2022 (1) TMI 403 - AT - Insolvency and Bankruptcy

CIRP proceedings - seeking payment of unpaid operational debt - Pre-existing dispute - grievance of the Appellant is that the First Respondent had clearly failed to make refunds even after accepting each liability, which had resulted in filing of the Application under Section 9 of the I B Code for initiating CIRP - scope and ambit of dispute - HELD THAT - In the instant case, the First Respondent/Operational Debtor has come out with the plea that 1476.36 MT of coal was supplied to the Appellant/Operational Creditor based on the Invoices and Ledger of the Appellant though the Agreement was towards the supply of 10000 MT of coal. Hence, the balance quantity is equal to 8523. 64 MT as claimed by the First Respondent. Therefore, the First Respondent/Operational Debtor rebuts the stand of the Appellant in the instant Appeal and in rejoinder that balance 7600 MT of Coal was sold by the First Respond without the approval of the First Respondent and in this regard, there is enough force, in the stand taken on behalf of the First Respondent. Dispute - HELD THAT - The dispute as defined in Section 5 (6) of the I BC is not to be restricted to the pending lis or proceedings within the limited purview of Suit or Arbitration proceedings and the term includes should be read as means and includes including the proceedings initiated or pending before Consumer Court, Tribunal, Labour Court or Mediation, Conciliation etc. Ambit of dispute - HELD THAT - The Adjudicating Authority under the I B Code is required to examine prior to the admission or rejection of an Application as per Section 9 of the Code as to whether the Dispute projected by the Corporate Debtor qualifies as a Dispute as per Section 5(6) of the Code and whether Notice of Dispute given by the Corporate Debtor satisfies the conditions enumerated in Section 8 (2) of the Code. Pre-existing dispute - HELD THAT - It is the duty of the Adjudicating Authority to find out whether there is a plausible plea which necessitates more investigation and the dispute is not weak one or an assertion of facts unsupported by materials/evidence. If the Dispute truly exists in fact and not an imaginary or an illusory or spurious one, then, the Adjudicating Authority is bound to turn down the Application. Violation of agreement/contract - HELD THAT - In the instant case, between Appellant/First Respondent, there are Pre-Existing Disputes and they are quite tangible/substantial one and as such, the plausible contentions projected/raised by the parties to the present Appeal require further investigation and in short, the dispute is not to be determined by the Adjudicating Authority /Appellate Tribunal in a Summary Jurisdiction under I B Code. The Adjudicating Authority is not a Court of Law and the CIRP is not an adversial litigation. The Adjudicating Authority is not to decide the Application under I BC like a Money Claim under the I B Code. Viewed in that perspective, the Adjudicating Authority is not supposed to go into the aspect of dispute in a thread bare fashion or on merits. Appeal dismissed.

Summary

Issues Involved:
1. Pre-existing dispute between the parties.
2. Admissibility of the application under Section 9 of the IBC.
3. Violation of the agreement/contract and its implications.
4. Determination of the amount due and payable.

Issue-wise Detailed Analysis:

1. Pre-existing dispute between the parties:
The primary issue revolves around whether there was a pre-existing dispute between the parties before the demand notice was issued. The Adjudicating Authority observed that there were clear indications of a pre-existing dispute related to the quality and delivery of coal. The Operational Creditor (OC) refused to accept the coal due to alleged inferior quality and non-delivery through a specific vessel, which the Corporate Debtor (CD) countered by alleging the OC's failure to lift the coal and delayed payments. The Tribunal noted that these allegations and counter-allegations proved the existence of a pre-existing dispute.

2. Admissibility of the application under Section 9 of the IBC:
The Tribunal emphasized that for an application under Section 9 of the IBC to be admitted, there should not be any pre-existing dispute. The Tribunal referred to the Supreme Court's judgments in "Innoventive Industries Ltd. Vs. ICICI Bank" and "Mobilox Innovations Pvt. Ltd. Vs. Kirusa Software Pvt. Ltd." to highlight that the existence of a dispute, even if raised before the demand notice, is sufficient to reject the application. The Tribunal found that the dispute between the parties was genuine and not spurious, thus making the application inadmissible.

3. Violation of the agreement/contract and its implications:
The Tribunal discussed the alleged breach of the agreement dated 27.02.2019 between the parties. The OC claimed that the CD failed to deliver the agreed quantity of coal and did not refund the advance payment. However, the CD argued that the agreement was inconclusive and pointed out that the OC had not fulfilled its obligations. The Tribunal noted that the determination of whether there was a breach of contract requires a detailed investigation, which cannot be conducted in a summary proceeding under the IBC.

4. Determination of the amount due and payable:
The OC claimed an outstanding amount of ?2,22,38,286/- including interest. The CD, however, contested this amount, stating that it had supplied 1476.36 MT of coal and that the remaining quantity was sold due to the OC's failure to lift it. The Tribunal observed that the calculation of the exact amount due involved complex issues that needed to be resolved in a proper legal forum, not in a summary proceeding under the IBC.

Conclusion:
The Tribunal concluded that the application under Section 9 of the IBC was rightly dismissed by the Adjudicating Authority due to the existence of a pre-existing dispute. The Tribunal emphasized that the IBC is not meant for resolving contractual disputes and that such matters should be adjudicated in appropriate legal forums. The appeal was dismissed without costs, and the application for exemption to file a certified copy of the impugned order was closed.