2022 (7) TMI 1246 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - whether there is a pre-existing dispute or not? - HELD THAT - It is not in dispute that the logistic services were provided to the Corporate Debtor and the Operational Creditor raised invoices of Rs. 8,72,582/-. But, the main dispute in the present matter is whether there is a pre-existing dispute or not? As per clauses 13 17 of the Principal Agreement, the Operational Creditor has indemnified the Corporate Debtor for the payment of loss or damage of the consignments during the transit. However, both parties have amended the terms of the Principal Agreement by signing an Addendum dated 09.10.2017 wherein clause 3 states that in no case Operational Creditor shall be responsible for any financial liability if the Insurance Company (Insurance Company -NSI Infinium Global Pvt. Ltd.) rejects the CoF and refuse to pay any amount against the damage. It is noted that as per the list of issued CoF produced on record by the Corporate Debtor, the Operational Creditor had issued more than 100 CoFs from 25.08.2017 to 29.06.2019, 9 CoFs were issued by the Operational Creditor for the loss of shipments, and rests are issued for the damaged shipment during the transit. Copies of 21 CoFs issued by the Operational Creditor from 17.07.2018 to 13.12.2018 are also placed on record by the Corporate Debtor, out of 21 CoFs, 3 were issued for the loss of shipments during the transit. The Corporate Debtor sent a number of emails from 01.11.2017 to 24.08.2019 to the Operational Creditor for damaged/loss of goods during the transit by the Operational Creditor which was prior to the issuance of the demand notice dated 07.11.2019. The Hon'ble Supreme Court of India in the case of MOBILOX INNOVATIONS PRIVATE LIMITED VERSUS KIRUSA SOFTWARE PRIVATE LIMITED 2017 (9) TMI 1270 - SUPREME COURT has held that so long as a dispute truly exists in fact and is not spurious, hypothetical or illusory, the Adjudicating Authority has to reject the application. If it is considered that the Operational Creditor is not liable for damage of goods in view of the provisions of addendum dated 09.10.2017, but it is liable for loss of goods which have duly intimated by Corporate Debtor to the Operational Creditor prior to the issuance of Demand Notice. Moreover, whether the terms and conditions of the Logistics Agreement executed between the parties supersede the provisions of the Carriage by Road Act, 2007 or not? can not be adjudicated in an application filed under section 9 of the IB Code. There is a preexisting dispute for the supplying of services by the operational creditor - Application dismissed.

Summary

Issues:
1. Initiation of Corporate Insolvency Resolution Process under Section 9 of the Insolvency and Bankruptcy Code, 2016.
2. Existence of a pre-existing dispute between the Operational Creditor and the Corporate Debtor regarding payment for logistic services.

Analysis:
1. The Operational Creditor filed an application under Section 9 of the IB Code against the Corporate Debtor for defaulting on payment of Rs. 8,72,582 along with interest. The Operational Creditor provided services and raised invoices, but the Corporate Debtor failed to pay despite reminders and a demand notice. The Corporate Debtor claimed a pre-existing dispute due to alleged deficiencies in services provided by the Operational Creditor.

2. The Corporate Debtor contended that there was no amount due and raised issues regarding deficiencies in services leading to financial losses. The Corporate Debtor also highlighted clauses in the Logistics Agreement and Addendum limiting the Operational Creditor's liability. The Corporate Debtor argued that the Operational Creditor's reliance on interest terms from invoices was not valid and that it had made substantial payments to the Operational Creditor.

3. The Tribunal examined the agreements between the parties, specifically the Principal Agreement and Addendum dated 09.10.2017, which clarified the responsibilities and liabilities of the Operational Creditor in case of damage or loss during transit. The Tribunal noted the issuance of Certificates of Facts (CoFs) by the Operational Creditor for damaged or lost shipments. The Tribunal also considered the communication between the parties regarding damaged goods prior to the demand notice.

4. Referring to the Supreme Court's decision in "Mobilox Innovation Private Limited versus Kirusa Software Private Limited," the Tribunal emphasized that a genuine dispute must exist for the application to be accepted. Considering the provisions of the agreements and the prior communication regarding damaged goods, the Tribunal concluded that a pre-existing dispute existed between the parties regarding the services provided.

5. Consequently, the Tribunal rejected the application under Section 9 of the IB Code, citing the presence of a pre-existing dispute. The Tribunal did not award costs to either party. The judgment highlighted the importance of examining contractual terms and prior communications in determining the existence of disputes in insolvency proceedings.