Payment Made Against Specific Invoice Can't Be Adjusted Against Back-Dated Invoices: NCLT Delhi

Background Facts:

Uniwoth Enterprises LLP (“Operational Creditor”) is engaged in the business of manufacturing pharma packaging materials such as PVC films, Alu and Triplex Films for the pharmaceutical Industry. On the other hand, M/s Straco Metaplast Private Limited (“Corporate Debtor”) is a supplier of a variety of PVC films, having its registered office in Delhi.

In 2019, the Corporate Debtor placed orders of pharma packaging materials with the Operational Creditor for a total quantity of 2,21,573 kgs, amounting to Rs.4,07,63,236/-. However, the operational creditor supplied only 1,35,567 kgs of goods amounting to Rs. 2,53,88620/- and raised invoices accordingly. The Corporate Debtor, in turn, issued debit notes amounting to Rs. 40,84,275/- for a quantity of 85,250 kgs, which was not supplied.

To settle the accounts, a meeting was held between the parties, and it was decided that the Operational creditor would issue a credit note of Rs. 40,84,725 /- for non-supply of materials on the condition that the corporate debtor will make the remaining payment of the supplies made or alternatively issue post-dated cheques.

However, the corporate debtor failed to make the payment or issue any post-dated cheques to settle the outstanding dues. Upon receiving no response, the Operational Creditor issued a demand notice under Section 8 of the code. As the Corporate Debtor did not respond to the notice, the Operational Creditor subsequently filed a petition under Section 9 for initiation of insolvency proceedings.

Contentions:

The Corporate Debtor Submitted that it had already made payments of ₹1.98 crore to the Operational Creditor against the invoices that were being claimed again. It contended that the payments were made with reference to specific invoices, but the operational creditor had improperly adjusted those payments against previous invoices.

In response, the Operational Creditor submitted that the payments made were adjusted against earlier purchase orders, following the standard accounting practice of the First-in-First-Out basis, under which payments are adjusted against the outstanding invoices first.

Findings:

The Tribunal observed that the Operational Creditor had raised payment due against specific invoices and the Corporate Debtor had made payment in relation to the specific invoices which was duly acknowledged by the Operational Creditor.

It further noted that the contention of the Operational creditor that these payments were adjusted against back-dated invoices based on the First-In-First-Out method, is denied as the payments were made by the Corporate Debtor against specific date invoices. So, when payment has been made for specific invoices, it cannot be discharged against any other previous pending invoice.

Hence, the amount remaining unpaid, after excluding the payments already made, fell below the minium threshold limit of Rs. 1 crore for initiating Insolvency under Section 9 of the Code. Consequently, the Tribunal dismissed the petition.

Case Title: Uniwoth Enterprises LLP V/s Starco Metaplast Pvt. Ltd.

Case Number: CP (IB) No. 176 (ND)/ 2023

Judgement Date: 09.05.2025

For Applicant: Mr. Prutha Bhasvar,

Ms. Natasha Dhruman, Advs.

For the Respondent : Mr. Mukesh Jain,

Mr. S. B. Chaturvedi, Advs.