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TMI Blog2024 (7) TMI 319X X X X Extracts X X X X X X X X Extracts X X X X ..... dismissed the application of the Appellant under Section 9 of the Code ("Impugned Order"). Factual Background 2. The dispute centers around a sales contract formed on March 20, 2017, between Hi Exports (Respondent) and Durst Phototechnik (Supplier) for the purchase of an industrial inkjet printer (Alpha 190-D). The agreed timeline for delivery was April 15, 2017, but the machine arrived significantly later on August 28, 2017. Upon receiving the machine, the Respondent discovered critical performance issues and defects that significantly hampered its functionality. Appellant's Case: 3. Background and Initial Transaction: 3.1. The debt in question originates from a transaction involving the purchase of a disperse system digital textile-printer with 32ph with standard accessories (hereinafter referred to as the "Machine") by the Corporate Debtor from Durst Phototechnik AG (hereinafter referred to as the "Supplier"). 3.2. In the course of business, the Corporate Debtor entered into a Sales Contract dated 20th March 2017 with the Supplier, which detailed the terms of sale of the Machine to the Corporate Debtor. 3.3. Upon executing the Sales Contract, the Supplier issued proforma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the Supplier to obtain overdue payments, the Corporate Debtor, while making use of the Machine, failed to make payments towards the promissory notes. 6. Demand Notice and Application Under IBC 6.1. Consequently, the Operational Creditor, through its Advocate, issued a Demand Notice dated 19th May 2021 under Section 8(1) of the Insolvency and Bankruptcy Code, 2016 (as amended). The notice was sent electronically to the Corporate Debtor's email addresses [email protected] and [email protected]. The notice was duly delivered as no failure report was received by the Operational Creditor's Advocate. Despite receiving the Demand Notice, the Corporate Debtor failed to respond. Adjudicating Authority erred in not appreciating that the Operational Creditor in the Affidavit of No Dispute dated 23.08.2021 in para 2 has categorically stated as under: "the said demand notice was received at the above email addresses of the corporate debtor to which no failed delivery notification was received from the server and hence the same shall be deemed to be delivered." 6.2. The Operational Creditor proceeded to file an application under Section 9 of the IBC before the Hon'ble NCLT Chandigarh Bench ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e demand notice. The Authority did not properly consider the Sales Contracts, the Corporate Debtor's acceptance of the Machine, and the fact that the demand notice was sent to the official email address listed with the Ministry of Corporate Affairs. The Authority also failed to recognize that the arbitration remedy does not supersede the statutory rights under the IBC. 10. Being aggrieved by the Impugned Order dated 6th July 2023, the Appellant is seeking this Tribunal's intervention to set aside the Impugned Order and grant the relief sought by the Operational Creditor in accordance with the provisions of the IBC, 2016. Respondent's Case: 11. The Respondent contends that the Supplier materially breached the sales contract in two ways: Delayed Delivery: The delay in delivering the machine beyond the agreed date of April 15, 2017, constitutes a breach of contract. Defective Machine: The Alpha 190-D exhibited substantial performance issues upon delivery. This constitutes a further breach, as the contract presumably obligated the Supplier to deliver a functional machine capable of performing its intended tasks. 12. Evidence supporting these breaches includes documented del ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a reason to reject an application under Section 9 of the IBC. 17. In conclusion, the Respondent argues that the NCLT's decision to dismiss the application was well-founded. The documented communication demonstrates a pre-existing dispute regarding the machine's performance, which falls outside the scope of the IBC. Additionally, the demand notice was improperly served, further weakening the Appellant's case. The Respondent maintains that the Supplier's breach of contract, including the delayed delivery and defective machine, justifies their position. Appraisal : 18. Heard both sides and perused all documents on record. 19. The dispute stems from a sales contract formed on March 20, 2017, between Hi Exports (Respondent) and Durst Phototechnik (Supplier) for the purchase of an industrial inkjet printer (Alpha 190-D). The agreed delivery date was April 15, 2017, but the machine arrived significantly later on August 28, 2017. Upon receiving the machine, the Respondent discovered critical performance issues that significantly hampered its functionality. 20. The Appellant argued that the Adjudicating Authority erred in its judgment on several grounds. First, they a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the case, it is evident that a pre-existing dispute existed between the parties regarding the performance and quality of the machine supplied. 24. The Respondent provides a detailed record of communication with the Supplier, including emails documenting performance issues, requests for return of the machine, and settlement discussions. 25. It would be apposite to see the communication exchanged between the two parties: a. Vide email dated 11.09.2017, the Respondent informed the Supplier that: "Till date out(r) machine still not running position due to recipe and cannot take for production and all commitment fails. ... Unless and until my machine will not start and earn money how can I pay instalments pls explain." b. Thereafter, the Supplier agreed to send a technical expert from Italy to resolve the performance issues/defects with the Machine. Furthermore, vide email dated 25.09.2017, the Respondent stated that: "the same fabric we print from Rajdhani sublimation the results already shown to your team, it was perfect and you have seen the results. The problem in ink or recipe. If this machine already running in Italy/Germany then why are we not getting the same resul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Respondent has provided sufficient evidence of this dispute, including documented communication with the Supplier about the machine's defects and delayed delivery. The documented communication between the Respondent and the Supplier shows that the Respondent had consistently raised concerns about the machine's performance well before the Appellant served the demand notice. It is clear that there was in fact a genuine and bona-fide pre-existing dispute before the (defective/improper) service of the demand notice dated 19.05.2021. The existence of these disputes is substantiated by emails, requests for returns, and settlement discussions. 27. We acknowledge the arguments presented by both parties. However, we place significant weight on the documented communication between the Respondent and the Supplier concerning the machine's performance issues. These communications, predating the demand notice, demonstrate a genuine dispute regarding the functionality of the machine. 28. The Respondent bolsters its arguments by citing relevant case laws: a. Mobilox Innovative Private Limited v. Kirusa Software Private Limited (2018) 1 SCC 353 wherein the Hon'ble Supreme Court held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opers Limited (Company Appeal (AT) (Insolvency) No. 703 of 2018 wherein this Tribunal had held that: "18. From the aforesaid decision, it is clear that the existence of dispute must be pre-existing i.e. it must exist before the receipt of the demand notice or invoice. If it comes to the notice of the Adjudicating Authority that the `operational debt' is exceeding Rs. 1 lakh and the application shows that the aforesaid debt is due and payable and has not been paid, in such case, in absence of any existence of a dispute between the parties or the record of the pendency of a suit or arbitration proceeding filed before the receipt of the demand notice of the unpaid `operational debt, the application under Section 9 cannot be rejected and is required to be admitted." This case emphasizes the need for a pre-existing dispute to be present before the demand notice is served. d. Rajratan Babulal Agarwal v. Solartex India (P) Ltd. (2023) 1 SCC 115 wherein Hon'ble Supreme Court held that: "75. When we speak about evidence, we must not overlook the law laid down in Mobilox (supra) that the court need not be satisfied that the defense is likely to succeed. The standard, in other w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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