Tribunal dismisses insolvency application due to valid dispute over goods quality.

The tribunal dismissed the application for the initiation of Corporate Insolvency Resolution Process against the Corporate Debtor as the Corporate Debtor had raised a valid dispute regarding the quality of goods supplied before the Demand Notice was issued. The Operational Creditor's claim that no dispute existed was deemed false, leading to the application being found not maintainable under Section 9(5)(ii)(d) of the Insolvency and Bankruptcy Code.

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Issues Involved:

1. Initiation of Corporate Insolvency Resolution Process (CIRP)
2. Existence of Operational Debt and Default
3. Dispute Regarding Quality of Goods
4. Compliance with Insolvency and Bankruptcy Code (IBC) Procedures

Issue-wise Detailed Analysis:

1. Initiation of Corporate Insolvency Resolution Process (CIRP):
The petition was filed under Section 9 of the Insolvency and Bankruptcy Code, 2016, by the Operational Creditor to initiate the Corporate Insolvency Resolution Process against the Corporate Debtor. The Operational Creditor claimed an outstanding amount of Rs. 1,82,96,486/- including interest. The Corporate Debtor had accepted the receipt of goods and made part payments.

2. Existence of Operational Debt and Default:
The Operational Creditor provided evidence of sales transactions and part payments received from the Corporate Debtor for the financial years 2015-16, 2016-17, and 2017-18. The Corporate Debtor confirmed the outstanding amount via email dated 26.04.2017. A Demand Notice was sent on 27.02.2019, which was replied to by the Corporate Debtor on 08.03.2019, disputing the claim.

3. Dispute Regarding Quality of Goods:
The Corporate Debtor contended that there was a pre-existing dispute regarding the quality of goods supplied, which was communicated to the Operational Creditor before the Demand Notice was issued. The Corporate Debtor cited letters dated 09.10.2015 and 16.10.2015, highlighting complaints about the quality of PVC Resins supplied. The Operational Creditor failed to address these complaints satisfactorily.

4. Compliance with Insolvency and Bankruptcy Code (IBC) Procedures:
The tribunal examined compliance with Sections 8 and 9 of the IBC. Section 8 requires the Operational Creditor to deliver a Demand Notice and the Corporate Debtor to respond within ten days, indicating any dispute or payment. Section 9 allows the Operational Creditor to file an application if no payment or dispute notice is received. The tribunal found that the Corporate Debtor had raised a dispute regarding the quality of goods before receiving the Demand Notice, which was not disclosed by the Operational Creditor in their affidavit under Section 9(3)(b).

Conclusion:
The tribunal concluded that the Corporate Debtor had raised a valid dispute regarding the quality of goods before the Demand Notice was issued. The Operational Creditor's affidavit stating no dispute existed was found to be false. Therefore, under Section 9(5)(ii)(d) of the IBC, the application was deemed not maintainable and was dismissed.

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