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2021 (12) TMI 43 - AT - Insolvency and BankruptcyDishonor of cheque - Corporate Debtor failed to repayment of its dues - business dispute including the disputes with respect of dishonoured of cheques - applicability of provisions of NI Act or IBC - Appropriate forum for recovery of dues - HELD THAT - It cannot be said that the transaction erupted only in the year 2017 between the parties seems there is a long term relationship between the parties but because of delayed supplied material against February 2017 PO, thereafter, hold on supply against PO of April 2017 enunciated difference and dispute between the parties which includes sub-standard supply of material by the OC to the CD and delayed supply resulting into disruption of production to the CD due to the default of OC. In any case, these are business dispute including the disputes with respect of dishonoured of cheques which are regulated as per provisions of The Negotiable Instruments Act, 1881 . All these disputes are of civil nature and needs to handle under the relevant commercial laws . Section 9 can be initiated only if, there is a debt legally liable to be paid to the OC, there must be default by the CD and the invoices/dues are undisputed - it is further reiterated that Section 9 of the Code can be enforced only the Debt is due and payable in law. There is a default by the CD and there is no notice of dispute. Reference is invited to the Hon ble Supreme Court in TRANSMISSION CORPORATION OF ANDHRA PRADESH LIMITED VERSUS EQUIPMENT CONDUCTORS AND CABLES LIMITED 2018 (10) TMI 1337 - SUPREME COURT where it is already held that IBC is not intended to be a substitute to a recovery forum and also laid down that whenever there is existence of real dispute, the IBC provisions cannot be invoked. Appeal dismissed.
Issues Involved:
1. Existence of pre-existing dispute. 2. Admissibility of Section 9 application under Insolvency and Bankruptcy Code, 2016. 3. Legal implications of dishonored cheques. 4. Role of Purchase Orders and quality disputes. Detailed Analysis: 1. Existence of Pre-existing Dispute: The Adjudicating Authority observed that the Respondent had issued two debit notes, one of which was directly related to the invoice in question, asserting that the goods supplied were of inferior quality. The delivery of these debit notes was established through courier receipts. The Tribunal concluded that the Respondent successfully demonstrated a pre-existing dispute regarding the quality of goods supplied by the Appellant. 2. Admissibility of Section 9 Application: The Tribunal referred to Section 9 of the Insolvency and Bankruptcy Code, 2016, which allows an operational creditor to initiate a corporate insolvency resolution process if there is an undisputed debt. The Tribunal emphasized that the existence of a dispute, as established by the Respondent, disqualifies the application under Section 9. The Tribunal reiterated that for an application to be admitted under Section 9, the debt must be due and payable, and there should be no notice of dispute. 3. Legal Implications of Dishonored Cheques: The Appellant argued that the Respondent had acknowledged its debt by issuing cheques, which were later dishonored. The Tribunal noted that the cheques were dishonored not due to insufficiency of funds but because the Respondent stopped the payment, which supported the existence of a pre-existing dispute. The Tribunal concluded that the dishonored cheques furthered the Respondent's contention of a dispute and did not constitute an acknowledgment of debt. 4. Role of Purchase Orders and Quality Disputes: The Tribunal examined the history of transactions between the parties, noting that the Respondent had placed multiple purchase orders and there were ongoing quality checks and replacements of defective goods. The Tribunal highlighted that the disputes regarding the quality of goods and the cancellation of a subsequent purchase order contributed to the pre-existing dispute. The Tribunal also referred to the liquidated damages clause in the purchase orders, which allowed the Respondent to cancel orders if terms and conditions were not met. Judicial Precedents: The Tribunal referenced the Supreme Court's decision in "Mobilox Innovations Private Limited vs. Kirusa Software Private Limited," which outlined the conditions under which an application under Section 9 should be admitted or rejected. The Tribunal also cited the Supreme Court's decision in "Transmission Corporation of Andhra Pradesh Limited vs. Equipment Conductors and Cables Limited," which held that the Insolvency and Bankruptcy Code is not a substitute for a recovery forum and should not be invoked in the presence of a real dispute. Conclusion: The Tribunal upheld the Adjudicating Authority's decision to dismiss the application, concluding that the existence of a pre-existing dispute disqualified the application under Section 9 of the Insolvency and Bankruptcy Code, 2016. The appeal was dismissed, and no order as to costs was made. Any interim orders passed by the Tribunal were vacated, and any pending applications were disposed of.
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