Tribunal dismisses application under Insolvency and Bankruptcy Code due to pre-existing dispute

The Tribunal dismissed the application under section 9 of the Insolvency and Bankruptcy Code, 2016, due to the presence of a pre-existing dispute between the parties before the demand notice and the claim being time-barred. The respondent's allegations of losses stemming from delayed deliveries, coupled with the issuance of the demand notice beyond the limitation period, led to the rejection of the application. The Tribunal emphasized the necessity for a genuine dispute and rejected the applicant's arguments, ultimately ruling in favor of the respondent.

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Issues:
1. Whether there was a pre-existing dispute between the parties before receipt of the demand noticeRs.
2. Whether the claim is barred by limitationRs.

Analysis:

Issue 1: Pre-existing Dispute
The applicant, an operational creditor, filed an application under section 9 of the Insolvency and Bankruptcy Code, 2016 against the respondent, a corporate debtor, for unpaid dues. The applicant claimed that the respondent failed to clear outstanding dues amounting to Rs. 80,23,368, which included principal and interest. The respondent countered, alleging that the applicant caused losses by failing to deliver goods on time, leading to order cancellations and financial losses. The respondent emphasized a pre-existing dispute and claimed that the applicant's actions caused substantial financial harm. The applicant, in response, argued that there was no legitimate dispute and that the deliveries were mutually rescheduled and accepted by the respondent without objection. The Tribunal examined the communications and found that a dispute existed prior to the demand notice, as evidenced by the respondent's claims of losses due to delayed deliveries.

Issue 2: Limitation
The respondent contended that the claim was time-barred, citing the last transaction on May 4, 2015, as the relevant date for limitation. The applicant argued that the claim was not time-barred, relying on a demand for payment on June 25, 2015, within the limitation period. However, the Tribunal determined that the claim was indeed barred by limitation, as the last payment was made on May 4, 2015, and the demand notice was issued on April 17, 2018, beyond the limitation period. Additionally, the respondent's reply to the demand notice did not constitute an acknowledgment of debt but rather a denial and counterclaim for losses incurred. The Tribunal referenced the Supreme Court's directive in Mobilox Innovations P. Ltd. v. Kirusa Software P. Ltd., emphasizing the need for a genuine dispute and rejecting spurious defenses. Consequently, the Tribunal concluded that there was a pre-existing dispute and the claim was time-barred, leading to the rejection of the application.

In conclusion, the Tribunal dismissed the application under section 9 of the Insolvency and Bankruptcy Code, 2016, citing the existence of a pre-existing dispute and the claim being barred by limitation.

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