2017 (10) TMI 1589 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - whether the respondent has raised a dispute or paid the money after service of the Demand Notice? - HELD THAT - Clause (b) of sub-section (3) of Section 9 of the Code says that the operational creditor shall along with the application furnish an affidavit to the effect that there is no notice given by the corporate-debtor relating to a dispute of unpaid operational debt. It is stated in the affidavit dated 21.08.2017 of Pravin Gupta at page 257 of the Paper Book that the respondent has given reply to the notice which is attached with the petition but it is contended that the contents of the reply do not show the existence of a dispute but only illusory defence. The primary document to support this contention of the petitioner is the issuance of Form C dated 20.06.2017 by the respondent-corporate debtor in respect of all the seven invoices. The transaction between the parties having taken place, the respondent was bound to issue Form C and in any case this by itself cannot be said to be a settlement of dispute between the parties for enabling the petitioner to trigger the insolvency resolution process - the present case cannot be said to be a matter where there is no dispute raised by the Corporate Debtor enabling the petitioner to an order of admission. Rather all this correspondence which the petitioner has attached with the present case, emanated before the issuance of demand notice dated 25.07.2017. In response to the demand notice, the respondent has taken the stand relating to the quality of the goods. There being existence of a dispute relating to the quality of the goods, the instant petition is rejected.

Summary

Issues Involved:
1. Territorial jurisdiction of the Tribunal.
2. Compliance with procedural requirements under the Insolvency and Bankruptcy Code, 2016.
3. Existence of operational debt and default.
4. Dispute regarding the quality of goods supplied.
5. Issuance and implications of Form C.
6. Admissibility of the petition under Section 9 of the Insolvency and Bankruptcy Code, 2016.

Issue-wise Detailed Analysis:

1. Territorial Jurisdiction of the Tribunal:
The respondent-company, incorporated on 27.01.2006 with its registered office at Gurugram, falls within the territorial jurisdiction of the National Company Law Tribunal (NCLT) Chandigarh. The petitioner-company is registered with the Registrar of Companies, Indore, Madhya Pradesh.

2. Compliance with Procedural Requirements:
The petitioner, an operational creditor, filed the petition under Section 9 of the Insolvency and Bankruptcy Code, 2016 (the "Code") in Form No. 5 as prescribed in Rule 6(1) of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 (the "Rules"). The application was supported by an affidavit dated 21.08.2017 by Mr. Pravin Gupta, Director of the petitioner-company.

3. Existence of Operational Debt and Default:
The respondent placed purchase orders for PP Bags, and goods were dispatched via seven invoices. Payments for invoice Nos. 198, 245, and 222 were made, but the remaining invoice Nos. 224, 246, 259, and 291, amounting to ?30,15,548/-, were unpaid. The petitioner also claimed interest at 24% per annum, amounting to ?5,43,554/-, for the delay. The last invoice was issued on 08.12.2016, marking the date of default.

4. Dispute Regarding the Quality of Goods Supplied:
The respondent raised a dispute regarding the quality of the supplied goods, specifically rejecting around 30,000 PP Bags (S2 Grade) and 26,000 PP Bags (M Grade), totaling 56,000 PP Bags. The respondent issued a debit note of ?24.55 lakh. The petitioner contended that there was no dispute regarding the quality of S1 and S2 grade bags and that the respondent had used the entire consignment.

5. Issuance and Implications of Form C:
The respondent issued Form C on 20.06.2017 for the entire consignment, which the petitioner argued indicated no dispute. However, the Tribunal held that the issuance of Form C alone could not be considered a settlement of disputes between the parties.

6. Admissibility of the Petition under Section 9:
The Tribunal examined whether the respondent had raised a "dispute" or paid the money after the service of the Demand Notice. The respondent's reply to the demand notice and subsequent correspondence indicated a genuine dispute regarding the quality of goods supplied. The Tribunal referred to the Supreme Court's judgment in Mobilox Innovations Private Limited vs. Kirusa Software Private Limited, which emphasized that the adjudicating authority must reject the application if a genuine dispute exists.

Conclusion:
Given the existence of a dispute relating to the quality of goods, the Tribunal rejected the petition. The Tribunal's decision was communicated to both parties.