2020 (10) TMI 163 - Tri - Insolvency and Bankruptcy

Company Petition Dismissed Under IBC Section 9: Disputes Deemed Pre-Existing

Pitti Coal Company Versus Mahalaxmi Continental Ltd. and Ors.

The Tribunal dismissed the Company Petition under Section 9 of IBC, ruling that the disputes between the Operational Creditor (OC) and Corporate Debtors ... Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - existence of debt and dispute or not - HELD THAT:- The OC and the CD have entered into an agreement with regard to purchase and supply of coal and the OC refused to accept the coal supplied by the CD both on the ground of inferior quality and also in not supplying the coal through a particular vessel by name MV Salt Lake City. It also appears that the prices of coal have been dropped after making payment by the OC to the CD at a particular price. The possibility of refusal of acceptance of coal by the OC due to fall of prices cannot be ruled out, since the advocate appearing for the applicant during the course of argument refused to accept coal when asked by this Tribunal as to why can't they resolve the issue by accepting coal from the CD as the CD expressed his ready and willingness to supply the coal. The OC did not place any material before this Tribunal to prove the alleged assertion by way of written concluding contract between the parties - It also transpires from the reply and the conduct that the OC is not inclined to accept the material due to obvious reasons. All the above allegations and counter allegations clearly proves a pre-existing dispute between the parties. In this case, the demand notice was dispatched on 01.06.2019 at 12.24 Noon as per the postal receipts placed by the OC and the CD is expected to receive it at least two/three days thereafter. In the meanwhile, the CD has sent an email to the OC on 31.05.2019 at 15.55 PM alleging so many breaches on the part of the OC which proves the pre-existing disputes between the parties with regard to enforcement of the terms & conditions of the contract. Therefore, this Tribunal is of the considered opinion that this is not a fit case where Section 9 of the IBC can be triggered in the above facts and circumstances and the above Company Petition is liable to be dismissed. Petition dismissed. Issues:Application under Section 9 of IBC, 2016 for initiating Corporate Insolvency Resolution Process against the Corporate Debtors. Dispute over non-supply of coal and contractual obligations.Analysis:The Operational Creditor (OC) filed an application under Section 9 of IBC, 2016 against the Corporate Debtors (CD) for not supplying coal as per the agreement. The CD contended that the OC filed the petition to avoid contractual obligations due to reduced coal prices. CD argued its financial solvency and disputed OC's claims. The main issue was whether the CD's contentions amounted to an existing dispute and if the application was maintainable.The OC claimed non-supply of coal and demanded a refund with interest. CD argued against OC's assertions regarding coal supply and timely payments. Both parties presented their arguments, citing legal precedents to support their positions. The Tribunal examined the agreement and found disputes over coal quality, vessel specifications, and price fluctuations. OC's refusal to accept coal and CD's allegations of delayed payments indicated a pre-existing dispute between the parties.The Tribunal reviewed legal precedents cited by both sides and concluded that the disputes in this case were not similar to the cases referenced. The Tribunal noted the existence of pre-existing disputes based on communications and conduct between the parties. It found that the CD's email alleging breaches before receiving the demand notice showed ongoing disputes. Consequently, the Tribunal dismissed the Company Petition under Section 9 of IBC, stating it was not a suitable case for insolvency proceedings, allowing the OC to pursue recovery through appropriate legal channels.In the final judgment, the Tribunal dismissed the Company Petition without costs, emphasizing that the OC could seek recovery through other legal avenues if desired. The decision was announced on February 24, 2020, highlighting the rejection of the insolvency application but not restricting the OC from seeking redress through alternative legal forums.