2018 (9) TMI 680 - Tri - Insolvency and Bankruptcy

Initiation of Corporate Insolvency Resolution Process - whether the corporate debtor succeeds in establishing pre-existing disputes as alleged in the reply affidavit? - proof of compliance as required under Section 9(5) of the Code - Held that - Borne in mind the principle laid down in the Mobilox Innovations Private Limited -Versus- Kirusa Software Private Limited 2017 (9) TMI 1270 - SUPREME COURT OF INDIA it appears to me that the dispute regarding the quality of goods raised on the side of the corporate debtor is a genuine pre-existing dispute. The corporate debtor succeeds in proving that the dispute was existing prior to the issuance of the demand notice. What is the amount liable to be paid by the corporate debtor is yet to be determined after resolving the disputes in between the corporate debtor and the operational creditor. In such view of the matter we can come to a right conclusion that the operational creditor failed in proving that the demand notice has been delivered to the corporate debtor and that the corporate debtor succeeds in establishing existence of a dispute between the corporate debtor and operational creditor regarding the quality of the goods and regarding the amount liable to be paid and, therefore, the application is liable to be rejected u/s. 9(5)(i)(a) and (d) of the I & B Code. Application rejected.

Summary

Issues Involved:
1. Maintainability of the application under Section 9 of the Insolvency and Bankruptcy Code, 2016.
2. Proof of delivery of the demand notice as per Section 8(1) of the I&B Code.
3. Existence of a pre-existing dispute regarding the quality of goods supplied.

Issue-wise Detailed Analysis:

1. Maintainability of the Application:
The operational creditor filed an application under Section 9 of the Insolvency and Bankruptcy Code, 2016, to initiate the Corporate Insolvency Resolution Process (CIRP) against the corporate debtor for non-payment of ?3,07,21,702, including interest. The corporate debtor contested the application, arguing it was not maintainable due to suppression of material facts and pre-existing disputes over the quality of goods supplied.

2. Proof of Delivery of Demand Notice:
The corporate debtor argued that the demand notice was not received, and the operational creditor failed to prove statutory compliance under Section 8(1) of the I&B Code. The operational creditor's track report did not definitively prove delivery of the notice. The Tribunal noted that proof of delivery is a critical requirement under Section 9(3)(a) and (5) of the I&B Code. The operational creditor's inability to provide supporting evidence from the Postal Authority led the Tribunal to conclude that the operational creditor failed to prove compliance with Section 9(5).

3. Existence of Pre-existing Dispute:
The corporate debtor claimed that the goods supplied were of poor quality, leading to disputes and differences between the parties. The operational creditor admitted the quality issue and agreed to a waiver of ?1.76 Crores, with the corporate debtor liable for ?1 Crore, conditional on cheque payments. The cheques were dishonored, leading to further disputes. The Tribunal found the email correspondences between the parties confirmed the pre-existing dispute regarding the quality of goods and the amount payable. The Tribunal referenced the principle laid down in Mobilox Innovations Private Limited vs. Kirusa Software Private Limited, confirming that the dispute was genuine and pre-existing.

Conclusion:
The Tribunal concluded that the operational creditor failed to prove the delivery of the demand notice and that there was a pre-existing dispute regarding the quality of goods and the amount payable. Consequently, the application was rejected under Section 9(5)(i)(a) and (d) of the I&B Code. The parties were directed to bear their respective costs.