Jay Ambe Industries Vs MIM Petroworld Pvt. Ltd. (NCLT Ahmedabad)
Summary: The National Company Law Tribunal, Ahmedabad Bench, Court-II considered a petition under Section 9 of the Insolvency and Bankruptcy Code, 2016 filed by Jay Ambe Industries, as Operational Creditor, seeking initiation of Corporate Insolvency Resolution Process against MIM Petroworld Pvt. Ltd., as Corporate Debtor. The Applicant stated that goods were supplied against invoices raised between 13.12.2022 and 18.12.2022 and claimed principal dues of Rs.1,77,32,898/-, with total outstanding debt of Rs.1,96,00,535/- including interest at 18%. A demand notice under Section 8 was issued on 19.08.2023 and received on 21.08.2023.
The Corporate Debtor opposed admission by alleging that goods supplied in November and December 2022 were of inferior quality, causing failures of customers’ vehicles and equipment, and relied on correspondence, WhatsApp communications, laboratory reports, returned invoices/debit notes and alleged losses exceeding Rs.3.75 crores. The Applicant disputed the alleged pre-existing dispute and questioned the authenticity and evidentiary value of the laboratory report, WhatsApp communications and debit notes. The petition had earlier been rejected by the Tribunal on 08.11.2024. In Company Appeal (AT) (Ins.) No. 2320 of 2024, the NCLAT on 06.04.2026 set aside that order and remanded the matter for fresh adjudication, observing that relevant WhatsApp screenshots, the laboratory report and the communication dated 14.08.2023 required consideration.
On remand, the Tribunal examined the additional affidavit and rival submissions. It noted that the purchase contract was not produced, the e-way bills and invoices identified the Corporate Debtor as recipient, the WhatsApp communications did not clearly identify the invoices in dispute and were addressed to Mr. Uday, who was not shown to be the authorised representative or proprietor of Jay Ambe Industries. The laboratory report did not satisfactorily establish its source, date or identity, while the communication dated 14.08.2023 specifically noticed by the NCLAT remained unproduced. The Tribunal further held that disputes raised by the Corporate Debtor’s customers and consequential losses between the Corporate Debtor and third parties did not establish a dispute concerning the invoices forming the subject matter of the claim. It concluded that the Corporate Debtor failed to establish a genuine pre-existing dispute within the meaning of Section 9 of the Code.
Since the operational debt exceeded the threshold of Rs.1 crore, default was established and the petition was within limitation, the petition was admitted. The Tribunal admitted MIM Petroworld Pvt. Ltd. into CIRP under Section 9(5), imposed moratorium under Section 14, appointed Mr Bhavik Haribhai Rupapara as Interim Resolution Professional under Section 13(1)(c), directed the public announcement and submission of claims under Section 15, and required the Corporate Debtor’s personnel and promoters to cooperate with the IRP under Section 19. The Operational Creditor was also directed to pay Rs.2,00,000/- in advance towards CIRP costs.
Cases Discussed
- Jay Ambe Industries – Prop Rajesh Khemani Vs. MIM Petroworld Pvt. Ltd. (NCLAT Principal Bench, New Delhi), Company Appeal (AT) (Ins.) No. 2320 of 2024, order dated 06.04.2026.
FULL TEXT OF THE JUDGMENT/ORDER OF NCLT
1. This Petition has been filed 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 by Jay Ambe Industries, (hereinafter referred to as ‘Operational Creditor’) seeking initiation of Corporate Insolvency Resolution Process against MIM Petroworld Pvt. Ltd (hereinafter referred to as ‘Corporate Debtor’.
Brief facts of the case:
2. The applicant supplied goods on various dated to the respondent and raised various invoices from 13.12.2022 to 18.12.2022 against the purchases made by the respondent amounting to Rs.1,77,32,898/-. Due to default in making the payments in terms stated in the invoices (due date is after 30 days of its issuance) and occurrence of default the applicant issued demand notice under Section 8 of the Code on 19.08.2023 which was received by the CD on 21.08.2023. As per Part IV of the application, it is stated that the total outstanding Debt is Rs.1,96,00,535/- out of which Rs.1,77,32,898/- towards the principal amount for the outstanding bills from 12.01.2023 to 17.01.2023 and Rs.18,67,637/- towards interest amount at the rate of 18% on outstanding invoice till 17.08.2023 and the Date of Default is stated to be from 12.01.2023 to 17.01.2023. The Operational Creditor has not proposed the name of any Insolvency Professional to act as a Resolution Professional.
