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2022 (9) TMI 538 - Tri - Insolvency and BankruptcyMaintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - pre-existing disputes or not - HELD THAT - The Corporate Debtor has produced on records letters dated 2nd March 2017, 2nd June 2017 and 20.06.2018 which clearly show that the Corporate Debtor had raised the said issues regarding the quality of goods supplied much prior to the issuance of the demand notice dated 19th December 2018 by the Operational Creditors. The Corporate Debtor has also notified the Operational Creditors of the pre-existing disputes vis a vis the abovementioned letters in his reply dated 1st January 2019 to the said Demand. In the reply to the second demand notice dated 8th March 2019, the Corporate Debtor has referred to its earlier reply being reply dated 1st January 2019, which mentions such disputes. In the instant matter, not only has the Corporate Debtor established that there were pre-existing disputes and that the Operational Creditors had notice of such disputes, but also, the chain of emails between the parties concerned as produced between pages 551 to 563 of the petition indicates that there was no consensus between the parties regarding the quantum of the debt owed to the Operational Creditors and the losses suffered by the Corporate Debtor on account of poor quality of supplies and multiple attempts were made to resolve the said issues. The correspondence between the parties along with the three letters issued by the Corporate Debtor further indicate that the said disputes were not mere feeble legal arguments or assertions of fact unsupported by evidence. The Operational Creditors, in order to recover its dues from the Corporate Debtor, has already filed a civil suit and thereafter execution proceedings for the decree awarded therein - this Adjudicating Authority is satisfied that the instant petition is liable to be rejected. Petition dismissed.
Issues Involved:
1. Existence of Debt and Default 2. Pre-existing Disputes 3. Limitation Period 4. Compliance with Insolvency and Bankruptcy Code Provisions 5. Suppression of Material Facts 6. Quality of Goods Supplied 7. Parallel Civil Proceedings Detailed Analysis: 1. Existence of Debt and Default The Operational Creditors claimed a total amount of Rs. 8,75,22,385/- due to default by the Corporate Debtor, which occurred on 18.02.2016. The Operational Creditors provided materials (HR Coils/sheets/plates) to the Corporate Debtor and raised 64 invoices between 18.01.2016 to 08.05.2018. The Corporate Debtor acknowledged receipt of the goods without any objections initially but later defaulted on payments. 2. Pre-existing Disputes The Corporate Debtor argued that there were serious pre-existing disputes regarding the quality of goods supplied, which were raised through letters dated 2nd March 2017, 2nd June 2017, and 20th June 2018, well before the demand notice dated 19th December 2018. The Tribunal referred to the Supreme Court's decision in Mobilox Innovations Private Limited vs. Kirusa Software Private Limited, which states that the existence of a dispute before the receipt of the demand notice can lead to the rejection of the insolvency application. 3. Limitation Period The Corporate Debtor contended that the claim was barred by limitation. However, the Tribunal did not specifically address this issue in the final analysis, focusing instead on the pre-existing disputes. 4. Compliance with Insolvency and Bankruptcy Code Provisions The Corporate Debtor argued that the application was not filed in compliance with the provisions of the Code and that the Operational Creditors had suppressed relevant documents that would establish the existence of disputes. The Tribunal found that the existence of pre-existing disputes was sufficient to reject the application. 5. Suppression of Material Facts The Corporate Debtor accused the Operational Creditors of suppressing material facts, including the existence of disputes and ongoing civil proceedings. The Tribunal noted that the Operational Creditors had already filed a civil suit for the recovery of dues and had not disclosed this adequately in the insolvency proceedings. 6. Quality of Goods Supplied The Corporate Debtor claimed that the goods supplied were of inferior quality, which affected their manufacturing process and caused financial losses. The Operational Creditors denied these allegations, stating that the goods were supplied with test certificates and that the Corporate Debtor had not raised any quality issues contemporaneously. The Tribunal found that the quality disputes could not be adjudicated in a summary proceeding under the Code. 7. Parallel Civil Proceedings The Operational Creditors had already filed a civil suit for the recovery of the price of goods sold and delivered, which was decreed in their favor. However, the Corporate Debtor had filed appeals and review petitions against the decree. The Tribunal noted that the existence of these parallel proceedings indicated genuine pre-existing disputes. Conclusion: The Tribunal dismissed the insolvency petition filed by the Operational Creditors, citing pre-existing disputes and the existence of parallel civil proceedings. The Operational Creditors were advised to pursue their remedies under other laws. The Tribunal emphasized that the purpose of the Insolvency and Bankruptcy Code is not to adjudicate on disputed claims but to resolve genuine insolvency issues.
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