Acknowledgment Of Creditor's Email Ledger Sufficient To Prove Debt Even Without Invoices: NCLAT

The National Company Law Appellate Tribunal (NCLAT) at Delhi has held that a corporate debtor's email acknowledgment of a creditor's ledger is sufficient acknowledgment of operational debt and is enough to justify admission of a Section 9-CIRP application.The tribunal ruled that once such acknowledgment is on record, the absence of invoices cannot defeat a claim or prevent crystallization of debt. A coram of Judicial Member Justice Ashok Bhushan and Technical Member Barun Mitra set aside the NCLT Mumbai's refusal to admit RMV IT Services' insolvency plea against Red Eye Services for unpaid IT equipment rental dues of about Rs 96 lakh. The tribunal relied on the email exchange between RMV IT Services and Red Eye Services showing the debtor's acceptance of outstanding rental dues. It observed, “Even at this stage, we find that the Corporate Debtor did not deny the veracity of the ledger entries except for indicating a variance of Rs 27,033/- in the payment made for the month of February as can be seen in the reply e-mail dated 21.02.2019. This email makes it amply clear that the Corporate Debtor had acknowledged that it had not paid the rentals from July 2018 to February 2019 and had also accepted the outstanding amount appearing in the ledger of the Operational Creditor minus an amount of Rs 27,033/- only.” RMV IT Services had supplied computers and IT equipment to Red Eye Services under six rental agreements with monthly payment obligations. Red Eye defaulted from mid-2018. RMV stopped raising invoices to avoid GST liability on unpaid invoices but continued providing services. In February 2019, Red Eye sought a complete ledger and, after reviewing it, accepted dues of about Rs 96 lakh with a single adjustment. RMV later sought return of the equipment, issued a demand notice in May 2019, and filed a CIRP application, which the NCLT rejected. RMV argued that the NCLT ignored the debtor's clear admission of debt and default and wrongly examined the quantum of dues despite the threshold being met. Red Eye claimed that no debt became payable without invoices, that reconciliation was incomplete, and that the mutual pre-termination of agreements removed liability for balance rental. The tribunal held that the agreements did not require issuance of invoices and that monthly rent became due under the contract itself. "When the terms of the agreement clearly stipulated that rent had to be paid on a monthly basis and there was no obligatory requirement spelt out for issue of invoices, in the given facts of the case, we are of the considered view that it cannot be argued that rental payments were not due or not payable merely because invoices were not raised.", it said. It held that the debt had crystallised through email confirmation well before the demand notice and that the alleged dispute over reconciliation was an afterthought. It held that the NCLT erred by overlooking the debtor's admission and by venturing into quantification. The appeal was allowed and the NCLT was directed to admit the CIRP application. Case Title: RMV IT Services Pvt. Ltd. v. Red Eye Services Pvt. Ltd.Case Number: Company Appeal (AT) (Insolvency) No. 1374 of 2023 Coram: Justice Ashok Bhushan (Chairperson) & Barun Mitra (Member Technical) For Appellant: Advocates Megha Karnwal, Aditya Thorat and Karthikeya Suyag, Advocates. For Respondent: Advocates Anjali Sharma, S K Sagar, Thanglunkim and GaikhuanlungClick Here To Read/Download Order

Acknowledgment Of Creditor's Email Ledger Sufficient To Prove Debt Even Without Invoices: NCLAT

Mohd.Rehan Ali

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