3. The Respondent filed its reply and submitted that it is engaged, inter alia, in the trading and supply of Mixed Mineral Hydrocarbon Oil to end-users operating specialised heavy vehicles and equipment. It is further submitted that the applicant, through Mr. Uday Jatin Shah, represented itself as the partner and being engaged in the business of supply of Mixed Mineral Hydrocarbon Oil and assured the Respondent of supply of quality material at competitive rates. Pursuant to which respondent placed orders for procuring Mixed Mineral Hydrocarbon Oil-27101990 with the Applicant from January 2022 onwards and procured goods stated to be worth approximately Rs.16.14 crores during FY 2021-22 and Rs.54.41 crores up to December 2022 during FY 2022-23.
4. The Respondent submitted that the goods supplied during November and December 2022 were of inferior quality and resulted in failure of vehicles and equipment of its end-customers. It is stated that the Respondent repeatedly brought the issue to the Applicant’s notice, whereupon assurances were given regarding supply of conforming goods and redressal of the consequences arising from the earlier supplies. Despite such assurances, further supplies were found to be substandard, resulting in stoppage of machinery on 18.12.2022, and the invoice dated 17.12.2022 was returned on 24.12.2022.
5. It is further submitted that certain batches of the goods were subjected to laboratory testing, the reports of which confirmed the inferior quality and were shared with the applicant. The Respondent has relied upon correspondence, laboratory reports, return invoices/debit notes and other electronic records in support of its contention regarding the quality dispute.
6. The Respondent further submitted that despite the non-resolution of the quality issue, it released a partial payment to the Applicant, relying upon the assurances given by Mr. Uday Jatin Shah. It is stated that the Applicant thereafter issued a demand notice dated 17.08.2023, which was replied to by the Respondent on 29.08.2023, specifically raising the dispute regarding the quality of goods and the applicant’s breach of its obligations.
7. The Respondent further submitted that on account of the inferior quality of goods supplied by the Applicant, it suffered loss of business and reputation, including repair and maintenance expenses incurred in respect of vehicles and equipment of its customers. It is stated that certain major customers discontinued business with the Respondent and sought reimbursement/compensation, including through issuance of credit notes. The Respondent claims to have incurred losses of more than Rs. 3.75 crores, exceeding the amount claimed by the Applicant.
8. The Respondent contended that the present application is not maintainable, inter alia, on the grounds that there was a pre-existing dispute regarding the quality of the goods and the Applicant’s failure to redress the same, which was raised through correspondence prior to the demand notice dated 17.08.2023 and reiterated in the reply dated 29.08.2023; that no operational debt is due and payable, as credit notes issued by the Applicant remain to be adjusted and the Applicant is liable for losses allegedly caused by the inferior goods, with reconciliation of accounts still pending; that the present proceedings have been instituted essentially as a recovery measure despite the existence of a genuine dispute, whereas the Respondent claims to be financially solvent and regularly servicing its obligations; and that the Applicant has suppressed material facts and documents relating to the pre-existing dispute, despite being aware thereof prior to initiation of the proceedings. The Respondent submitted that the dates of default and the agreement relied upon by the Applicant does not stipulate the payment terms forming the basis of the default date.
9. The applicant filed its rejoinder and denied that one Mr. Uday Jatin Shah was the partner of the proprietorship firm and stated that Mr. Rajesh Harkishandas Khemani is a sole proprietor of the firm and is managing the same. The respondent has intentionally roped a third party to create a false dispute. The lab report regarding inferior quality was neither communicated to the applicant and nor produced before this Tribunal which is crucial evidence. The respondent has not annexed the certificate under section 65(b) of the Evidence Act, 1872. The debit notes attached by the respondent in its reply are not issued by the applicant and even otherwise, it relates to different period..
