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2022 (3) TMI 1222 - Tri - Insolvency and BankruptcyMaintainability 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 - The Corporate Debtor in their letter dated 10.01.2018 has categorically mentioned that the goods supplied by JSPL against back to back arrangement were of extremely substandard Quality. Further, their consent to pay the outstanding of JSPL was based on the condition that the goods to be supplied to them would be of agreed specification and quality' - Further, the Operational Creditor in their reply dated 29.01.2018 stated that they will cancel the back to back arrangements and shall make claims against JSPL and they also assured that the Corporate Debtor will have no liability in this regards. The defence is not spurious or plainly frivolous or vexatious. The dispute very much existed between the parties way before the demand notice sent by the Operational Creditor i.e., 06.08.2019 - Petition dismissed.
Issues Involved:
1. Maintainability of the application under Section 9 of the Insolvency and Bankruptcy Code, 2016. 2. Existence of operational debt and default. 3. Alleged suppression of facts and documents by the Operational Creditor. 4. Existence of a pre-existing dispute. 5. Failure to mention the date of default in the application. Issue-wise Detailed Analysis: 1. Maintainability of the Application under Section 9 of the Insolvency and Bankruptcy Code, 2016: The Corporate Debtor argued that the application filed by the Operational Creditor was not maintainable in law, and no operational debt was due. They contended that the application was barred by limitation and that the Petitioner lacked the locus standi to file the application or make any claims against the Corporate Debtor. 2. Existence of Operational Debt and Default: The Operational Creditor claimed that they provided transportation/freight services to Jindal Steel and Power Limited (JSPL), and due to an internal arrangement between JSPL and the Corporate Debtor, the dues were transferred to the Corporate Debtor. The Corporate Debtor accepted this transfer and made partial payments but failed to clear the outstanding balance. The Operational Creditor also mentioned that cheques issued by the Corporate Debtor were dishonored due to insufficient funds. The Corporate Debtor, however, denied any default and claimed that the accounts were fully and finally settled. 3. Alleged Suppression of Facts and Documents by the Operational Creditor: The Corporate Debtor accused the Operational Creditor of suppressing a letter dated 10.01.2018, in which the Corporate Debtor had withdrawn their consent to have the outstanding dues transferred and called for the return of their cheques. The Operational Creditor, in response, had agreed to cancel the back-to-back arrangements and make claims against JSPL, thereby absolving the Corporate Debtor of any liability. 4. Existence of a Pre-existing Dispute: The Corporate Debtor argued that there was a pre-existing dispute regarding the quality of goods supplied by JSPL, which was a condition for their consent to pay the outstanding dues. This dispute was communicated to the Operational Creditor in the letter dated 10.01.2018. The Operational Creditor's reply dated 29.01.2018, acknowledging the cancellation of the back-to-back arrangements, indicated that the dispute existed before the demand notice was issued on 06.08.2019. The Tribunal relied on the Supreme Court's judgment in Innoventive Industries Ltd. v. ICICI Bank and Anr. and Mobilox Innovations Pvt. Ltd. Vs. Kirusa Software (P.) Limited to emphasize that the existence of a dispute must be pre-existing and not a patently feeble legal argument. 5. Failure to Mention the Date of Default in the Application: The Tribunal noted that the Operational Creditor failed to mention the date of default in the application, which is a mandatory condition under Section 9 of the Insolvency and Bankruptcy Code. This omission further weakened the case of the Operational Creditor. Conclusion: The Tribunal dismissed the petition, stating that the defence raised by the Corporate Debtor was not spurious, frivolous, or vexatious, and a pre-existing dispute existed between the parties before the demand notice was issued. Additionally, the Operational Creditor failed to mention the date of default in the application, leading to the dismissal of the petition. Order: The petition being C.P.(IB) No. 1628/KB/2019 was dismissed. A certified copy of the order may be issued upon compliance with requisite formalities. Files were consigned to record, and CP(IB) No. 43/7/AMR/2021 was dismissed via separate orders. Order pronounced on 21st March 2022.
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