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2021 (5) TMI 709 - AT - Insolvency and BankruptcyMaintainability 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 - The Letter of the Appeal Paper Book sent by Respondent through Ld. Advocate (supra) clearly shows that the dispute prior to issuance of Demand Notice - The representatives, Mr. Micheal Mr. Sunil K. Deepati had visited the Respondent office on 17.07.2018 and the Respondent was informed by them that the Appellant is ready to resumption of further supply on 90 days L.C. but this fact has been concealed in the notice issuance of under Section 8 of the IBC. The Adjudicating Authority has also taken note of the fact that the claim of an independent entity M/s Connel Bros. Company (India) Pvt. Ltd. ( Connel ) was also included by the Appellant in their claim. So taking note of all these facts, we are of the considered view that there is pre-existing dispute between the parties much prior to issuance of Demand Notice under Section 8 of the IBC and there is no illegality in the order passed by the Ld. Adjudicating Authority. The Appellant has failed to demonstrate that the impugned order suffers from any legal infirmity - Appeal dismissed.
Issues Involved:
1. Existence of a pre-existing dispute prior to the issuance of the Demand Notice. 2. Admission of debt by the Corporate Debtor. 3. Appropriateness of the reconciliation of accounts. 4. Legitimacy of the claim alteration by the Appellant. 5. Compliance with legal precedents and procedural rules. Detailed Analysis: 1. Existence of a Pre-existing Dispute Prior to the Issuance of the Demand Notice The core issue was whether there was a pre-existing dispute between the parties before the issuance of the Demand Notice under Section 8 of the Insolvency and Bankruptcy Code, 2016 (IBC). The Adjudicating Authority found that the Corporate Debtor had raised a dispute regarding the quality of materials supplied, which was acknowledged by the Operational Creditor. The Corporate Debtor had sent a Legal Notice on 01.08.2018, indicating a dispute over the materials worth ?17,12,649/-, which were returned due to quality issues. The Tribunal held that this constituted a plausible contention requiring further investigation, thus establishing a pre-existing dispute. 2. Admission of Debt by the Corporate Debtor The Appellant argued that the Corporate Debtor had admitted to a debt of ?27,37,803/- in a settlement offer dated 03.06.2019. Additionally, the Appellant relied on various confirmations of debt by the Corporate Debtor, including emails and ledgers, which indicated an acknowledgment of the debt amounting to ?63,37,000/-. Despite these admissions, the Tribunal focused on the pre-existing dispute and did not find these acknowledgments sufficient to override the existence of the dispute. 3. Appropriateness of the Reconciliation of Accounts The Official Liquidator appointed a Chartered Accountant to reconcile the accounts for 11 invoices. The Chartered Accountant's report noted that the Corporate Debtor could not provide concrete evidence linking payments of ?27,30,000/- to specific invoices, given the old outstanding dues. The report also mentioned a disputed Debit Note for ?8,20,283/- raised by the Corporate Debtor. The Tribunal noted these findings, which further supported the existence of a dispute. 4. Legitimacy of the Claim Alteration by the Appellant The Tribunal observed that the Appellant had altered its claim to include debts due to an independent entity, M/s Connel Bros. Company (India) Pvt. Ltd., at a belated stage. This alteration was not disclosed in the statutory notice or the initial application, rendering the petition defective. The Tribunal found that this change in claim without providing the Corporate Debtor an opportunity to respond was procedurally improper. 5. Compliance with Legal Precedents and Procedural Rules The Appellant cited the Supreme Court's judgments in 'M/s Innoventive Industries Ltd. V. ICICI Bank' and 'Mobilox Innovations Private Ltd. Vs Kirusa Software Private Ltd.' to argue that the debt should be considered irrespective of the dispute. However, the Tribunal held that these precedents emphasize the need for the dispute to be pre-existing before the demand notice. The Tribunal found that the dispute in this case was indeed pre-existing and genuine, thus justifying the dismissal of the application under Section 9 of the IBC. Conclusion: The Tribunal concluded that there was a pre-existing dispute between the parties before the issuance of the Demand Notice under Section 8 of the IBC. The Appellant's claims, including the altered claim involving M/s Connel Bros., were found to be procedurally defective. The Tribunal upheld the Adjudicating Authority's decision to dismiss the application, finding no merit in the appeal. The appeal was dismissed with no order as to costs.
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