Operational Creditor Application Dismissed for Lack of Proof of Demand Notice & Pre-existing Dispute

The Tribunal rejected the application under Section 9 of the Insolvency and Bankruptcy Code, 2016, as the operational creditor failed to prove delivery of the demand notice and a pre-existing dispute existed regarding the quality of goods and payment amount. The corporate debtor's arguments on maintainability due to suppression of facts were considered, leading to the application's dismissal. The parties were instructed to bear their own costs.

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Issues Involved:
1. Maintainability of the application under Section 9 of the Insolvency and Bankruptcy Code, 2016.
2. Proof of delivery of the demand notice as per Section 8(1) of the I&B Code.
3. Existence of a pre-existing dispute regarding the quality of goods supplied.

Issue-wise Detailed Analysis:

1. Maintainability of the Application:
The operational creditor filed an application under Section 9 of the Insolvency and Bankruptcy Code, 2016, to initiate the Corporate Insolvency Resolution Process (CIRP) against the corporate debtor for non-payment of Rs. 3,07,21,702, including interest. The corporate debtor contested the application, arguing it was not maintainable due to suppression of material facts and pre-existing disputes over the quality of goods supplied.

2. Proof of Delivery of Demand Notice:
The corporate debtor argued that the demand notice was not received, and the operational creditor failed to prove statutory compliance under Section 8(1) of the I&B Code. The operational creditor's track report did not definitively prove delivery of the notice. The Tribunal noted that proof of delivery is a critical requirement under Section 9(3)(a) and (5) of the I&B Code. The operational creditor's inability to provide supporting evidence from the Postal Authority led the Tribunal to conclude that the operational creditor failed to prove compliance with Section 9(5).

3. Existence of Pre-existing Dispute:
The corporate debtor claimed that the goods supplied were of poor quality, leading to disputes and differences between the parties. The operational creditor admitted the quality issue and agreed to a waiver of Rs. 1.76 Crores, with the corporate debtor liable for Rs. 1 Crore, conditional on cheque payments. The cheques were dishonored, leading to further disputes. The Tribunal found the email correspondences between the parties confirmed the pre-existing dispute regarding the quality of goods and the amount payable. The Tribunal referenced the principle laid down in Mobilox Innovations Private Limited vs. Kirusa Software Private Limited, confirming that the dispute was genuine and pre-existing.

Conclusion:
The Tribunal concluded that the operational creditor failed to prove the delivery of the demand notice and that there was a pre-existing dispute regarding the quality of goods and the amount payable. Consequently, the application was rejected under Section 9(5)(i)(a) and (d) of the I&B Code. The parties were directed to bear their respective costs.

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