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TMI Blog2022 (9) TMI 169X X X X Extracts X X X X X X X X Extracts X X X X ..... r in the Hon'ble High Court of Delhi. The Hon'ble Supreme Court in B.K. Educational Services (P) Ltd. v. Parag Gupta Associates [ 2018 (10) TMI 777 - SUPREME COURT ] held that the Limitation Act would apply to applications filed under Sections 7 and 9 of the IBC. The Hon'ble Supreme Court in a catena of Judgement has laid down the principle that pre-existing dispute which may be ground to thwart an application under Section 9 has to be real dispute, a conflict or controversy. A conflict of claims or rights should be apparent from the reply as contemplated by Section 8. The Corporate Debtor is not to raise bogie of disputes but there has to be real substantial dispute - The existence of dispute when the Demand Notice was issued is mandatory condition for exercising jurisdiction to reject the Application by the Adjudicating Authority as is referred to in sub-section (5) of Section 9. There exists dispute between the parties with regard to the same cause of action i.e., outstanding payment of operational debt of USD 228,924 as claimed in Part IV of the Form 5 and the applicant is indulging in the act of forum shopping by pursuing the present petition before th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vate Limited had entered into a Distribution Agreement on 29.04.1999 with the corporate debtor. The applicant further adds that in terms of the distribution agreement, it was agreed that the corporate debtor shall act as the Distributor' for Wacker's silicone sealant cartridges on non-exclusive basis. b. The applicant submits that in 2003, Wacker Chemicals (South Asia) Pte Ltd. had sold its manufacturing unit, consequently, M/s. Wacker Chemicals Private Limited, India by a letter informed the corporate debtor that corporate debtor shall distribute the Wacker's silicon Sealant Cartridges in India manufactured by Wacker Chemic GmbH Germany and it was clearly mentioned that McCoy works on an exclusive basis and that WMC is entitled to deal on its own or authorize third parties to deal with Wacker products. c. The applicant submits that during 2006-2008, there was an apparent change of focus in corporate debtor's strategy and corporate debtor had stuck its brand label on all Wacker cartridges sold and repacked the boxed locally with McCoy cartons. d. The applicant further submits that during these period the corporate debtor started dishonoring payments ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the NCLT, New Delhi in view of the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2018. i. The applicant submits that during the hearing of the said petition, the Hon'ble NCLT vide order dated 04.10.2018 had allowed the withdrawal of the petition with liberty to file a fresh petition on the same cause of action. j. The applicant submits that applicant issued demand notice in Form - 3 on 15.10.2018 demanding the payment of outstanding debt amounting USD 228,924/-. The applicant further submits that the said demand notice had been duly delivered at the address of the corporate debtor, however the corporate debtor neither replied nor made payment of the legitimate dues. Consequently the instant Application was filed. k. The applicant had provided the following documents on record to prove the claims: i. Copy of the Distribution Agreement dated 29.04.1999. ii. Copy of the extension agreement dated 05.01.2004. iii. Copy of the Five Invoices issued by the applicant to the Corporate Debtor iv. Copy of the legal notice dated 05.03.2013 sent by applicant to the corporate debtor. v. Copy of the reply dated 20.03.2012 and 03.04.2012 sent by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e dispute by the letter and email dated 29.01.2010 and 29.07.2010 respectively. f. The corporate debtor submits that the applicant had sent demand notice dated 05.03.2012 under Section 433(e), 434 of the Companies Act, 1956 demanding the amount as claimed in the present case which was duly replied by the corporate debtor on 20.03.2012 and 11.05.2012 stating that there exist serious and bona fide disputes between the parties. g. The corporate debtor submits that M/s. Wacker Metroark Chemicals Pvt. Ltd., subsidiary company of the applicant had filed a winding up Company Petition No. 232/2012 against the respondent company which was dismissed on 17.05.2012 by the Ld. Single Judge of Hon'ble High Court by holding that This court is of the view that the defence of the respondent would have to be examined. However, this court cannot do so as its jurisdiction is summary in nature. Consequently, the company petition was dismissed with liberty to file a recovery proceeding. h. The corporate debtor adds that being aggrieved by the order dated 17.05.2012, M/s. Wacker Metroark Chemicals Pvt. Ltd. had filed a Company Appeal No. 640 of 2012 before the Division Bench of the H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pt. 2 of Part-IV of the Form -5, we observe that according to the Applicant, a total of 5 invoices dated 10.09.2009, 10.09.2009, 11.09.2009, 22.09.2009 and 22.09.2009 raised by the applicant were in default and as per the terms of the invoice, the debt became payable 90 days after B/L date. We further observe that the applicant sent demand notice dated 05.03.2012 under Section 433(e), 434 of the Companies Act, 1956 to the corporate debtor demanding the alleged outstanding dues, pursuant to which the applicant had filed winding up petition under Section 433 and 434 of the Companies Act, 1956 being Company Petition No. 464/2012 against the corporate debtor in the Hon'ble High Court of Delhi. 8. The Hon'ble Supreme Court in B.K. Educational Services (P) Ltd. v. Parag Gupta Associates held that the Limitation Act would apply to applications filed under Sections 7 and 9 of the IBC. The Court held: 42. It is thus clear that since the Limitation Act is applicable to applications filed under Sections 7 and 9 of the Code from the inception of the Code, Article 137 of the Limitation Act gets attracted. The right to sue , therefore, accrues when a default occurs. If the de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... find that in order to substantiate the plea of preexisting dispute between the parties, the corporate debtor has stated contentions in its reply and additional reply along with relevant documents showing the exchange of correspondence letters between the parties to resolve the dispute regarding the alleged breach of distribution agreement. 13. The Hon'ble Supreme Court in a catena of Judgement has laid down the principle that pre-existing dispute which may be ground to thwart an application under Section 9 has to be real dispute, a conflict or controversy. A conflict of claims or rights should be apparent from the reply as contemplated by Section 8. The Corporate Debtor is not to raise bogie of disputes but there has to be real substantial dispute. The existence of dispute when the Demand Notice was issued is mandatory condition for exercising jurisdiction to reject the Application by the Adjudicating Authority as is referred to in sub-section (5) of Section 9. The statute uses the expression 'existence of a dispute'. The word 'dispute' has been defined in Black's Law Dictionary as in the following manner:- Dispute. A conflict or controversy; a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the dispute can only be adjudicated by a trial in a civil court. We are in agreement with the finding of the leaned Single Judge that the defence raise is reasonable and bonafide and needs to be examined, which would only be done by a civil court, for which liberty has already been granted to the appellant to file a recovery proceedings in accordance with law. We find no infirmity in the impugned order. Appeal is accordingly dismissed with no orders as to costs. **** 15. In the case of Mobilox Innovative Private Limited vs. Kirusa Software Private Limited in civil appeal number 9405 of 2017 ( [2017] ibclaw.in 01 SC) the Hon'ble Supreme Court vide order dated 21.09.2017 has held that: Therefore, all the adjudicating authority is to see at this stage is whether there is a plausible contention which requires further investigation and that the dispute is not a patently feeble legal argument or an assertion of fact unsupported by evidence. It is important to separate the grain from the chaff and to reject a spurious defence which is mere bluster. However, in doing so, the court does not need to be satisfied that the defence is likely to succeed. The court d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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