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2022 (12) TMI 271 - AT - Insolvency and BankruptcyMaintainability of petition - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - proper authorization for issuance of demand notice under Section 8 of IBC - existence of debt and dispute or not - HELD THAT - The Adjudicating Authority on perusal of the record has recorded that both the demand notices, first dated 29.11.2018 and the second dated 10.10.2019 issued under Section 8 of the code which is pre-requisite for initiation of CIRP proceedings was signed and issued by one Mr. Surendra Prasad Shukla , in the capacity of whole-time Director and authorized signatory of the Applicant company, without there being any authorization. Once, the Ld. Adjudicating Authority had noticed that there was no specific authorization on record authorizing Mr. Surendra Prasad Shukla for issuance of demand notice under Section 8 of the code, such demand notice may not be termed in accordance with Section 8 of the code. If the Appellant was not in a position to satisfy the Adjudicating Authority on the validity of the demand notice certainly application filed under Section 9 of the code was required to be rejected. In absence of proper authorization for issuance of demand notice under Section 8 of the code such demand notice may not be termed as if it was in accordance with the provision contained in the code for admitting an application under Section 9 of the code, valid and legal demand notice under Section 8 of the code is pre-requisite. Appeal dismissed.
Issues Involved:
1. Maintainability of the application under Section 9 of the Insolvency and Bankruptcy Code, 2016. 2. Authorization for issuing demand notice under Section 8 of the Insolvency and Bankruptcy Code, 2016. 3. Pre-existing dispute between the parties regarding the quality of goods supplied. Detailed Analysis: Issue 1: Maintainability of the Application under Section 9 of the Insolvency and Bankruptcy Code, 2016 The application under Section 9 was dismissed by the National Company Law Tribunal (NCLT), Ahmedabad Bench, primarily on the ground of maintainability. The Appellant, an operational creditor, filed the application seeking initiation of Corporate Insolvency Resolution Process (CIRP) against the Respondent, a corporate debtor, due to non-payment of Rs. 78,79,452/- for the supply of goods. The NCLT found that the demand notices issued under Section 8 were not authorized, and there existed a pre-existing dispute between the parties regarding the quality of goods supplied. Issue 2: Authorization for Issuing Demand Notice under Section 8 of the Insolvency and Bankruptcy Code, 2016 The NCLT noted that the demand notices dated 29.11.2018 and 10.10.2019, which are prerequisites for initiating CIRP, were issued by Mr. Surendra Prasad Shukla, who claimed to be the Whole-time Director and authorized signatory of the operational creditor company. However, the authorization for Mr. Shukla was not valid at the time of issuing the demand notices. The resolution authorizing Mr. Shukla was passed on 24.10.2019, much after the issuance of the demand notices. Therefore, the demand notices were deemed invalid in the eye of law. Issue 3: Pre-existing Dispute Between the Parties Regarding the Quality of Goods Supplied The Respondent raised several objections, including the claim that the goods supplied were of low quality and that there was a pre-existing dispute regarding the quality of the coal supplied. The Respondent provided evidence of an inspection report dated 06.08.2018, conducted at their plant, which indicated that the quality of the coal did not meet the agreed specifications. The Appellant argued that the inspection should have been conducted at the discharge port as per the agreement. However, the NCLT found that there was indeed a pre-existing dispute regarding the quality of goods, which was not a fabricated issue to avoid payment. Conclusion: The National Company Law Appellate Tribunal (NCLAT) upheld the decision of the NCLT, dismissing the appeal on the grounds that: 1. The demand notices issued under Section 8 were not authorized as per the requirements of the Insolvency and Bankruptcy Code, 2016. 2. There was a pre-existing dispute between the parties regarding the quality of goods supplied, which was sufficient to reject the application under Section 9. The NCLAT concluded that the application filed under Section 9 was correctly dismissed by the Adjudicating Authority due to the lack of proper authorization for the demand notice and the existence of a pre-existing dispute. The appeal was dismissed, and the order of the Adjudicating Authority was approved.
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