Section 9 of the Code especially if the disputes appears frivolous. We note that the similar stand was taken by this Appellate Tribunal in Company Appeal (AT ) (Ins.) No. 583/ 2024 dated 13.11.2024. 61. It need to be appreciated that the burden to prove the pre-existing disputes lies on the Corporate Debtor like the Respondent herein, by producing critical Comp. App. (AT) (Ins.) No. 375 of 2024 Page 42 of 43 evidence for same and general denying the claims of the Operational Creditor like Appellant herein may not suffice to reject application filed under Section 9 of the Code. 62. We also need to take into account the acknowledgement of debt by way of ledger accounts and other documentary evidence like GST Forms also proves the claim of the Appellant as Operational Creditor as seen in the present case where both the parties have taken into account the GST impact for their respective transactions. 63. We have noted that the claims of the Appellant as per part IV of Section 9 application is Rs.. 1,36,06,646/- and even three invoices amount is excluded (the all three invoices which have been mentioned by the Adjudicating Authority) (total amounting to Rs. 20,01,948/-), the remaining residual amount of default is still is Rs. 1,16,04,698/- which is more than the threshold limit of Rs. 1 Crores. 64. Based on above detailed analysis and taking into consideration the judgments of the Hon’ble Supreme Court of India as well as this Appellate Tribunal and further taking into consideration the various records discussed earlier, we find that the Adjudicating Authority clearly erred in rejecting the application filed under Section 9 of the Code of the Appellant. 65. In fine, the appeal succeeds and the Impugned Order is set aside. The original petition bearing in C.P. (I.B) No. 534/MB/2023 is restored back. Both the parties are directed to appear before the Adjudicating Authority on 14.07.2025, who shall take further action in accordance with law. Comp. App. (AT) (Ins.) No. 375 of 2024 Page 43 of 43 66. No cost. I.A., if any, are closed. [Justice Rakesh Kumar Jain] Member (Judicial) [Mr. Naresh Salecha] Member (Technical) [Mr. Indevar Pandey] Member (Technical) Sim "