10. The present matter was rejected by this Tribunal vide order dated 08.11.2024 and the appeal was preferred by the petitioner before Hon’ble NCLAT being Company Appeal (AT) (Ins.) No. 2320 of 2024. The Hon’ble NCLAT in its order dated 06.04.2026 observed that the Appellant had not specifically denied the WhatsApp screenshots relied upon by the Respondent, but had only objected to their being selective. It further noted that while the debit note pertaining to Reliable Industries appeared unrelated to the Appellant’s supplies, the debit note issued by Hiltop Highrise Pvt. Ltd., relating to purchases made during April-May 2023, appeared relevant to the alleged supply of sub-standard material. The Hon’ble NCLAT also observed that the Appellant had not specifically denied the lab test report showing failure of the material, though it disputed the timing of the report. Since the communication dated 14.08.2023 regarding sub-standard material and the lab test report were not available on record, the Hon’ble NCLAT held that the dispute could not be finally adjudicated in the absence of these documents. Accordingly, the impugned order was set aside and the matter was remanded to this Tribunal for fresh adjudication by a reasoned order after providing an opportunity of hearing to the parties.
11. Subsequently, after giving opportunity to both parties, the respondent has filed an additional affidavit before this Tribunal placing the communications made through whatsapp demonstrating sub-standard goods received prior to the issuance of demand notice dated 17.08.2023 and lab test report on record. The applicant has filed its rejoinder to the additional affidavit of the respondent and submitted that despite the directions of the Hon’ble NCLAT dated 06.04.2026, the Respondent has not produced the communication dated 14.08.2023 or the lab test report. It is submitted that no dispute was communicated prior to issuance of the Section 8 notice. The Applicant further submits that the Whats App communications have not been produced with the requisite certificate under Section 65B of the Indian Evidence Act, 1872. The Applicant denies the existence of any pre-existing dispute and submits that no debit note or ledger was raised or furnished in relation to the Applicant, while payments and subsequent purchases were made by the Respondent.
12. We have heard the learned Counsels for both the parties and perused the documents on record along with written submissions and judgements relied upon by the parties.
13. Observations & Conclusions:
a. The dispute between the parties on the quality of goods, lab testing report do not form part of any such provisions in the invoice or the purchase contract (not produced). Even if there is a dispute, it is submitted by the respondent CD that they had received quality related issues from their clients – from whom or on whom there are debit/credit notes exchanged by the respondent.
b. The e way bills or invoices mention only the CD as the recipient of goods and no where there is provision for directing the supply directly to the agents or customers of the respondent CD.
c. The whats app chat are there before the date of issue of demand notice, the applicant in his rejoinder has questioned the lab test which does not mention the institution which issued it, date or its identity. Even though there have been certain rejections and return of goods back to the applicant, the goods under these invoices have not been returned to the applicant (as per documents produced). Even if there are subsequent disputes due to quality issues, we observe there is only one tax invoice dated 24.12.2022 having been returned to the applicant.
d. Since the purchase contract is not provided, dispute, any arose subsequently from the other parties who are not subject to the contract between applicant and the respondent. The respondent has also not placed the communication dated 14.08.2023 even after the Hon’ble NCLAT passed its order and made the observation. It is also made clear that the applicant is only represented by the sole proprietor, in the absence of binding contract between the parties enabling such third party usage or third party shipments made (the goods have gone to the CD), whatsapp communication do not clearly mention the invoices under dispute, as they are raised by third parties who took the product from the CD.
e. The applicant has submitted that the dispute was not raised in time, they are routine in matter and the lab test report shows the absence of institution which has issued the report, nor the date or identity is established. These were also not communicated to the applicant before issue of the Sec 8 notice under IBC. tt is further contended on the additional affidavit by the respondent that the dispute of quality was conveyed to the partner or other officials. It is also submitted that there are running disputes and losses to the tune of Rs.3,75,00,000 caused due to supply of bad quality of goods. However, these could be persistent issues between the parties to be dealt separately in the absence of a contract. However, the fact remains that the invoices not paid and the applicant has responded to the document are that the return of material is already accounted for and the present debt is over and above the same for consideration of payment. It is also submitted that no debit note raised or respondent has availed input tax credit under GST on material supplied.
