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2020 (10) TMI 387 - Tri - Insolvency and BankruptcyMaintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - existence of debt and dispute or not - whether this adjudicating authority is competent to decide the question regarding the point raised by the petitioner in a proceeding, which is initiated under Section 9 of the IBC? - HELD THAT - The demand notice was issued on 04.07.2019 and reply to the demand notice was sent on 15.07.2019 and we further find that at page 4, the applicant has not enclosed, tracking report of the delivery of the demand notice to show when the demand notice was delivered, of course, it is dated 14.07.2019 but in the absence of the delivery report and tracking report to show, when it was delivered, we had no option but to hold that the reply of the demand notice is filed within 10 days from the date of receipt of demand notice and this fact has not been disputed by the petitioner. Also, the respondent has raised the dispute prior to the delivery of demand notice. While considering the application under Section 9 the Adjudicating Authority is not competent to examine whether the dispute is according with the law or not. These are the facts which are required to be decided by the Court having the jurisdiction to try the suit, while exercising under Section 9 the Adjudicating Authority is required to see only whether there is existence of dispute between the parties or the record of pendency of suit or arbitration proceedings filed before the receipt of such notice or invoice in relation to such dispute or not. We are unable to accept the submission of the Ld. Counsel for petitioner that this adjudicating authority is competent to decide the point which has been raised by the Ld. Counsel for petitioner in course of arguments, whether the respondent is competent to forfeit the amount in terms of forfeiture clause or not? Since, there is existence of dispute which has been raised before the issue of demand notice and the documents which enclosed with the application, shows that there is existence of dispute. Therefore, in view of Section 9(5)(ii), the present application is not maintainable. Application dismissed.
Issues Involved:
1. Whether the sum of ?1 crore advanced by the Applicant was non-refundable. 2. Whether the Corporate Debtor was justified in forfeiting the amount. 3. Whether the Adjudicating Authority has the jurisdiction to decide on the forfeiture of the amount. 4. Whether there was a pre-existing dispute between the parties prior to the issuance of the demand notice. Issue-wise Detailed Analysis: 1. Non-Refundability of ?1 Crore Advance: The Applicant, M/s. Gati Limited, contended that the Corporate Debtor, Balaji Operation and Maintenance Service Pvt. Ltd., failed to deliver the goods as per the purchase order and sought a refund of ?1 crore paid as an advance. The Corporate Debtor argued that the amount was non-refundable, as explicitly stated in the proposal dated 28.02.2019, which the Applicant had accepted without objections. The Tribunal noted that the Petitioner admitted the non-refundable nature of the advance in the petition. 2. Justification for Forfeiture: The Corporate Debtor asserted that the advance was rightly forfeited due to the Applicant's failure to hand over the site and abrupt termination of the work order. The Tribunal referred to the work order and the terms of the agreement, which included the forfeiture clause. The Tribunal found that the Corporate Debtor had subcontracted the work and incurred expenses, further justifying the forfeiture. The Tribunal referred to the Mobilox Innovations Pvt. Ltd. Vs. Kirusa Software Pvt. Ltd. case, emphasizing that the existence of a dispute removes the matter from the scope of the Insolvency and Bankruptcy Code (IBC). 3. Jurisdiction of Adjudicating Authority: The Tribunal examined whether it had the jurisdiction to decide on the forfeiture issue under Section 9 of the IBC. It concluded that the scope of Section 9 is limited to determining the existence of an operational debt and whether there is a pre-existing dispute. The Tribunal referred to Sections 8 and 9 of the IBC, which mandate the rejection of an application if a notice of dispute is received. The Tribunal emphasized that it is not competent to adjudicate on the merits of the forfeiture clause, which should be decided by a court with proper jurisdiction. 4. Pre-Existing Dispute: The Tribunal found that the Corporate Debtor had raised a dispute regarding the refundability of the advance before the issuance of the demand notice. The Corporate Debtor's letter dated 04.07.2019 and email dated 06.03.2019, which stated the non-refundable nature of the advance, were considered sufficient to establish the existence of a dispute. The Tribunal reiterated the Supreme Court's stance in Mobilox Innovations Pvt. Ltd Vs. Kirusa Software Pvt. Ltd., which held that the existence of a pre-existing dispute disqualifies the application under Section 9 of the IBC. Conclusion: Based on the analysis, the Tribunal concluded that there was a pre-existing dispute between the parties and that the Corporate Debtor had raised the dispute before the delivery of the demand notice. Consequently, the application under Section 9 of the IBC was deemed not maintainable. The Tribunal dismissed the application, emphasizing that the adjudicating authority's role is limited to verifying the existence of a dispute and not adjudicating on the merits of the contractual terms. The office was directed to send a free copy of the order to both parties.
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