2021 (5) TMI 212 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - HELD THAT - Upon hearing submissions and perusal of the documents placed before this Adjudicating Authority, it is seen that there is clear pre-existing dispute between the parties. It is an evident that the Pre-existing dispute from the set of emails exchanges filed along with reply. Further, the goods supplied by operational creditor have lot of mismatch as highlighted in the email between the parties. A few were replaced by Applicant as reflected in the emails. The total picture emerging from pleading and documents is that there has been a lot of discussions, replacement of goods and issue of mismatch of goods as earlier as email dated 27.08.2018 onwards. The Respondent has also filed copy of email dated 22.02.2019 in respect of loss faced and dissatisfaction of customer due to mismatch of casting valves. Further, by email dated 07.03.2019, the respondent has sought clarification regarding delayed supply and replacement of wrong supply. Application dismissed.

Summary

Issues:
Application under Section 9 of the Insolvency and Bankruptcy Code, 2016 for Corporate Insolvency Resolution Process based on default in payment by the Corporate Debtor.

Analysis:
The application was filed by an Operational Creditor against a Corporate Debtor under Section 9 of the Insolvency and Bankruptcy Code, 2016, seeking initiation of Corporate Insolvency Resolution Process (CIRP) due to a default in payment amounting to ?39,00,422.82 for the supply of steel cast products. The application detailed the operational debt, including invoices raised with interest at 18% per annum, and the default in payment by the Corporate Debtor. The Operational Creditor sent demand notices, but the Corporate Debtor failed to make payments despite reminders, citing issues of incomplete supplies as a reason for non-payment.

The Corporate Debtor, in response, claimed disputes regarding the supplies made, citing issues of short supplies, mismatches, and quality problems. They alleged that an agreement was reached for a reduced payment against the ledger balance, subject to the completion of supplies as per the despatch plan. The Corporate Debtor contended that they withheld further payments due to non-receipt of the agreed-upon supplies.

Upon reviewing the submissions and documents, the Adjudicating Authority noted a clear pre-existing dispute between the parties, evidenced by email communications regarding mismatches in supplied goods and dissatisfaction with the quality of products. Citing a Supreme Court ruling, the Authority emphasized the need for a genuine dispute to exist, not merely a spurious defense, for the rejection of an insolvency application. In this case, as a genuine dispute was established, the application for Corporate Insolvency Resolution Process was dismissed.

The judgment concluded by directing the Registry to communicate the dismissal order to both the Operational Creditor and the Corporate Debtor promptly.