2018 (8) TMI 1618 - AT - Insolvency and Bankruptcy

Tribunal Dismisses Appeal Due to Pre-Existing Dispute

M/s Impex Services India Private Limited Versus M/s DBA Enterprises LLP

The Tribunal dismissed the appeal as the Respondent proved the pre-existing dispute on service deficiency before the demand notice issuance under Section ... Corporate Insolvency Resolution Process - existence of dispute’ between the Appellant/Operational Creditor and the Respondent/ Corporate Debtor - disputes existed inter-se the parties even prior to issuance of Demand Notice under Section 8 of I&B Code with respect to deficiency in services rendered - Held that:- The dispute in regard to deficiency of service was raised as early as 18.04.2016. Respondent/ Corporate Debtor claimed to have suffered pecuniary loss in an amount of ₹ 5,69,734/-. Admittedly, demand notice in terms of Section 8(1) of I&B Code was issued by the Appellant/ Operational Creditor on 04.09.2017 demanding payment. The Respondent/ Corporate Debtor issued letter dated 01.09.2017 asking the Appellant/ Operational Creditor to resolve the dispute by way of conciliation proceedings under Arbitration Act. There is no escape from the conclusion that the Respondent/Corporate Debtor had raised dispute much prior to the issuance of demand notice by Appellant/ Operational Creditor under Section 8(1) of I&B Code. The mere fact that the Respondent/ Corporate Debtor had sent its ledger account via. e-mail dated 19.04.2017 in regard to principal amount of dues of the Appellant/Operational Creditor as per the closing balance mentioned in the statement would not in any manner dilute the factum of a pre-existing dispute when the demand notice in terms of Section 8(1) of I&B Code was issued by the Appellant/Operational Creditor. On consideration of the material on record, we are of the considered opinion that the Respondent/ Corporate Debtor has been able to demonstrate that a pre-existing dispute in regard to deficiency of service was in existence when the demand notice under Section 8(1) of I&B Code was issued by the Appellant/ Operational Creditor. The Adjudicating Authority did not err in noticing the same. Issues Involved:1. Existence of a pre-existing dispute between the Appellant (Operational Creditor) and the Respondent (Corporate Debtor).2. Applicability of the agreement dated 01.10.2015 between the Appellant and M/s SSMP Industries Ltd. to the transactions with the Corporate Debtor.3. Compliance with the conditions necessary to trigger the Corporate Insolvency Resolution Process under Section 9 of the Insolvency and Bankruptcy Code, 2016 (I&B Code).Detailed Analysis:1. Existence of a Pre-Existing Dispute:The primary issue in this appeal was whether a pre-existing dispute existed between the Appellant and the Respondent before the issuance of the demand notice under Section 8(1) of the I&B Code. The Adjudicating Authority found that disputes regarding the deficiency in services existed between the parties even prior to the issuance of the demand notice. The Respondent claimed that due to negligence on the part of the Appellant in filling documents correctly, they suffered financial losses amounting to Rs. 5,69,734/- in export incentives. The Respondent had been demanding compensation for these losses, which was communicated through emails starting from 18.04.2016. The Tribunal concluded that the dispute was raised much before the Appellant issued the demand notice on 04.09.2017, thereby establishing the existence of a pre-existing dispute.2. Applicability of the Agreement Dated 01.10.2015:The Appellant argued that the agreement dated 01.10.2015 between them and M/s SSMP Industries Ltd. did not relate to transactions with the Corporate Debtor, DBA Enterprises LLP. However, the Respondent contended that the services were provided on similar terms to both entities, which shared common management and address. The Tribunal noted that the transactions between the Appellant and both entities were interrelated, and the bills were discharged from the accounts of either company. The emails relied upon by both parties were addressed to the sister company of the Respondent, and there was no separate agreement executed between the Appellant and the Respondent for the shipment. The Tribunal concluded that the agreement dated 01.10.2015 and the interrelated transactions indicated that the dispute regarding the deficiency in services applied to both entities.3. Compliance with Conditions for Triggering Corporate Insolvency Resolution Process:For an Operational Creditor to trigger the Corporate Insolvency Resolution Process under Section 9 of the I&B Code, the following conditions must be met:- Occurrence of a default.- Delivery of a demand notice of an unpaid operational debt.- Non-receipt of payment or a reply indicating the existence of a pre-existing dispute within 10 days of receipt of the demand notice.The Tribunal emphasized that the existence of a dispute must be clear and not a mere assertion unsupported by evidence. In this case, the Respondent had issued a letter on 01.09.2017 proposing conciliation under the Arbitration Act before the demand notice was issued by the Appellant. The Tribunal found that the Respondent had demonstrated a pre-existing dispute regarding the deficiency of service, which was raised well before the demand notice was issued. Consequently, the Tribunal held that the conditions for triggering the Corporate Insolvency Resolution Process were not met, as the existence of a pre-existing dispute was established.Conclusion:The Tribunal concluded that the Respondent successfully demonstrated the existence of a pre-existing dispute regarding the deficiency of service before the issuance of the demand notice under Section 8(1) of the I&B Code. The Adjudicating Authority did not err in rejecting the Appellant's petition under Section 9 of the I&B Code. Therefore, the appeal was dismissed, and no orders as to costs were issued.