2020 (1) TMI 1264 - Tri - Insolvency and Bankruptcy

Dismissal of Corporate Insolvency Petition due to Dispute in Delivery; No Costs Imposed

Horizon Translifters Pvt. Ltd. Versus Garden Silk Mills Limited

The Adjudicating Authority dismissed the petition for initiation of Corporate Insolvency Resolution Process under Section 9 of the Insolvency and ... Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its debt - Insurance claim pending - existence of debt and dispute or not - HELD THAT:- In case of dispute, this is not the forum to examine and adjudicate as to what extent the claim of the Petitioner is admissible as due and recoverable. Neither the Tribunal in the present proceedings will examine the merits of the respective claims. Moreover, even the adequacy of the dispute has not been seen. It is only to be seen whether the dispute raised by the Corporate Debtor qualified as dispute as defined under sub-Section 6 of Section-5 of the IB Code. The contention raised by the Corporate Debtor was neither spurious nor hypothecated nor illusory and infact there is a dispute with respect to delivery of goods in good condition at the destination place. The existence of non-disputed debt is sine-qua-non nor for initiation of CIRP under Section 9 of the IB Code, the IB Code is intended to be a substitute to a recovery forum - In the present case, the dispute was raised before the issuance of notice under Section 8 besides the correspondence placed on record shows that the liability has been disputed and there is a plausible dispute pre-exist between the parties. The claim of the operational debt in question is not free from dispute. Records show that the dispute was raised prior to issuance of notice under Section 8 of the IB Code - this Adjudicating Authority is of the view that the petition does not qualify for admission under Section 9 of the IB Code and therefore, the same is rejected. Petition dismissed without cost. Issues:Initiation of Corporate Insolvency Resolution Process under Section 9 of the Insolvency and Bankruptcy Code, 2016 for recovery of unpaid Operational Debt.Analysis:1. The Petitioner, a company incorporated under the Companies Act, 1956, filed a petition under Section 9 of the Insolvency and Bankruptcy Code, 2016, seeking initiation of Corporate Insolvency Resolution Process against the Corporate Debtor, Garden Silk Mills Limited, for recovery of unpaid Operational Debt related to transportation services provided.2. The Respondent Company raised objections, including the lack of authority in the Demand Notice, a pre-existing dispute regarding shortage/theft, absence of invoices, and a settlement offer through a debit note and cheque.3. The Adjudicating Authority considered the arguments presented by both parties and examined the documents submitted, noting the absence of authority for the Demand Notice, a dispute regarding shortage/theft, and the failure to provide invoices as required under the IB Code.4. Referring to the Supreme Court case of Mobilox Innovation Pvt. Ltd. Vs. Kirusa Software Project Ltd. 2017, the Adjudicating Authority emphasized the need to reject the application if a notice of dispute exists, without delving into the merits of the dispute.5. The Adjudicating Authority concluded that a plausible dispute existed regarding the delivery of goods in good condition, and since the dispute was raised before the issuance of the notice under Section 8 of the IB Code, the petition did not qualify for admission under Section 9.6. The judgment clarified that the dismissal of the petition did not prejudice the Petitioner's rights in pursuing the matter in another forum, and the decision was made without imposing any costs on the parties.This detailed analysis of the judgment provides a comprehensive overview of the issues involved, the arguments presented by both parties, the legal considerations applied by the Adjudicating Authority, and the ultimate decision reached in the case.