2019 (9) TMI 964 - Tri - Insolvency and Bankruptcy

Tribunal Rejects Company's Insolvency Petition Due to Pre-existing Dispute

The Tribunal rejected the Company petition for the initiation of Corporate Insolvency Resolution Process against the Corporate Debtor due to the existence ... Maintainability of application - initiation of CIRP - Corporate Debtor - Default in repayment of amount alongwith interest - pre-existing dispute or not - HELD THAT:- It is clear that there was a pre-existing dispute which was brought to the notice of the Operational Creditor before the receipt of the Demand Notice by the Corporate Debtor. The Company petition has been filed by Supreme Transport Organisation Pvt Ltd, the Operational Creditor under Section 9 of the Insolvency and Bankruptcy Code, 2016 (I&B Code) for initiation of Corporate Insolvency Resolution Process (CIRP) against DSV Air & Sea Pvt Ltd, the Corporate Debtor is rejected. Issues:- Initiation of Corporate Insolvency Resolution Process under Section 9 of the Insolvency and Bankruptcy Code, 2016.- Existence of pre-existing dispute between the Operational Creditor and the Corporate Debtor.- Application of the judgment in Mobilox Innovations Private Limited vs Kirusa Software Private Limited.Initiation of Corporate Insolvency Resolution Process:The Company petition was filed by the Operational Creditor against the Corporate Debtor for default in payment, leading to the initiation of Corporate Insolvency Resolution Process under Section 9 of the Insolvency and Bankruptcy Code, 2016. The Operational Creditor alleged that the Corporate Debtor failed to pay an amount, including interest, for services rendered in transporting machinery parts to the Corporate Debtor's client in Haryana. The Operational Creditor issued a Demand Notice, which was responded to by the Corporate Debtor, claiming losses due to the Operational Creditor's breach of agreed terms.Existence of Pre-Existing Dispute:The Corporate Debtor contended that there was a pre-existing dispute regarding the services provided by the Operational Creditor before the receipt of the Demand Notice. The Corporate Debtor raised issues of delayed delivery, resulting in losses and deductions due to idling costs incurred by Italian engineers at the client's site. Various email communications between the parties showcased the dispute being brought to the Operational Creditor's notice before the Demand Notice was issued.Application of Judgment in Mobilox Innovations Private Limited vs Kirusa Software Private Limited:The Tribunal referred to the judgment in Mobilox Innovations Private Limited vs Kirusa Software Private Limited, emphasizing the requirement to reject a petition under Section 9 of the Insolvency and Bankruptcy Code if a pre-existing dispute exists. The judgment highlighted the need for a plausible contention requiring further investigation and the rejection of spurious defenses. Based on the facts and circumstances presented, the Tribunal concluded that the pre-existing dispute was brought to the Operational Creditor's notice before the Demand Notice, leading to the rejection of the petition under Section 9 of the Insolvency and Bankruptcy Code.Conclusion:The Tribunal rejected the Company petition for the initiation of Corporate Insolvency Resolution Process against the Corporate Debtor. However, it clarified that the rejection did not affect the Operational Creditor's right to pursue recovery of dues through other appropriate legal avenues.