NCLAT dismisses insolvency plea against Gujarat Ambuja Exports

The National Company Law Appellate Tribunal (NCLAT) has upheld the National Company Law Tribunal (NCLT) order setting aside a plea seeking initiation of insolvency proceedings against agro-processing company Gujarat Ambuja Exports Ltd.

Samay Impex Pvt Ltd, an operational creditor, moved the appellate tribunal after the NCLT’s Ahmedabad bench had, in February, dismissed its plea to initiate the corporate insolvency resolution procedure (CIRP) under Section 9 of the Insolvency and Bankruptcy Code (IBC) against Gujarat Ambuja for having committed operational default of over Rs 9.39 lakh.

“We find no legal infirmity in the impugned order. The appeal is accordingly dismissed at the very pre-admission stage,” the order said.

The reply to demand notice furnished by the debtor showed a debit note, dated August 17, 2018, for an amount of Rs. 11.12 lakh was issued by the debtor for supply of 1,500 MT of steam coal and a credit note dated October 27, 2018 was issued to the appellant, leaving the amount of debit after issuing the credit note at Rs. 9.12 lakh.

Further, the debtor had made last payment of Rs. 23.69 lakh through cheque drawn on Bank of India along with payment advice dated October 27, 2018 after reconciliation, while disputing the quantum of coal supplied which, according to the debtor, was at 1,499.05 MT and not 1,504.73 MT, resulting in a differential amount.

According to the debtor, after reconciliation based on the consideration of the debit note and the rebate given later through the credit note, the accounts stood fully settled and paid.

The three-judge bench headed by NCLAT’s Acting Chairman Justice Bansi Lal Bhat noted that with the debtor’s reply to the demand notice, counsel of the appellant “could not satisfy” the appellate tribunal as to how the corporate debtor could be held to be in default after reconciliation followed by last payment effected through cheque.

“The dispute raised by the corporate debtor in reply to demand notice in regard to supply of goods and payment made after reconciliation and settlement of accounts between the two parties, taking into consideration the debit note raised by the respondent much before the issuance of demand notice and the rebate given later through the credit note, cannot be said to be illusory or moonshine,” it said.

“Such dispute, being pre-existing i.e. prior to issuance of demand notice and corporate debtors’ plea of having satisfied the operational debt after reconciliation of accounts and rebate allowed, cannot be resolved in Corporate Insolvency Resolution Proceedings. In the given circumstances, the Adjudicating Authority was right in declining to initiate CIRP against the Corporate Debtor.”