f. The WhatsApp communications relied upon were addressed to one Mr. Uday, who is not shown to be the authorised representative/proprietor of the Applicant, namely Mr. Rajesh Harkishandas Khemani. Further, the lab report does not satisfactorily establish its source, date or identity, and the communication dated 14.08.2023, specifically noticed by the Hon’ble NCLAT, has not been produced. The disputes raised by the Respondent’s customers and the consequential losses claimed by the Respondent are matters between the Respondent and third parties and do not establish a dispute in respect of the invoices forming the subject matter of the present claim.
g. In view of the foregoing, we are of the view that the Respondent has failed to establish a genuine pre-existing dispute within the meaning of Section 9 of the Code in respect of the operational debt claimed. The operational debt being above the threshold of Rs. 1 crore and default is established, this petition filed within limitation deserves to be admitted.
14. Therefore, we pass the following orders:
ORDER
I. CP (IB) 252 of 2023 is allowed.
II. The Corporate Debtor – MIM Petroworld Pvt. Ltd is admitted into Corporate Insolvency Resolution Process under section 9(5) of the Code.
III. The order of moratorium under section 14 of the Code shall come to effect from the date of this order till the completion of the Corporate Insolvency Resolution Process or until this Adjudicating Authority approves the Resolution Plan under sub-section (1) of section 31 or passes an order for liquidation of the corporate debtor under Section 33 of the IBC 2016, as the case may be.
IV. However, in terms of Section 14(2) to 14(3) of the Code, the supply of essential goods or services to the corporate debtor as may be specified, if continuing, shall not be terminated or suspended, or interrupted during the moratorium period.
V. We hereby appoint Mr Bhavik Haribhai Rupapara Registered Insolvency Professional having IBBI Registration No: IBBI/IPA-001/IP-P-02741/2022-2023/14196, Email- [email protected] under Section 13(1)(c) of the Code to act as Interim Resolution Professional (IRP). He shall conduct the Corporate Insolvency Process as per the Insolvency and Bankruptcy Code, 2016 r.w. Regulations made thereunder.
VI. The IRP so appointed shall make a public announcement of the initiation of Corporate Insolvency Resolution Process and call for submissions of claims under section 15, as required by Section 13(1)(b) of the Code.
VII. The IRP shall perform all his functions as contemplated, inter-alia, by sections 17, 18, 20 and 21 of the Code. It is further made clear that all personnel connected with the corporate debtor, its promoters, or any other person associated with the management of the corporate debtor are under legal obligation as per section 19 of the Code to extend every assistance and cooperation to the IRP. Where any personnel of the corporate debtor, its promoters, or any other person required to assist or co-operate with IRP, do not assist or cooperate, the IRP is at liberty to make appropriate application to this Adjudicating Authority with a prayer for passing an appropriate order.
VIII. The IRP is expected to take full charge of the corporate debtor’s assets, and documents without any delay whatsoever. He is also free to take police assistance in this regard, and this Court hereby directs the Police Authorities to render all assistance as may be required by the IRP in this regard.
IX. The IRP shall be under a duty to protect and preserve the value of the property of the ‘corporate debtor company’ and manage the operations of the corporate debtor company as a going concern as a part of obligation imposed by section 20 of the Code.
X. The IRP or the RP, as the case may be shall submit to this Adjudicating Authority periodical report with regard to the progress of the CIRP in respect of the Corporate Debtor.
XI. We direct the Operational Creditor to pay IRP a sum of Rs.2,00,000/- (Rupees Two Lakh Only) in advance within a period of 7 days from the date of this order to meet the cost of CIRP arising out of issuing public notice and inviting claims till the CoC decides about his fees/expenses.
XII. The Registry is directed to communicate this order to the Operational Creditor, corporate debtor, and to the Interim Resolution Professional, the concerned Registrar of Companies and the Insolvency and Bankruptcy Board of India after completion of necessary formalities, within seven working days and upload the same on the website immediately after pronouncement of the order. The Registrar of Companies shall update its website by updating the Master Data of the Corporate Debtor in MCA portal specific mention regarding admission of this Application and shall forward the compliance report to the Registrar, NCLT.
XIII. The commencement of the Corporate Insolvency Resolution Process shall be effective from the date of this order.
