2022 (5) TMI 913 - 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, before issuance of SCN or not - HELD THAT - On perusal of the records it is found that the corporate debtor has brought on record letters dated 08.05.2015, 15.10.2016, 16.01.2017, 24.07.2018 and email dated 09.12.2016 sent to the applicant - right from the year 2015 the corporate debtor has been complaining about the poor quality of goods supplied by the applicant. The corporate debtor has brought on record documents to substantiate its arguments that before issuance of demand notice dated 24.02.2020, there were genuine disputes with regard to quality and quantity of the goods supplied by the applicant. Hon'ble Supreme Court in the matter of MOBILOX INNOVATIONS PRIVATE LIMITED VERSUS KIRUSA SOFTWARE PRIVATE LIMITED 2017 (9) TMI 1270 - SUPREME COURT that in case of genuine dispute raised by the corporate debtor, the application cannot be admitted. Application dismissed.

Summary

Issues:
- Application filed under Section 9 of Insolvency and Bankruptcy Code, 2016 for initiating Corporate Insolvency process against a limited company.
- Dispute regarding outstanding payment for goods supplied.
- Authenticity of invoices and quality of goods supplied.
- Timeliness of the application and jurisdiction of the Tribunal.

Analysis:
1. The application was filed under Section 9 of the Insolvency and Bankruptcy Code, 2016, seeking to initiate the Corporate Insolvency process against the respondent, a limited company. The applicant, an operational creditor, claimed that the respondent owed a significant amount for goods supplied, with outstanding dues and interest. The respondent disputed the debt, citing prior disputes regarding the quality of materials supplied and alleged discrepancies in invoices.

2. The dispute primarily revolved around the authenticity of the invoices and the quality of goods supplied. The applicant maintained that the respondent had outstanding payments for numerous invoices, which the respondent acknowledged in its ledger accounts. However, the respondent contended that there were genuine disputes regarding the quality and quantity of materials supplied, as evidenced by correspondences dating back to 2015 highlighting concerns about substandard materials.

3. The respondent raised various objections, including the timeliness of the application, jurisdictional issues, and the lack of admission of debt. The respondent argued that the application was defective, incomplete, and time-barred. Moreover, the respondent emphasized prior disputes regarding the quality of goods supplied, asserting that the applicant failed to address these concerns adequately.

4. The Tribunal carefully examined the submissions, documents, and precedents cited by both parties. Citing the judgment of the Hon'ble Supreme Court in a similar case, the Tribunal emphasized the importance of genuine disputes in admitting insolvency applications. Considering the evidence presented, including the historical complaints about the quality of materials supplied, the Tribunal concluded that there were valid disputes that warranted further investigation. Consequently, the Tribunal dismissed the application, ruling that it did not meet the criteria for admission under the Insolvency and Bankruptcy Code.

5. In conclusion, the Tribunal rejected the application for initiating the Corporate Insolvency process against the respondent. The decision was based on the existence of genuine disputes regarding the quality and quantity of goods supplied, as highlighted in the historical correspondences between the parties. The ruling underscored the necessity of addressing valid disputes before admitting insolvency applications, in line with legal precedents and the principles of natural justice.