2019 (3) TMI 1237 - Tri - Insolvency and Bankruptcy

Corporate Insolvency Resolution Process - existence of dispute - dispute regarding execution, validity and legality of Settlement Agreements is pending before civil court - there is Pre-existence dispute prior to the notice served under section 8 of I & B Code - HELD THAT - A conclusion can be drawn that there is Preexistence dispute and was raised by corporate debtor time and again much prior to the notice served under section 8 of I & B Code. It is a fit case to reject the application under section 9 of the Insolvency & Bankruptcy Code, 2016.

Summary

Issues Involved:
1. Application under section 9 of Insolvency and Bankruptcy Code, 2016 for Corporate Insolvency Resolution Process initiation.
2. Dispute regarding the alleged Settlement Agreements and debt existence.

Analysis:
1. The Applicant, CIL Australia North Pty Limited, filed an application under section 9 of the Insolvency and Bankruptcy Code, 2016, seeking to initiate the Corporate Insolvency Resolution Process against M/s Sharp Corp Limited. The Applicant had previous business dealings with the Corporate Debtor, involving contracts for the sale of Australian Desi Chickpeas. The Corporate Debtor defaulted on payment obligations under these contracts, leading to arbitration proceedings and subsequent settlement agreements. Despite settlement terms, the Corporate Debtor failed to make payments, resulting in a total outstanding debt claim of USD 2,290,350.00 and USD 605,000.00 under the respective Settlement Agreements.

2. The Respondent disputed the existence and validity of the Settlement Agreements, initiating a Civil Suit seeking to declare them null and void. The Respondent argued that the alleged Settlement Agreements were contested in the civil court before the demand notice under the IBC, 2016 was served. The Respondent highlighted that the issue of execution, validity, and legality of the Settlement Agreements was under adjudication in the civil court, emphasizing the need for detailed examination by the competent civil authority.

3. The Tribunal considered the definition of 'dispute' under the Insolvency and Bankruptcy Code, which includes suits or arbitration proceedings related to the amount of debt, quality of goods or services, or breach of representation or warranty. The Tribunal observed that a wide interpretation of 'dispute' should encompass all disputes concerning debt and default, not limited to pending suits or arbitrations. After evaluating the contentions raised by both parties, the Tribunal concluded that a pre-existing dispute existed between the parties, requiring further trial or investigation.

4. In light of the pre-existing dispute raised by the Corporate Debtor regarding the alleged Settlement Agreements and debt claims, the Tribunal dismissed the application under section 9 of the Insolvency and Bankruptcy Code, 2016. The Tribunal emphasized that the existence of a genuine dispute, regardless of its potential success, warranted rejection of the insolvency application. The order was issued without costs, with a copy forwarded to the Insolvency and Bankruptcy Board of India for record-keeping purposes.