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TMI Blog2020 (12) TMI 1283X X X X Extracts X X X X X X X X Extracts X X X X ..... tant case, it is found that from 2017 itself a dispute has been going on with regard to the quality of goods supplied by the Petitioner and the payments due from the Respondent, i.e. much prior to the issue of the Demand Notice under the Code and filing of the instant Petition. It is seen from the email dated 15.07.2017 and 01.08.2017, i.e. prior to the filing of this Petition, which were sent by the Respondent to the Applicant, that the Respondent had already raised disputes regarding the shoddy work done by the Applicant and the quality of the goods supplied - From the evidence brought on record, it is convincing that the disputes cited were genuine, were taken into other forums such as MSMEC, and documented, and not merely a made up dispute or ruse to stall initiation of CIRP. In the instant case, it is admittedly a real dispute that has been taken to the MSMEC for resolution. Hence as far as the IBC is concerned, existence of such a dispute takes the Petition out of the ambit and scope of this Tribunal - it cannot be said that the Respondent has lost its substratum and is unable to run its business or pay its debts. Such a company cannot be unjustifiably pushed into an insol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mount is annexed to the petition as the 'Workings for computation of default'. (2) The Applicant has listed out 92 Sales invoices against the supplies made to the Respondent from 28.01.2017 to 28.07.2017. Total invoice amounts being ₹ 1,07,50,568/- (Rupees One Crore Seven Lakh Fifty Thousand Five Hundred and Sixty Eight only) out of which the Applicant admittedly received ₹ 71,30,412/- (Rupees Seventy One Lakh Thirty Lakh Four Hundred and Twelve only). Copies of the purchase orders and the invoices are annexed to the Petition. (3) The Applicant submits that it issued Demand Notice under Section 8 of the Code, 2016 demanding payment of ₹ 50,67,926/-. Copy of the Demand Notice in Form 3 and Form 4 on 21.12.2019 was duly served on Respondent on 23.12.2019. Copies of the postal receipt and postal track consignment summary are annexed to the petition. (4) The Applicant has filed Affidavit in compliance to Section 9(3)b of the Code, 2016 stating that no notice of dispute has been received by the Applicant from the Respondent after the issuance of Demand Notice. (5) The Applicant has annexed its Bank Statements of accounts held with SBI and Kotak Mahi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies out of its own pocket to rectify the shoddy work carried out by the Applicant. However, the said offer was rejected by the Applicant. (6) The Respondent submits that on account of the Applicant's shoddy work, the Respondent faced humiliation from their clients. The Respondent has annexed copies of email dated 15.07.2017 and 12.11.2018 by one of the many aggrieved customers of the Respondent to prove this point. (7) The Respondent states that the technical snags of the faulty material supplied by the Applicant was inspected by an independent expert being the Project Executive who pointed out that Edge binding of the furniture needed buffing . The Respondent's Client SRM School in email dated 31.07.2017 stated that Our school children are getting hurt in the edges of the furniture, So give top priority to this and start the buffing work immediately . Copy of email dated 31.07.2017 is annexed to the Objections. (8) The Respondent has annexed emails dated 15.07.2017 and 12.11.2018 showing existence of quality related issues. Email dated 15.07.2017 reads as follows: With reference to our visit to Vellore yesterday for spring days, the table top supplied looks ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ministry of Corporate Affairs. The Petition having been filed after the notification deserves to be dismissed. 5. The Petitioner has filed its Rejoinder with the following contentions: (1) From para No. 6 of the Objections filed by the Respondent it appears that the Respondent is also into the business of manufacture of furniture items which means the furniture supplied by the Applicant may be re-worked by the Respondent and then supplied to its customers. Further stating that there were no issues raised by the Respondent when the goods were supplied to the Respondent which means that the furniture had reached the Respondent in good condition and no defects can be linked to the goods. Any changes made to the furniture after supply to the Respondent and defects caused due to such changes cannot be attributed to the Applicant. (2) The Applicant denies to have entered into any agreement to supply table tops and chair writing tables to the Respondent and states that all the supplies were made under the purchase orders and invoices were raised for the same. (3) Applicant states that various emails relied by the Respondent in its Objections that were exchanged between the Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ision of Hon'ble Supreme Court in M/s. Innoventive Industries Ltd. v. ICICI Bank Anr. in Civil Appeal Nos. 8337-8338 of 2017 stating that bankruptcy process is initiated not only for a business failure but also a financial failure. 6. The Respondent filed its Sur-rejoinder refuting the contentions of the Applicant with the submissions made as under: (1) That the Applicant filed this Petition to enforce the MSME order dated 18.02.2019. However, this Tribunal cannot be used as recovery forum and for execution of an order. The same needs to be done before Civil Court. (2) It is submitted that the Respondent is a commercially solvent company and a solvency certificate has been annexed. (3) Further, it is stated that the petition having been filed on 24.03.2020, the notification by the Ministry of Corporate Affairs which enhances the threshold to trigger section 4 of the IBC does not apply to this petition and hence it needs to be dismissed. (4) Further, section 18 of MSME Act deals with dispute resolution facet of any dispute under the MSME Act and any action taken under the same is treated as conciliation proceedings under the Arbitration and conciliation Act, 199 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7 CLA 112 (SC) Hon'ble Supreme Court of India has inter alia held that existence of undisputed debt is sine qua non of initiating CIRP. As per para 34 of the judgement, it is stated that the Adjudicating Authority, while examining an application filed under Section 9 of Code, will have to determine a) whether there is an 'operational debt' as defined exceeding ₹ 1 Lakh? b) Whether documentary evidence furnished with the application shows that the aforesaid debt is due and payable and has not yet been paid? and c) Whether there is existence of dispute between the parties or the record of the pendency of a suit or arbitration proceeding filed before receipt of demand notice of the unpaid operational debt in relation to such dispute? If any one of aforesaid conditions is lacking, the application would have to be rejected. 11. In the instant case we find that from 2017 itself a dispute has been going on with regard to the quality of goods supplied by the Petitioner and the payments due from the Respondent, i.e. much prior to the issue of the Demand Notice under the Code and filing of the instant Petition. It is seen from the email dated 15.07.2017 and 01.08.2017, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty of goods supplied even before the Council and the same is a matter of record. The nature and purpose of proceedings before the MSME Council are completely different and cannot alone be a basis of this Tribunal's decision under IBC proceedings. This Tribunal is not a dispute resolution mechanism, and cannot be used as a recovery forum for decrees of MSMEC. Under the I B Code, 2016, this Tribunal offers a mechanism to reorganise and resolve the insolvency of corporate entities etc. in a time bound manner while maximising the value of assets to the benefit of all stakeholders. Unless the Petitioner makes out a case for insolvency, merely because an order has been passed by the MSMEC cannot have a bearing on these proceedings. As regards the case law cited by the Petitioner to state that decree of civil court can be taken cognisance of while deciding a matter under IBC is concerned, the same is inapplicable in as much as in that case a case was also independently made out under the I B Code, 2016 and did not merely hinge upon the decision of another court. 14. With reference to the dispute discussed above and the decision of the MSMEC, we may add that it is not essential that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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