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2021 (1) TMI 1227 - Tri - Insolvency and BankruptcyMaintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - pre-existing-dispute or not - HELD THAT - The existence of dispute is evident from the letter dated 31.01.2019 by the Operational Creditor to the Corporate Debtor. It is further pertinent to mention that the existence of dispute is evident from the letter dated 29.03.2019 issued by Operational Creditor whereby the Operational Creditor had referred the dispute to the Ld. Arbitrator for outstanding payment of 6, 49, 94, 661/- and proposed the name of Mr. Sanjiv Kumar Additional District and Session Judge (Retd.) in pursuant to Arbitration Conciliation Act. In pursuance of letter dated 29.03.2019 issued by the Operational Creditor the Corporate Debtor by its letter dated 04.04.2019 had again informed about deteriorated quality of Crude Palm Oil of Edible Grade and asked the Operational Creditor to pay an amount of 50 crores towards losses incurred by the Corporate Debtor - The Sole Arbitrator Mr. Sanjiv Kumar Additional District and Session Judge (Retd.) after consideration of the disputes raised by both the parties had passed an Arbitral Award dated 24.09.2019 whereby the Ld. Sole Arbitrator dismissed the Claim being premature and also dismissed the Counter Claim of the Corporate Debtor by recording that the same would be considered only after the Claimant (Operational Creditor herein) has failed to take all possible legal remedies to recover the Claim of the Respondent with the supplier. It is clear that the dispute must exist before the receipt of demand notice. Be that as it may on appraisal of the arguments advanced by the Ld. Counsels it emerges that there were disputes existing prior to the issuance of the Demand Notice - since there is a pre-existing dispute between the parties we have no option but to reject the prayer of the Operational Creditor to initiate proceedings under Section 9 of IBC 2016. Application dismissed.
Issues Involved:
1. Whether the Corporate Debtor defaulted on the payment of ?6,49,94,661/- to the Operational Creditor. 2. Whether there was a pre-existing dispute between the parties before the issuance of the demand notice under Section 8 of the Insolvency and Bankruptcy Code, 2016. 3. Whether the Operational Creditor is entitled to initiate Corporate Insolvency Resolution Process (CIRP) under Section 9 of the Insolvency and Bankruptcy Code, 2016. Issue-wise Detailed Analysis: 1. Default on Payment: The Operational Creditor, Jindal Oil & Fats Limited, claimed that the Corporate Debtor, Isha Global Private Limited, failed to clear a debt of ?6,49,94,661/- for the supply of Crude Palm Oil under two High Seas Sale Agreements dated 26.10.2017 and 09.12.2017. Despite repeated follow-ups, only partial payments amounting to ?3,90,18,248/- were made by the Corporate Debtor. The Operational Creditor issued a demand notice on 28.01.2021 under Section 8 of the Insolvency and Bankruptcy Code, 2016, which was denied by the Corporate Debtor on 04.02.2021, citing deteriorated quality of goods supplied. 2. Pre-existing Dispute: The Corporate Debtor argued that there was a pre-existing dispute regarding the quality of the Crude Palm Oil supplied. Correspondences dated 09.01.2019 and 31.01.2019 indicated complaints about the deteriorated quality of goods. The Operational Creditor had acknowledged these complaints and assured to take up the issue with the supplier. The matter was also referred to arbitration, where both parties filed claims and counterclaims. The Sole Arbitrator dismissed the claims as premature, stating that the Operational Creditor must exhaust all legal remedies with the supplier first. The Tribunal noted that the communications and arbitration proceedings established the existence of a dispute prior to the issuance of the demand notice. This was further supported by the Operational Creditor's own letter dated 31.01.2019, acknowledging the complaint about the quality of the goods and promising to address it with the supplier. 3. Entitlement to Initiate CIRP: The Tribunal referred to the Supreme Court's decision in "Mobilox Innovations Pvt. Ltd. Vs. Kirusa Software (P.) Limited," emphasizing that for an application under Section 9 of the Insolvency and Bankruptcy Code, 2016, the existence of a dispute must be pre-existing, i.e., before the receipt of the demand notice. The Tribunal concluded that the dispute between the parties existed before the issuance of the demand notice on 28.01.2021. Given the pre-existing dispute, the Tribunal determined that the application for initiating CIRP under Section 9 of the Insolvency and Bankruptcy Code, 2016, was not maintainable. Consequently, the Tribunal dismissed the application. Conclusion: The Tribunal dismissed the application filed by the Operational Creditor to initiate CIRP against the Corporate Debtor due to the existence of a pre-existing dispute regarding the quality of the goods supplied, which was evident from the communications and arbitration proceedings between the parties.
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