2021 (1) TMI 512 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - alleged default on part of the Respondent in settling an amount - Operational debt - existence of debt and dispute or not - HELD THAT - The Respondent has sent an email on 02.06.2018, complaining about the quality of the goods supplied by the Operational Creditor. That on perusal of the e-mails sent by the Respondent to the Operational Creditor on 02.06.2018 and 19.06.2018 before the issuance of demand notice, it can be seen there is a preexisting dispute between the parties with respect to quality of material supplied by the Applicant. It is evident that the Respondent had meetings with the Operational Creditor in Mumbai and Banswara, where the complaints regarding the quality of the goods supplied by the operational creditor were made by the Respondent. Also arrangement regarding payment of outstanding debt was made where the Applicant would waive the amount of ₹ 33,00,000/- out of the total of ₹ 83,00,000/- and it was also discussed that the balance overdue amount of ₹ 50,00,000/- would be settled. It is evident from the WhatsApp Communications between the Applicant and the Corporate Debtor held on date 31.07.2018 and 27.08.2018 that above arrangement was made between the parties in relation to clearance of outstanding debt. The Applicant in the WhatsApp communication between the parties duly admitted the arrangement proposal and specifically stated that it will supply best quality in future. The documentary evidences submitted by both the parties clearly establishes the preexistence of dispute between the parties prior to the issuing of notice by the Applicant. Application dismissed.

Summary

Issues:
Initiation of Corporate Insolvency Resolution Process under Section 9 of the Insolvency and Bankruptcy Code 2016 for alleged default in settling payment due for goods supplied.

Analysis:
The Applicant, a trading firm, filed an application to initiate Corporate Insolvency Resolution Process against the Respondent, a textile manufacturing company, for non-settlement of an amount due for goods supplied. The Applicant alleged that despite reminders, an amount of ?93,89,378 remained unpaid by the Respondent. The Respondent contended that the goods supplied were of inferior quality, causing losses due to failed tests and client dissatisfaction. Meetings were held to discuss the quality issues, resulting in an agreement to waive a portion of the amount owed and settle the balance in a specified manner.

The Respondent argued that there was a pre-existing dispute regarding the quality of goods supplied, supported by emails and WhatsApp communications. The Respondent highlighted its profitability and cash reserves to establish the genuineness of the dispute. Legal precedents were cited to support the Respondent's position.

Upon reviewing the submissions and arguments from both parties, the Tribunal found evidence of a pre-existing dispute regarding the quality of goods supplied. The communications between the parties, including emails and WhatsApp messages, demonstrated the existence of disagreements prior to the demand notice. The Tribunal noted the agreement reached between the parties to resolve the outstanding debt, indicating an ongoing negotiation process related to the payment.

Considering the documented evidence and arguments presented, the Tribunal concluded that the application for Corporate Insolvency Resolution Process was dismissed. No costs were imposed on the Applicant, and the application was officially dismissed. The decision was based on the established pre-existing dispute and the ongoing negotiations between the parties regarding the outstanding debt, leading to the rejection of the application.