2019 (8) TMI 685 - AT - Insolvency and Bankruptcy

Appeal dismissed in operational debt claim dispute over product specification agreement. Upholding need to prove debt and default.

ALOK JAIN Versus TIJARIA POLYPIPES LTD.

The Tribunal dismissed the appeal in a case involving an operational debt claim under Section 9 of the Insolvency and Bankruptcy Code. The dispute arose ... Admissibility of petition - Initiation of Corporate Insolvency Resolution Process - sale of PLP Duct Pipe - existence of dispute or not - Section 9 of the Insolvency and Bankruptcy Code, 2016 - HELD THAT:- In order to trigger the provisions of the IBC on the basis of Section 9, it is necessary for the Operational Creditor, to show that there is outstanding operational debt and that there is a default - On hearing Counsel and perusing Impugned Order, we are unable to accept the submissions of Appellant. Appellant has failed to show debt due. Also, the supply order which is being relied on by the Appellant itself mentioned in the reference, and it shows that supply order was being given to the Respondent on the basis of RC Agreement dated 05.06.2017. This is clearly a date which is prior to the Agreement dated 26th December, 2017, which is being relied on by the Appellant. The Appellant has failed to show that operational debt existed. Appeal dismissed. Issues:Operational debt claim under Section 9 of the Insolvency and Bankruptcy Code, 2016 (IBC) based on an Agreement for sales representation of Polypipes in Telangana.Detailed Analysis:1. The Appellant, an Operational Creditor, filed a petition under Section 9 of the IBC claiming an outstanding operational debt against the Corporate Debtor for services provided as a sales representative for PLP Duct Pipes in Telangana. Despite orders procured by the Corporate Debtor, the Appellant alleged non-payment of dues, leading to the initiation of insolvency proceedings.2. The Adjudicating Authority dismissed the petition, citing an existing dispute regarding the interpretation of the product mentioned in the Agreement. The Authority found that the claim was not sustainable due to the disagreement between the parties over the type of product involved.3. During the appeal, the Counsel for the Appellant argued that the Agreement referred to PLB HDPE Duct Pipes, not PLP Duct Pipes, and should be construed accordingly. The Respondent contended that the products were distinct and the Appellant cannot claim commission for a different product not specified in the Agreement.4. To trigger IBC provisions under Section 9, the Operational Creditor must establish the existence of operational debt and default. The Appellant relied on the Agreement mentioning 'PLP Duct Pipe' and a supply order for 'PLB HDPE Duct' to support the claim. However, the Tribunal found the Appellant failed to demonstrate the debt due, as the products differed, and the supply order predated the Agreement.5. Additionally, the supply order referenced in the appeal was based on an agreement predating the one relied upon by the Appellant. The Tribunal concluded that the Appellant did not substantiate the operational debt claim, leading to the rejection of the appeal and upholding the Adjudicating Authority's decision.In conclusion, the Tribunal rejected the appeal, emphasizing the importance of establishing the existence of operational debt and default under the IBC for initiating insolvency proceedings. The disagreement over the product type specified in the Agreement and the supply order timeline were crucial factors leading to the dismissal of the claim.