2018 (8) TMI 446 - Tri - Insolvency and Bankruptcy

Corporate insolvency process - application filed under Section 9 of the Insolvency and Bankruptcy Code, 2016 - pre-existing dispute - Held that - The defense put up is not a mere sham or illusory and coupled in addition with the proceedings before the criminal court pending ever since 2012 clearly establishes that the dispute is of such a nature as between the parties which cannot be decided in a summary manner. In this connection, this Tribunal is also fortified by the decision of Hon ble NCLAT rendered in A.D. Electro Steel Co. Pvt. Ltd. v. Anil Steel in Company Appeal (AT) (Insolvency) 2017 (11) TMI 890 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI in which it has been held that reply to a notice under Section 138 of Negotiable Instruments Act, 1881 prior to the filing of application can be considered as a pre-existing dispute. Application dismissed.

Issues Involved:
1. Barred by Limitation
2. Non-disclosure of Material Facts
3. Pre-existing Dispute
4. Receipt of Debit Notes
5. Validity of Defense Raised by Corporate Debtor (CD)

Analysis:

1. Barred by Limitation:
The Corporate Debtor (CD) argued that the claim made by the Operational Creditor (OC) is barred by limitation as the invoices pertain to the period more than three years prior to the filing of the petition. The OC countered this by stating that the criminal proceedings initiated in 2012 for dishonor of cheques should be considered to save the limitation period. The Tribunal noted that the OC had not initiated any civil proceedings for recovery of dues for over six years, and the criminal proceedings could not be equated to civil proceedings. However, the Tribunal deferred a final decision on this issue, citing the pending decision of the Hon'ble Supreme Court on the applicability of the Limitation Act under IBC, 2016.

2. Non-disclosure of Material Facts:
The CD contended that the OC did not disclose all material facts, specifically omitting one of the three purchase orders dated 13.10.2010. The OC argued that this purchase order was a separate transaction and not relevant to the current claim. The Tribunal did not find sufficient grounds to dismiss the petition solely based on this non-disclosure, as the OC maintained that the omitted purchase order was independent of the transactions under dispute.

3. Pre-existing Dispute:
The CD claimed that there was a pre-existing dispute regarding defective supplies and delays, supported by email communications from 2012 and debit notes issued in 2015. The OC denied receiving any debit notes and argued that the CD’s claims were fabricated. The Tribunal found that the email communications and the issuance of debit notes indicated a pre-existing dispute. The Tribunal emphasized that the nature of the dispute could not be resolved summarily and required a more detailed examination.

4. Receipt of Debit Notes:
The CD provided evidence that debit notes were dispatched to the OC in 2015, which the OC denied receiving. The Tribunal examined the dispatch register and speed post receipts, concluding that the debit notes were likely received by the OC. This further supported the existence of a pre-existing dispute.

5. Validity of Defense Raised by Corporate Debtor (CD):
The Tribunal considered whether the defense raised by the CD was a sham or illusory. Referring to the Mobilox Innovations (P.) Ltd. v. Kirusa Software (P.) Ltd. case, the Tribunal concluded that the defense was not sham or illusory but substantial. The Tribunal noted that the ongoing criminal proceedings since 2012 and the email communications from 2012 indicated that the dispute was genuine and pre-existing.

Conclusion:
The Tribunal dismissed the application filed by the OC seeking to initiate the Corporate Insolvent Resolution Process (CIRP) against the CD. The Tribunal found that there was a pre-existing dispute between the parties, and the defense raised by the CD was substantial and not merely an afterthought. The application was dismissed without costs.

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