Tribunal rejects insolvency petition due to pre-existing dispute.

The tribunal rejected the petition under Section 9 of the Insolvency and Bankruptcy Code, 2016, as there was a pre-existing dispute due to a pending civil suit filed by the operational creditor against the corporate debtor, making the petition not maintainable.

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Issues Involved:
1. Maintainability of the petition under Section 9 of the Insolvency and Bankruptcy Code, 2016.
2. Existence of operational debt and the status of the petitioner as an operational creditor.
3. Pre-existing dispute due to the pending civil suit.

Issue-wise Detailed Analysis:

1. Maintainability of the Petition under Section 9 of the Insolvency and Bankruptcy Code, 2016:
The petition was filed by the operational creditor under Section 9 of the Insolvency and Bankruptcy Code, 2016 (I&B Code, 2016), seeking repayment of Rs. 5,52,944/- for defective goods returned to the corporate debtor. The corporate debtor acknowledged the defective goods and issued credit notes. However, the corporate debtor contended that the petition is not maintainable since the petitioner had already filed a recovery suit prior to issuing the Demand Notice dated 17-6-2019 and before filing the present petition. According to sub-section (6) of Section 5 of the I&B Code, 2016, 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 representation or warranty. Therefore, the corporate debtor argued that the petition under Section 9 is not maintainable due to the pending suit.

2. Existence of Operational Debt and the Status of the Petitioner as an Operational Creditor:
The petitioner claimed that the corporate debtor supplied defective vitamin gummies worth Rs. 5,52,944/-, which were returned, and credit notes were issued by the corporate debtor. The petitioner issued a Demand Notice and claimed repayment. The corporate debtor argued that the petitioner is not an operational creditor, as the petitioner is a distributor and the corporate debtor is the supplier. The corporate debtor contended that the petitioner did not provide any goods or services to the corporate debtor, and thus, the claim does not qualify as operational debt. However, the tribunal found that the petitioner, being a distributor of the corporate debtor's goods, is rendering a kind of service to the corporate debtor. Therefore, the petitioner falls under the definition of an operational creditor, and the amount qualifies as operational debt.

3. Pre-existing Dispute Due to the Pending Civil Suit:
The corporate debtor argued that the petition cannot be admitted under Section 9 of the I&B Code due to a pre-existing dispute, as the petitioner had already filed a civil suit against the corporate debtor regarding the same debt. The tribunal referred to Section 5(6) of the I&B Code, which includes the pendency of a suit as a dispute. The tribunal also cited decisions from the Hon'ble NCLAT, which held that if a suit is pending before the issuance of the demand notice, the petition under Section 9 is not maintainable. The tribunal concluded that the pending civil suit amounts to a pre-existing dispute, and therefore, the petition cannot be admitted under Section 9 of the I&B Code.

Conclusion:
The tribunal rejected the petition on the grounds that there was a pre-existing dispute due to the pending civil suit filed by the operational creditor against the corporate debtor. The petition under Section 9 of the I&B Code was deemed not maintainable.

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