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Strict burden of proof not applicable to proceedings under the I&B Code, 2016

Cause Title : Ashok Kumar Bhasin. vs ABB Power Products and Systems India Limited, Company Appeal (AT)(Insolvency) No. 414 of 2023, National Company Law Appellate Tribunal

Date of Judgment/Order : 

Corum : 

Citied: 

Anil Rishi Vs. Gurbaksh Singh, (2006) 5 SCC 558

Rangammal Vs. Kuppuswami & Anr., (2011) 12 SCC 220

Mascot Petrochem Private Limited Vs. Midas Construction Company Private Limited, C.A. (AT) Ins. No. 1399 of 2019 decided on 03.02.2022,

Background

The Appellant suspended director of the Corporate Debtor Sigma-C Infrastructure Private Limited has filed this Appeal challenging the admission order under Section 9 of the Insolvency Code, issued by NCLT, Kolkata.

Allegedly, some goods were supplied by the Operational Creditor to the Corporate Debtor for onward delivery to CESC, against which payment were not received. Hence the application under Section 9.

One of objections raised by the  Corporate Debtor was that Operational Creditor has failed to file any document proving delivery of the materials which fact was also noticed in the communication by Advocate of Operational Creditor. Operational Creditor in Section 9 Application did not file any proof of service of Section 8 Notice. The burden of proof lies on the Operational Creditor proving delivery of goods before any claim for payment can be considered. Operational Creditor failed to prove the delivery of goods.

Judgment

The NCLAT observed that supplementary affidavit was filed before the Adjudicating Authority bringing on record the proof of service of Section 8 Notice and in the said notice, Section 9 application as well as Part-IV of the Application (Particulars of Operational Debt), it has been clearly stated that “the equipment was duly received by the Corporate Debtor from the Operational Creditor, without any dispute or demur.” Further, the tax invoice has been filed along with Section 9 Application dated 16.05.2018 in which details of recipients is mentioned as name of the Corporate Debtor and details of consignee was mentioned as CESC Limited. Also, there were communications between the OP and the CD which indicate deliveries were made and at no point of time prior to filing reply to Section 9 Application, corporate debtor issued any such letter or complaint informing the Operational Creditor about non-delivery of goods. 

Invalidating the various SC judgments referred to by the CD which had insisted on strict proof of delivery for admission of application under Section 9 of IBC, the NCLAT held that the above judgements were considering the provisions of Section 101, 102 and 106 of the Indian Evidence Act, 1872. The observations made by the Hon’ble Supreme Court were in context of burden of proof under the Indian Evidence Act. Strict burden of proof under the Evidence Act can not be applicable with regard to proceedings under the I&B Code, 2016 which are summary proceeding where pleadings are in proforma as prescribed in Rules and Regulations.

As for the NCLT order, the NCLAT held that this is a case where Demand Notice was not even replied by the Corporate Debtor and the plea raised in the Reply by the Corporate Debtor regarding non-supply of goods has been held to be dishonest plea and moonshine plea hence the judgement of this Tribunal in above case does not come to any help to the Appellant.

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