2022 (11) TMI 567 - AT - Insolvency and Bankruptcy

Maintainability of petition - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - Notice of Dispute issued by the Corporate Debtor after receiving the Demand Notice - pre-existing dispute between the parties or not - HELD THAT - The Notice of Dispute issued by the Corporate Debtor after receiving the Demand Notice, which notice of dispute contains relevant facts indicating that there is pre-existing dispute. The Adjudicating Authority has rightly rejected the Application filed under Section 9 of the Code as per the provisions of the Code. Thus, no illegality has been committed by the Adjudicating Authority in rejecting the Section 9 Application - appeal dismissed.

Summary

Issues:
- Rejection of Section 9 Application based on pre-existing dispute between parties.

Analysis:
1. The Appellant, an Operational Creditor, filed an Appeal against the Order rejecting their Application under Section 9 of the Insolvency and Bankruptcy Code, 2016, due to a pre-existing dispute stated by the Adjudicating Authority.

2. The dispute arose from the supply of Crushed Iron Ore by the Appellant to the Respondent based on Purchase Orders. The Respondent disputed the amount claimed by the Appellant, citing issues with the quality of the supplied materials and issuing debit notes to adjust the due amount. The Respondent also highlighted that the alleged acknowledgment emails sent by a former employee were unauthorized and did not constitute an acknowledgment of debt.

3. The Appellant argued that only 8 out of 12 Purchase Orders were supplied as per the contract terms and that the Respondent's contentions regarding quality issues were baseless. The Appellant emphasized the acknowledgment emails as evidence of the debt owed.

4. The Adjudicating Authority considered the submissions and records. The Respondent refuted the Appellant's claims, mentioning the issuance of debit notes based on laboratory reports and full payment made against the supplied materials. The Respondent also highlighted the advance payment made for four unfulfilled purchase orders.

5. The Adjudicating Authority found a pre-existing dispute between the parties based on the detailed responses and evidence provided by the Respondent. The Authority rejected the Section 9 Application, concluding that no amount was due as per the records and that the dispute existed prior to the demand notice.

6. The Adjudicating Authority's decision was upheld, emphasizing the Notice of Dispute issued by the Respondent after receiving the Demand Notice, which clearly indicated the pre-existing dispute. The rejection of the Section 9 Application was deemed lawful and in line with the provisions of the Insolvency and Bankruptcy Code.

7. In conclusion, the Appeal was dismissed as the Adjudicating Authority's decision to reject the Section 9 Application based on the pre-existing dispute was found to be legally sound and supported by the evidence presented during the proceedings.