Appeal Allowed: Dispute Over Goods Quality Not a Bar to Insolvency Application

The National Company Law Appellate Tribunal allowed the appeal and set aside the Adjudicating Authority's order dismissing the application under Section 9 of the Insolvency and Bankruptcy Code, 2016. The Tribunal found that the existence of a dispute regarding the quality of goods supplied and the demand notice issued by an advocate were not sufficient grounds for rejection. It was determined that there was no dispute regarding the majority of goods supplied, except for one invoice in 2015, which was not the subject of the claim, leading to the admission of the application under Section 9.

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Issues: Dismissal of application under Section 9 of the Insolvency and Bankruptcy Code, 2016 due to existence of dispute and demand notice issued by an advocate.

In this judgment by the National Company Law Appellate Tribunal, the Adjudicating Authority dismissed the application under Section 9 of the Insolvency and Bankruptcy Code, 2016, citing two main grounds: the demand notice was issued by an advocate, and there was an existence of a dispute. The Respondent had raised a dispute regarding the quality of waste paper supplied, contending that the application was not maintainable as a dispute was already pending. The Adjudicating Authority noted the Respondent's challenge to the quality of goods supplied in various notices, including a reply notice highlighting the unusable waste paper supplied. The Appellant argued that subsequent invoices raised after the initial dispute should not affect the application's validity. The Respondent claimed that a quality report from 2015 showed substandard goods, but the Appellant pointed out that invoices from 2013 to 2015 did not have accompanying quality reports. The Tribunal found that there was no dispute regarding the majority of goods supplied after 2013, except for one invoice in 2015, which was not the subject of the claim, leading to the admission of the application under Section 9.

Furthermore, the Tribunal addressed the issue of the demand notice being issued by an advocate, citing a Supreme Court decision that such a factor should not be a ground for rejecting the application. As the Adjudicating Authority failed to consider crucial facts, the Tribunal set aside the order and remitted the case for admission, allowing the Respondent to settle the claim with the Appellant before admission. The appeal was allowed with these observations, and no costs were awarded in the matter.

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