2021 (5) TMI 310 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - HELD THAT - In the Purchase Order dated 19.10.2018 enclosed at Page 13 of the application, it is clear that the Respondent placed a Purchase Order for a sum of ₹ 62,31,780/-. On perusal of the Purchase Order, it clearly shows that there is no Clause mentioned in respect of interest for the delayed payments - As per the Purchase Order also, it was mutually agreed between the parties that the materials plus or minus 5% shall be adjusted after transactions. The Applicant failed to quantify the debt amount and default . Thus, it is clear that there is a pre-existing dispute between the parties - In the matter of MOBILOX INNOVATIONS PRIVATE LIMITED VERSUS KIRUSA SOFTWARE PRIVATE LIMITED 2017 (9) TMI 1270 - SUPREME COURT , the Hon'ble Apex Court held that all that the Adjudicating Authority is to see at this stage is whether there is a plausible contention which requires further investigation and that the dispute is not a patently feeble legal argument or an assertion of fact unsupported by evidence. It is important to separate the grain from the chaff and to reject a spurious defence which is a mere bluster. Application dismissed.

Summary

Issues:
1. Application filed under Section 9 of the Insolvency & Bankruptcy Code, 2016 seeking initiation of Corporate Insolvency Resolution Process.
2. Dispute regarding non-payment between Operational Creditor and Corporate Debtor.
3. Existence of pre-existing dispute between the parties affecting the admission of the application.

Analysis:
1. The judgment pertains to an application filed under Section 9 of the Insolvency & Bankruptcy Code, 2016 by an Operational Creditor against a Corporate Debtor seeking initiation of Corporate Insolvency Resolution Process. The Operational Creditor alleged non-payment by the Corporate Debtor for supplied materials, leading to a total claim of ?20,13,146. The Corporate Debtor contested these claims, citing ongoing business transactions since 2008 and disputing the quantity supplied, as well as asserting an agreement for return of excess goods. The Purchase Order and related documents formed crucial evidence in this dispute.

2. The key contention revolved around the existence of a pre-existing dispute between the parties. The Respondent Corporate Debtor argued that discrepancies in quantity supplied were addressed through return of excess goods, as agreed upon in their business dealings. The Applicant Operational Creditor failed to quantify the debt amount accurately, leading to a lack of clarity regarding the actual default. The Tribunal referred to the case law of Mobilox Innovations Pvt. Ltd. vs. Kirusa Software Pvt. Ltd., emphasizing the necessity of a genuine dispute notice to the Operational Creditor before admitting such insolvency applications. The absence of a clear debt amount and the presence of a pre-existing dispute were crucial factors in dismissing the application.

3. Considering the submissions from both parties, the Tribunal carefully analyzed the Purchase Order terms, the alleged debt amount, and the documented communications between the parties. It was observed that the dispute regarding the quantity supplied and the return of excess goods created a genuine contention, indicating the presence of a pre-existing dispute that required further investigation. As per the legal precedent cited, the Tribunal dismissed the application, highlighting the importance of substantiated claims and genuine disputes in insolvency proceedings. The judgment underscores the significance of clear evidence and quantification of debt in insolvency applications to ensure fair adjudication and protection of the parties' rights.