2019 (3) TMI 123 - Tri - Insolvency and Bankruptcy

Corporate Insolvency Resolution Process (CIRP) - existence of dispute - HELD THAT - Corporate Debtor has communicated the issue of poor quality of goods to the Petitioner on 28.06.2014. The issue of poor quality of goods supplied was again raised by the Corporate Debtor in its letter dated 28.07.2014. In the letter of the Corporate Debtor dated 19.09.2014 it has again communicated its inability to pay the outstanding amount due to the poor quality of the goods supplied and that it was assured a compensatory deduction of 25/MT by Glints in lieu of the loss caused. As demanded the deduction of 10% advance that it has paid from the total outstanding amount. The same were repeatedly communicated to the Petitioner by the Corporate Debtor vide its letter dated 19.11.2014, 02.12.2014 and in its reply to the Demand Notice dated 04.01.2018. The letter of the Petitioner dated 23.03.2015 communicating the settlement terms to the Corporate Debtor clearly mentions that it has note of the continuous denial by the Corporate Debtor of any obligation towards the Petitioner against the sale invoice. Argument of the Petitioner that it is not concerned with any alleged issues with regard to the quality of goods and all such issues, if exists, are between Glints and the Corporate Debtor and ought to be resolved between them is not tenable. We are of the opinion that there exists a dispute with regard to the alleged unpaid operational debt which is supported by documents and the operational creditor had notice of the same before the date of the Demand Notice. We hereby reject this petition as under section 9(5)(2)(d).

Summary

Issues:
Petition filed under section 9 of Insolvency & Bankruptcy Code, 2016 by Credit Suisse AG against Corporate Debtor for default in payment. Dispute over the amount claimed due to poor quality of goods supplied and deductions sought by Corporate Debtor.

Analysis:
1. The Petitioner, an Operational Creditor, filed a petition under section 9 of IBC against the Corporate Debtor, Crest Steel & Power Private Limited, for defaulting on a payment of $1,453,228.40. The Petitioner provided credit facility to Glints Global General Trading LLC, and subsequently, Glints entered into a sales transaction with the Corporate Debtor for the supply of goods.

2. The Corporate Debtor raised concerns about the quality of goods supplied, citing delays in payment from their customer due to quality issues. The Petitioner sent multiple communications demanding payment, while the Corporate Debtor acknowledged the debt but disputed the amount due to quality concerns.

3. The Corporate Debtor communicated its inability to pay the outstanding amount due to poor quality of goods supplied and demanded deductions for advance payments and compensation for losses. The Petitioner argued that as an assignee of the operational debt, it is not concerned with quality issues between Glints and the Corporate Debtor.

4. The Tribunal, referring to established legal precedents, found that a dispute existed regarding the alleged unpaid operational debt, supported by documents and communications between the parties. The Tribunal concluded that the dispute was not a patently feeble legal argument and, therefore, rejected the petition under section 9(5)(2)(d) of IBC.

5. The judgment highlighted the importance of examining the merits of a dispute in insolvency cases and emphasized the need for clear communication and evidence to support claims. The Registry was directed to communicate the order to both parties promptly.

This detailed analysis of the judgment provides a comprehensive overview of the legal issues, arguments presented by both parties, and the Tribunal's decision based on the evidence and legal principles involved.