2018 (2) TMI 2002 - AT - Insolvency and Bankruptcy

Appellate Tribunal confirms rejection of insolvency application due to genuine dispute over goods quality

Shrivarad Polyfab Versus OLAM Agro India Pvt. Ltd.

The Appellate Tribunal upheld the Adjudicating Authority's decision to reject the application under Section 9 of the Insolvency and Bankruptcy Code, 2016, ... Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - existence of debt and dispute or not - HELD THAT:- The Adjudicating Authority rightly dealt with the matter of Form “C” - In view of the fact that there is an existence of dispute relating to quality of goods supplied by the Appellant, the Adjudicating Authority rightly refused to entertain the application under Section 9 of the ‘I&B Code’. Appeal dismissed. Issues:- Application under Section 9 of the Insolvency and Bankruptcy Code, 2016 for initiation of Corporate Insolvency Resolution Process.- Dispute regarding liability of debt or default of debt based on the issuance of Form 'C'.- Response of the Respondent raising objections related to the quality of goods supplied.Analysis:1. The Appellant, an Operational Creditor, filed an application under Section 9 of the Insolvency and Bankruptcy Code, 2016, seeking the initiation of Corporate Insolvency Resolution Process against the Respondent, a Corporate Debtor. The Adjudicating Authority rejected the application citing a dispute as the reason, leading to the appeal.2. The Appellant argued that the Form 'C' relied upon by the Adjudicating Authority did not signify a dispute, as it only confirmed the receipt of goods. Any defects in the transaction were rectified before the issuance of the Form 'C', contradicting the Adjudicating Authority's decision.3. On the other hand, the Respondent contended that the mere issuance of Form 'C' did not establish liability or default of debt. The existence of a dispute regarding the quality of goods supplied was highlighted as the reason for the dismissal of the application by the Adjudicating Authority.4. The Appellate Tribunal carefully examined the impugned order and agreed with the Adjudicating Authority's assessment. The Tribunal noted that the issuance of Form 'C' did not resolve the underlying dispute between the parties, especially concerning the quality of goods supplied.5. Additionally, the response from the Respondent detailing objections related to damages and losses suffered due to substandard goods further reinforced the presence of a dispute. The Tribunal upheld the decision of the Adjudicating Authority, emphasizing the existence of a genuine dispute as a valid reason for dismissing the application under the Insolvency and Bankruptcy Code.6. Consequently, the Tribunal dismissed the appeal, granting liberty to the Appellant to seek appropriate relief from the relevant forum. The judgment highlighted the importance of resolving disputes before initiating insolvency proceedings and reiterated the necessity of addressing underlying issues such as quality disputes in commercial transactions.