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2021 (5) TMI 113 - Tri - Insolvency and BankruptcyMaintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - existence of debt and dispute or not before issuance of demand notice - HELD THAT - A conjoint reading of all the e-mails exchanged between the parties as well as the respective invoices supra, it comes to the fore that there exist a dispute between the parties before the issuance of the Demand Notice and the said dispute is still in existence. The Hon'ble Supreme Court in MOBILOX INNOVATIONS PRIVATE LIMITED VERSUS KIRUSA SOFTWARE PRIVATE LIMITED 2017 (9) TMI 1270 - SUPREME COURT held that the 'existence of dispute' and/or the suit or arbitration proceeding must be pre-existing i.e. it must exist before the receipt of the Demand Notice or Invoice as the case may be. Thus, it is evident that there is a genuine dispute between the parties and the defence raised by the Corporate Debtor on the grounds of existence of a dispute is real and not spurious, hypothetical, illusory or misconceived - Application dismissed.
Issues:
Application under Section 9 of I & B Code, 2016 for CIRP initiation against Corporate Debtor. Analysis: 1. The Operational Creditors filed an application under Section 9 of the Insolvency and Bankruptcy Code, 2016, seeking to initiate the Corporate Insolvency Resolution Process against the Corporate Debtor. The total debt due from the Corporate Debtor to the Operational Creditors was USD 326,725, excluding interest. The Operational Creditor No. 1 supplied high carbon ferrochrome materials to the Corporate Debtor as per the Sales Confirmation contracts, which the Corporate Debtor accepted without demur. 2. Despite repeated assurances, the Corporate Debtor defaulted in making payments, leading the Operational Creditor No. 1 to seek indemnification from Operational Creditor No. 2. The Operational Creditor No. 2 indemnified the outstanding unpaid invoices, and the Operational Creditor No. 1 assigned all rights to recover the loss amount due to non-payment by the Corporate Debtor to Operational Creditor No. 2. 3. The Corporate Debtor raised disputes regarding the invoices, claiming a preexisting dispute, particularly concerning the quality and type of materials supplied. The Operational Creditors argued that the materials supplied were as per the Sales Confirmation contracts and that the Corporate Debtor had used the materials without dispute within the statutory period. 4. The Tribunal noted the existence of a genuine dispute between the parties before the issuance of the Demand Notice, as required under the Insolvency and Bankruptcy Code. Citing the Supreme Court's ruling in Mobilox Innovations Pvt. Ltd. Vs. Kirusa Software (P) Limited, the Tribunal emphasized that the existence of a dispute must be preexisting before the receipt of the Demand Notice or Invoice. The Tribunal found the Corporate Debtor's defense on the grounds of a genuine dispute to be valid and not spurious. 5. Consequently, considering the genuine dispute between the parties, the Tribunal dismissed the application under Section 9 of the I & B Code, 2016, as the defense raised by the Corporate Debtor regarding the preexisting dispute was found to be real and not hypothetical or misconceived. The application was dismissed, and no costs were awarded. This detailed analysis covers the issues involved in the legal judgment, highlighting the key arguments, disputes, and the Tribunal's decision based on the evidence and legal principles presented during the proceedings.
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