2021 (9) TMI 432 - AT - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - HELD THAT - Learned Counsel for the Respondent has fairly conceded that the observations in Paras 29 and 34 of the Impugned Order do touch upon the merits of the case and that he has no objection to the same being expunged. Keeping in view the facts and circumstances of the case and the observation made in these two Paras, we are of the considered view that the aforenoted Paras 29 and 34 of the Impugned Order be expunged and the same is ordered. We observe that we have not gone into merits of the matter with respect to any Pre-Existing Dispute or otherwise. This Appeal is disposed of expunging Paras 29 and 34 from the Impugned Order dated 04.01.2021.

Summary

Issues:
1. Dismissal of Section 9 Application under the Insolvency and Bankruptcy Code.
2. Existence of pre-existing dispute between Operational Creditor and Corporate Debtor.
3. Observations made by the Adjudicating Authority regarding short supply of coal and penalty payment.
4. Request for expunging certain paragraphs from the Impugned Order.

Analysis:
1. The judgment revolves around the dismissal of a Section 9 Application under the Insolvency and Bankruptcy Code by the Adjudicating Authority. The Operational Creditor filed an appeal against the Order dated 04.01.2021, claiming that the Corporate Debtor failed to pay the due amount under the Contract Agreement. The Adjudicating Authority dismissed the application citing a pre-existing dispute between the parties as a reason for non-payment.

2. The crux of the matter lies in determining the existence of a pre-existing dispute between the Operational Creditor and the Corporate Debtor. The Corporate Debtor alleged a shortage of coal supply and disputed the amounts claimed by the Operational Creditor. Various correspondences and responses from both parties indicated conflicting claims regarding the payment obligations, leading to a deadlock in resolving the financial dispute.

3. The Adjudicating Authority's observations on the short supply of coal and penalty payment played a significant role in the judgment. The Authority highlighted clauses from the Purchase Order, emphasizing the penalty for short supplies of coal. The Operational Creditor's failure to provide necessary documentation, such as the Purchase Order, and the Corporate Debtor's responses regarding penalty payments added complexity to the case.

4. Additionally, a request was made to expunge specific paragraphs from the Impugned Order that touched upon the merits of the case. The Appellate Tribunal ordered the removal of these paragraphs to prevent any interference with potential arbitration proceedings. This decision aimed to maintain neutrality and avoid prejudicing either party based on the initial observations made by the Adjudicating Authority.

In conclusion, the judgment delves into the intricacies of financial disputes, the importance of clear documentation, and the impact of pre-existing disputes on insolvency proceedings. The expunging of certain paragraphs reflects a cautious approach to ensure fairness and impartiality in potential future legal actions.