Application to Initiate CIRP Dismissed Due to Pre-Existing Dispute

The Tribunal dismissed the Operational Creditor's application to initiate Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor. The decision was based on the pre-existing dispute between the parties regarding the quality of goods supplied, as evidenced by communications and arbitration proceedings, rendering the application under Section 9 of the Insolvency and Bankruptcy Code, 2016, not maintainable.

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Issues Involved:
1. Whether the Corporate Debtor defaulted on the payment of Rs. 6,49,94,661/- to the Operational Creditor.
2. Whether there was a pre-existing dispute between the parties before the issuance of the demand notice under Section 8 of the Insolvency and Bankruptcy Code, 2016.
3. Whether the Operational Creditor is entitled to initiate Corporate Insolvency Resolution Process (CIRP) under Section 9 of the Insolvency and Bankruptcy Code, 2016.

Issue-wise Detailed Analysis:

1. Default on Payment:
The Operational Creditor, Jindal Oil & Fats Limited, claimed that the Corporate Debtor, Isha Global Private Limited, failed to clear a debt of Rs. 6,49,94,661/- for the supply of Crude Palm Oil under two High Seas Sale Agreements dated 26.10.2017 and 09.12.2017. Despite repeated follow-ups, only partial payments amounting to Rs. 3,90,18,248/- were made by the Corporate Debtor. The Operational Creditor issued a demand notice on 28.01.2021 under Section 8 of the Insolvency and Bankruptcy Code, 2016, which was denied by the Corporate Debtor on 04.02.2021, citing deteriorated quality of goods supplied.

2. Pre-existing Dispute:
The Corporate Debtor argued that there was a pre-existing dispute regarding the quality of the Crude Palm Oil supplied. Correspondences dated 09.01.2019 and 31.01.2019 indicated complaints about the deteriorated quality of goods. The Operational Creditor had acknowledged these complaints and assured to take up the issue with the supplier. The matter was also referred to arbitration, where both parties filed claims and counterclaims. The Sole Arbitrator dismissed the claims as premature, stating that the Operational Creditor must exhaust all legal remedies with the supplier first.

The Tribunal noted that the communications and arbitration proceedings established the existence of a dispute prior to the issuance of the demand notice. This was further supported by the Operational Creditor's own letter dated 31.01.2019, acknowledging the complaint about the quality of the goods and promising to address it with the supplier.

3. Entitlement to Initiate CIRP:
The Tribunal referred to the Supreme Court's decision in "Mobilox Innovations Pvt. Ltd. Vs. Kirusa Software (P.) Limited," emphasizing that for an application under Section 9 of the Insolvency and Bankruptcy Code, 2016, the existence of a dispute must be pre-existing, i.e., before the receipt of the demand notice. The Tribunal concluded that the dispute between the parties existed before the issuance of the demand notice on 28.01.2021.

Given the pre-existing dispute, the Tribunal determined that the application for initiating CIRP under Section 9 of the Insolvency and Bankruptcy Code, 2016, was not maintainable. Consequently, the Tribunal dismissed the application.

Conclusion:
The Tribunal dismissed the application filed by the Operational Creditor to initiate CIRP against the Corporate Debtor due to the existence of a pre-existing dispute regarding the quality of the goods supplied, which was evident from the communications and arbitration proceedings between the parties.

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