NCLAT Delhi Upholds CIRP Against Shri Paramsukh Edible Foods Based On GST Credit And TDS Records

On 14 October, the National Company Law Appellate Tribunal (NCLAT) at Delhi upheld the admission of insolvency proceedings against Shri Paramsukh Edible Foods Pvt. Ltd., holding that tax deducted at source (TDS), claims of input tax credit (ITC) on goods and services tax (GST), and ledger entries established the supply of goods and the existence of an outstanding operational debt.

A Bench of Judicial Member Justice Sharad Kumar Sharma and Technical Member Indevar Pandey dismissed the appeal filed by the corporate debtor, observing:

“…once there was an input tax credit claimed on the part of the GST paid as invoiced by the supplier, all these documents did show that the goods were actually supplied and received by the Appellant, and the minor change in the PIN Code in the invoices for the demand notice will not have any adverse bearing on the proceedings under Section 9 of the IBC Code.”

Mohini Food Product, the operational creditor, had supplied mustard seeds to Shri Paramsukh Edible Foods under eight invoices dated between 5 August 2021 and 31 August 2021. The outstanding principal amount was Rs. 1.42 crore, along with interest of Rs. 28,58,480 at 12% per annum.

Subsequently, Mohini Food Product issued a demand notice under Section 8 of the Insolvency and Bankruptcy Code, 2016, on 10 May 2023. Following non-payment, it filed an application under Section 9 on 20 July 2023. The National Company Law Tribunal (NCLT) admitted the application.

Challenging the admission, the corporate debtor contended that no goods had actually been supplied and that the e-way bills contained incorrect addresses, particularly incorrect PIN codes. It also disputed the interest claim, arguing that the parties had no agreement for payment of interest. Further, it questioned the claim on the ground that the GST returns did not separately identify the supplies in question.

The NCLAT examined the invoices, ledger entries, GST returns and TDS deductions. It noted that the corporate debtor had admitted deducting TDS and claiming ITC on the GST paid against the supplier's invoices, supporting the conclusion that the goods had been supplied and received.

Further, the Bench noted that the corporate debtor had admitted having no premises other than its registered office and that the discrepancy concerned only the PIN code. It observed:

“We are of the view that the difference in the PIN Code in itself cannot lead to any positive conclusive inference, that the goods were not supplied. He further admits the fact, as per the invoices, he had never raised any query with the Respondent about non-supply of goods or non-receipt of goods, and if that was the situation, the natural consequence would be that the goods were supplied.”

Accordingly, the NCLAT upheld the NCLT's order admitting the CIRP against Shri Paramsukh Edible Foods Pvt. Ltd. and dismissed the appeal.