2019 (1) TMI 1944 - Tri - Insolvency and Bankruptcy

Winding up petition - Transfer of Proceedings Rules - Operational Creditor has initially filed a Petition U/s. 433 and 434 of the Companies Act, 1956 for Winding-Up of the Respondent Debtor before the Hon ble High Court of Bombay on 07.11.2016 but subsequently after enactment of the Insolvency and Bankruptcy Code, 2016 this Petition is transferred to this Bench in light of Transfer of Proceedings Rules - HELD THAT - On careful perusal of the documents it is noticed that the Corporate Debtor has admittedly supplied 4 modules of Better Technology instead of 7 modules of agreed specifications. It has also been informed to the court that some payment has been made out of the claimed amount. The Corporate Debtor has also raised a dispute regarding the amount claimed. In the present case, it seems that the Petitioner is not sure about its claims and have mentioned different and inconsistent calculations of the alleged excess amount. The correct position of the outstanding debt has not been revealed to this Bench till date. It is clear that a dispute as to the existence of the amount of debt was already in existence, prior to the issue of Demand Notice under Section 8 of the Code and the same has been raised by the Corporate debtor time and again - The Corporate Debtor could not have unilaterally altered the number of modules to be supplied under the Purchase Orders. Hence, the question of quality of goods services provided requires more intrusion and whether there has been a breach of representation or warranty, has to be adjudicated by an appropriate forum. In respect of the definition of dispute . the law is now very much settled as held by several Hon'ble Courts, most importantly the decision of Mobilox Vs. Kirusa 2017 (9) TMI 1270 - SUPREME COURT in which an observation has been made that the Adjudicating Authority is to examine at the stage of admission that whether there is a plausible contention which requires further investigation and on assertion of fact a dispute is supported by evidence. Finally, a conclusion is hereby drawn that this is not a case where the impugned Debt and the alleged default was free from existence of plausible dispute or merely a feeble argument; but duly supported by corroborative evidences, therefore, cannot be proceeded under the Insolvency Code so as to commence CIRP by declaring the Debtor Insolvent or Bankrupt. However, it is worth to put on record that the scope and Jurisdiction of this Tribunal is limited and also confined to the provisions of Insolvency Code only while dealing with Petition filed under Section 9, therefore, the impugned Debt in question does not fall within those ambits. Petition dismissed.

Summary

Issues Involved:
1. Transfer of Petition under Companies Act to Insolvency and Bankruptcy Code (IBC).
2. Alleged short supply and overcharging by the Corporate Debtor.
3. Existence of a pre-existing dispute.
4. Jurisdiction of National Company Law Tribunal (NCLT).

Detailed Analysis:

1. Transfer of Petition under Companies Act to Insolvency and Bankruptcy Code (IBC):
The Petitioner, identified as the Operational Creditor, initially filed a Petition under Sections 433 and 434 of the Companies Act, 1956, for winding up the Respondent Debtor before the Bombay High Court. After the enactment of the Insolvency and Bankruptcy Code, 2016, the Petition was transferred to the NCLT, Mumbai Bench, following the 'Transfer of Proceedings Rules'. The Petitioner subsequently furnished Form No. 5 under Rule 6 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016, invoking Section 9 of the IBC.

2. Alleged Short Supply and Overcharging by the Corporate Debtor:
The Operational Creditor, part of the Kalpataru Group, entered into an agreement with the Corporate Debtor for the supply of Video Door Phones and Home Automation System Units for a project named 'Kalpataru Harmony'. The Corporate Debtor was supposed to supply seven modules per flat, but an audit revealed only four modules of inferior quality were supplied, leading to an overcharge of ?42,29,060 for 188 flats. Despite multiple correspondences and a statutory notice demanding the excess amount, the Corporate Debtor denied the claims, asserting the supplied modules were of "better technology".

3. Existence of a Pre-existing Dispute:
The Corporate Debtor raised a counterclaim of ?74,08,068 against the Operational Creditor and argued that the dispute regarding the quality and quantity of the supplied goods existed before the issuance of the Demand Notice under Section 8 of the IBC. The NCLT noted that the Corporate Debtor had admitted to supplying only four modules per flat but justified it on the grounds of better technology. The Tribunal emphasized that the quality of goods and services and the breach of representation or warranty were issues requiring further adjudication, which fell outside its jurisdiction.

4. Jurisdiction of National Company Law Tribunal (NCLT):
The NCLT concluded that the dispute involved issues of quality and overcharging that required detailed investigation and were beyond its scope. The Tribunal referred to the Supreme Court's decision in Mobilox Innovations Private Limited v. Kirusa Software Private Limited, which mandates that if a plausible contention of dispute exists, the application under Section 9 of the IBC must be rejected. The NCLT found sufficient evidence of a pre-existing dispute and determined that the Petition did not meet the criteria for admission under the IBC.

Conclusion:
The NCLT dismissed the Petition, concluding that the debt and alleged default were not free from dispute and could not be adjudicated under the Insolvency Code. The Tribunal clarified that the Petitioner could pursue claims under other applicable laws, but the current Petition did not survive under the IBC. The case was closed, and the file was consigned to records.