Tribunal denies application under Section 9 of I&B Code due to lack of evidence and pre-existing disputes.

The Tribunal rejected the application under Section 9 of the I&B Code as the operational debt and default were not proven, and pre-existing disputes existed between the parties. The Tribunal clarified it did not rule on the merits of the Applicant's claim, allowing the Applicant to pursue remedies through the appropriate legal channels.

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Issues Involved:
1. Existence of the operational debt and its default.
2. Existence of pre-existing disputes.

Detailed Analysis:

I. Existence of the operational debt and its default:

a. Applicant’s Contention:
The Applicant argued that the Transfer Consideration for the undertaking on a Slump Sale Basis was Rs. 123,00,00,000/-, and the consideration under the 3 Tranches totaling Rs. 58,00,00,000/- was for Additional Works. These two sets of considerations were distinct and separate from each other and could not be combined. Therefore, the Corporate Debtor was liable to pay the balance consideration of Rs. 58,00,00,000/- out of Rs. 123,00,00,000/- from 18.06.2018, independent of another Rs. 58,00,00,000/- payable for additional works under 3 Tranches.

b. Contradictions in Applicant’s Claims:
The Applicant’s contention was contradicted by its own admissions in emails and letters. For instance, an email dated 04.01.2019 from the Applicant to the Corporate Debtor stated, “This confirmation of INR 123 crores sale of this plant on Slump Sale Basis was done... BTA divided the payment of INR 123 crores in closing payment and three Tranches.” Similarly, an email dated 11.02.2019 from the Applicant requested the processing of the balance payment of Rs. 6 crores out of Rs. 123 crores. These admissions indicated that the Applicant was aware and had agreed to the division of the Transfer Consideration into parts as per the BTA.

c. Documentary Evidence:
The primary document, the Business Transfer Agreement (BTA) dated 07.04.2018, defined "Transfer Consideration" as an aggregate amount of up to Rs. 123,00,00,000/- to be adjusted and paid in accordance with the Agreement. The BTA detailed the payment of Transfer Consideration in parts, including an initial transfer consideration of Rs. 65,00,00,000/- and the balance consideration in three tranches. The Applicant’s ledger accounts showed that the Transfer Consideration under the BTA was duly paid by the Corporate Debtor.

d. Definition of Slump Sale:
The Applicant argued that the definition of Slump Sale under Section 2(42C) of the Income Tax Act did not allow for apportionment of sale consideration. However, the definition is silent on the mode of payment, and thus, the Applicant’s interpretation was not supported by the law.

e. Delayed Demand:
The Applicant first demanded the balance consideration of Rs. 58,00,00,000/- on 13.05.2019, nearly a year after the transfer of the undertaking and after receiving the total transfer consideration under the BTA. This delayed demand raised doubts about the genuineness of the Applicant’s claim.

II. Existence of pre-existing disputes:

a. Pre-existing Dispute Principle:
The Supreme Court in "Mobilox Innovations Private Limited vs Kirusa Software Private Limited" held that the existence of a dispute must be pre-existing before the receipt of the demand notice. The Corporate Debtor must bring to the notice of the operational creditor the existence of a dispute within 10 days of receipt of the demand notice.

b. Definition of Dispute:
Under Section 5(6) of the I&B Code, a “dispute” includes a suit or arbitration proceedings relating to the existence of the amount of debt, the quality of goods or service, or the breach of a representation or warranty.

c. Evidence of Pre-existing Dispute:
The Corporate Debtor’s letter dated 08.01.2019, signed by both parties, indicated that the Applicant had failed to complete the Tranche II Conditions Precedent, leading the Corporate Debtor to set off and adjust the Tranche III payment of Rs. 6,00,00,000/-. Further, the Corporate Debtor’s letter dated 06.03.2019 demanded a refund from the Applicant for violating the terms of the letter dated 08.01.2019 and disputed the Applicant’s compliance with the BTA. These disputes were raised before the receipt of the demand notices, and the Corporate Debtor responded to the demand notices within the statutory period, raising disputes regarding the Applicant’s claims and non-compliance with the BTA.

Conclusion:

The Tribunal concluded that the operational debt and its default were not satisfactorily proven, and there were pre-existing disputes between the parties. Therefore, the application filed under Section 9 of the I&B Code was not maintainable and was rejected. The Tribunal clarified that it did not decide on the merits of the Applicant’s claim, and the Applicant was at liberty to proceed before the appropriate authority as per law.

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