Application for Corporate Insolvency Rejected: Lack of Authorized Demand Notice and Genuine Dispute

The Tribunal rejected the application for initiating the corporate insolvency resolution process. The demand notice was not issued by an authorized person, and there was a pre-existing genuine dispute regarding the quality of goods supplied. Therefore, the application was dismissed with no order as to costs.

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Issues Involved:

1. Authority of advocate to issue demand notice in Form-3.
2. Existence of a dispute under Section 5(6) of the Insolvency and Bankruptcy Code, 2016 (I&B Code).

Issue-wise Detailed Analysis:

1. Authority of Advocate to Issue Demand Notice in Form-3:

The Tribunal examined whether the advocate who issued the demand notice in Form-3 had the authority to do so. The demand notice was issued by Advocate Mr. Ankita Mitra, who was purportedly authorized by Mr. Laxmi Narayan Shaw. However, the Tribunal found no letter of authorization from Mr. Laxmi Narayan Shaw or Mr. Mohan Shaw in favor of Advocate Ankita Mitra. The Tribunal concluded that the advocate was not an authorized person as per the statutory requirements, citing precedents such as *Macquarie Bank Ltd. v. Uttam Galva Metallic Ltd.*, where it was held that a notice issued by an advocate without proper authorization cannot be treated as a notice under Section 8 of the I&B Code. Consequently, the Tribunal held that the demand notice was not issued in accordance with Section 8(1) of the I&B Code, thus making the application unsustainable on this ground.

2. Existence of a Dispute Under Section 5(6) of the I&B Code:

The respondent contended that there was a pre-existing dispute regarding the quality of goods supplied, which was communicated to the applicant long before the issuance of the demand notice. The Tribunal examined various notices and communications, including a notice dated 15.04.2013, where the respondent complained about the quality of waste paper supplied. The Tribunal found that the dispute was genuine and had been raised in a timely manner. The applicant's argument that the dispute was not pending before any court or adjudicating authority was dismissed, as the Tribunal emphasized that the existence of a dispute, rather than its merit or pendency, was the crucial factor. The Tribunal referred to the Supreme Court's judgment in *Mobilox Innovations (P.) Ltd. v. Kirusa Software (P.) Ltd.*, which clarified that the existence of a plausible dispute, even if not adjudicated, is sufficient to reject an application under Section 9 of the I&B Code. The Tribunal concluded that the respondent had successfully demonstrated the existence of a genuine dispute, thereby making the application liable for rejection.

Conclusion:

In light of the findings on both issues, the Tribunal rejected the application for initiating the corporate insolvency resolution process. The demand notice was not issued by an authorized person, and there was a pre-existing genuine dispute regarding the quality of goods supplied. Therefore, the application was dismissed with no order as to costs.

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