2022 (2) TMI 142 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - High Sea Sale Contract - Operational Creditors - existence of debt and dispute or not - identity of the applicant - principles of res-judicata - HELD THAT - The Doctrine of Constructive Res Judicata does not apply to the issues/points or any 'lis' between parties that has not been decided previously, and despite being pleaded, has not been considered by a court/tribunal and expressly dealt with in the order so passed. In Indian law, the principle has been recognized in Section 11 of the Code of Civil Procedure 1908 - while res judicata may have been codified in Section 11, that does not bar its application to other judicial proceedings, such as the one in the present case. In the present case, the applicant has intentionally withdrawn the application after the application has been served on other side, and that, if considered and decided by the Tribunal, the fate will be against the applicant. Moreover, the application was allowed to be withdrawn with costs of ₹ 25,000/- which itself shows that the Tribunal was ready to hear and dispose of the matter so that a final order can be passed. Smelling the outcome, the applicant withdrew the application and filed the present application - It is pertinent to state that the applicant did not obey the directions to pay costs instead he filed the present application, which is definitely hit by res judicata. Thereafter, after an extended period, the costs were paid. Whether the case is finally decided by the Tribunal does not arise, as the intention behind the withdrawal of the application is well known to both parties. Identity of the applicant - HELD THAT - On a verification of the records, it is seen that nowhere the applicant has put his signature, even though, while the High Sea Sale Contract was executed on 31.05.2017, the same person who, stated to have been filed this application has put his signature. Nowhere in the application, it is stated why the applicant could not sign and on whose presence the Left Thumb impression has been taken and that anybody has counter signed or attested the Left Thumb Impression of the applicant in the application - the applicant has not annexed Form No. NCLT 14 with the application. Hence, there is every reason to believe that this application has been filed without the actual knowledge or authority of the applicant, as rightly argued by the learned counsel for the Corporate Debtor. Pre-existing dispute or not - HELD THAT - The Corporate Debtor could establish the Sub-Section 6 of Section 5 of the Code to determine what 'dispute' is, and established that there is a pre-existing dispute between the parties in this matter regarding the quality of goods or services. There are no reason to order initiation of Corporate Insolvency Resolution Process against the Corporate Debtor - application dismissed.

Summary

Issues Involved:
1. Res judicata
2. Identity of the Applicant
3. Pre-existing Dispute

Issue-wise Detailed Analysis:

1. Res judicata:
The Corporate Debtor contended that the present application is barred by res judicata, as a previous application (CP(IB)/03/KOB/2021) filed by the same applicant through a Power of Attorney holder was dismissed. The Tribunal noted that the doctrine of res judicata, as codified in Section 11 of the Code of Civil Procedure, 1908, applies to prevent re-litigation of issues that have been adjudicated. However, the doctrine applies only when there has been a conscious adjudication of the issue on merits. The Tribunal found that the previous application was withdrawn with costs, indicating that the Tribunal was prepared to adjudicate the matter. The applicant's withdrawal of the application to avoid an unfavorable decision and subsequent filing of a new application on the same cause of action was deemed to be barred by res judicata.

2. Identity of the Applicant:
The Corporate Debtor questioned the identity of the applicant, noting that the current application was filed with a Left Thumb Impression instead of a signature, without any explanation or attestation. The Tribunal referenced Rule 128 of the NCLT Rules, 2016, which requires an affidavit for illiterate or visually challenged persons to be certified by an attester. The absence of Form No. NCLT 14, which certifies the affidavit was read, explained, or translated to the deponent, raised doubts about the authenticity and authority of the application. The Tribunal concluded that the application might have been filed without the actual knowledge or authority of the applicant.

3. Pre-existing Dispute:
The Corporate Debtor argued that there was a pre-existing dispute regarding the High Sea Sale Contract, which should bar the initiation of the Corporate Insolvency Resolution Process (CIRP). The Tribunal examined Section 5(6) of the Insolvency and Bankruptcy Code, 2016, which defines a dispute to include suits or arbitration proceedings related to the existence of the debt, quality of goods or services, or breach of representation or warranty. The Tribunal found that the Corporate Debtor had established a pre-existing dispute regarding the quality of goods supplied under the High Sea Sale Contract. The existence of this dispute was corroborated by multiple legal actions and caveats filed by the Corporate Debtor against the applicant.

Conclusion:
Based on the findings, the Tribunal dismissed the application for initiation of the Corporate Insolvency Resolution Process against the Corporate Debtor, citing the principles of res judicata, questionable identity of the applicant, and the existence of a pre-existing dispute. The application was deemed to be without merit and dismissed without costs.