2023 (8) TMI 1155 - AT - Insolvency and Bankruptcy

Rejection of application filed u/s 9 of IBC - failure of the Respondent to supply the material within three months of the advance payments - pre-existing dispute between the parties or not - HELD THAT - The Appellant complied with various clauses of the Sales Contract especially regarding advance payment which the Appellant performed by making two tranches of payment of Rs. 10 Crores on 25.02.2019 and Rs. 5 Crores on 06.03.2019. Upon his making advance payment, the responsibility was on the Respondent as Seller of the material to arrange for the trucks, load the materials on to trucks and deliver the same at the site of the Appellant and then only the liability and risk would have transferred to the Appellant as Buyers of the goods. From the various documents made available including the Sales Contract, there remains no doubt that while the Appellant had paid the advance of Rs. 15 Crores but the Respondent has not been able to supply the material. As per the Sales Contract, the delivery was to be completed preferably within three months and maximum six months from the date of receipt of Rs. 15 Crores advance. It is the case of the Respondent that he asked the Appellant vide his letter dated 07.08.2019, inter-alia, about delivery schedule. We note that the Sales Contract was signed on 22.02.2019 between the Appellant and the Respondent and the Appellant had paid of Rs. 10 Crores on 25.02.2019 and balance of Rs. 5 Crores on 06.03.2019. The three months normal period for delivery of material by the Respondent would have been over by 05.06.2019, much before alleged letter of the Respondent dated 07.08.2019. All these events indicates that perhaps the Respondent was not in a position to supply material and no attempt was made by him in this regard. There are no cogent reason for rejecting the application under Section 9 of the Code and - the Impugned Order passed by the Adjudicating Authority cannot be agreed - Impugned Order is set-aside and the case is remanded back to the Adjudicating Authority who shall pass suitable order in accordance with the law at an early date - appeal allowed.

Summary

Issues Involved:
1. Existence of pre-existing disputes.
2. Responsibility for delivery of material.
3. Adjudicating Authority's application of mind and examination of documents.

Summary:

Existence of Pre-Existing Disputes:
The Appellant filed an appeal under Section 61 of the Insolvency & Bankruptcy Code, 2016, challenging the Impugned Order dated 03.01.2023, which rejected their application under Section 9 of the Code. The Appellant contended that the Respondent failed to supply the agreed material and created artificial disputes to avoid refunding the advance payment. The Respondent argued that the Appellant breached the contract by failing to make the balance payment and arrange for transportation, leading to pre-existing disputes.

Responsibility for Delivery of Material:
The Sales Contract dated 22.02.2019 stipulated that the Respondent was responsible for delivering the material within three months of the advance payment, with delivery to be completed within six months. The Tribunal noted that the Respondent's claim that the Appellant was responsible for arranging trucks was unfounded, as the contract did not specify this requirement. The Tribunal found that the Respondent failed to deliver the material as per the contract terms and attempted to shift the blame to the Appellant.

Adjudicating Authority's Application of Mind and Examination of Documents:
The Tribunal criticized the Adjudicating Authority for not adequately examining the documents and failing to provide detailed findings regarding the alleged pre-existing disputes. The Tribunal noted that the Authority's reliance on the Respondent's letter dated 07.08.2019 was misplaced and lacked proper reasoning. The Tribunal found that the Appellant had complied with the contract terms by making the advance payment, while the Respondent failed to deliver the material.

Conclusion:
The Tribunal set aside the Impugned Order and remanded the case back to the Adjudicating Authority to pass a suitable order in accordance with the law. The parties were directed to appear before the Adjudicating Authority on 31st August, 2023.