2020 (10) TMI 772 - Tri - Insolvency and Bankruptcy

Application for Corporate Insolvency Rejected Due to Pre-Existing Dispute

Chempharm Industries India Private Limited Versus SGS Pharmaceuticals Pvt. Ltd.

The Tribunal rejected the application for corporate insolvency resolution process under Section 9 of the Insolvency and Bankruptcy Code due to the ... 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 Respondent has sent an email on 15.11.2018, complaining about the delay in completion of work and quality of service provided by the petitioner and on perusal of the E-mails sent by respondent to the applicant dated 02.11.2017, 20.11.2018 and 02.06.2018 it can be concluded that the respondent has requested several times to the applicant for the timely completion of work and has complained about the delay in the completion of work. The project hand over report dated 13.08.2018 submitted by the neutral third party to certify the construction site submitted by the applicant in the petition also contains the fact that major leakage has been found in the work as well as work was not found as per the satisfaction of the third party. The documentary evidence submitted by both the parties clearly establishes the pre-existence of dispute between the parties prior to the issuing of notice by the Petitioner. Application dismissed. Issues:Application for corporate insolvency resolution process under Section 9 of the Insolvency and Bankruptcy Code 2016 based on alleged default in payment by the Respondent.Analysis:1. The Applicant, a company providing clean room solutions, filed an application seeking initiation of corporate insolvency resolution process against the Respondent, a pharmaceutical company, for defaulting on a debt of Rs. 21,81,444, including the principal amount of Rs. 19,73,965 for materials supplied. The Applicant raised invoices upon the Respondent for services provided but the payment was not made, leading to the demand notice being issued under the Code.2. The Respondent contested the claim, arguing that the amount claimed was not recoverable as it had already paid the full amount. The Respondent also raised issues regarding the authorization of the insolvency application, alleging unethical behavior by the Applicant, monetary losses, and delays in work completion. The Respondent maintained that it was not liable to pay any amount to the Applicant.3. Both parties presented written submissions supporting their positions. The Applicant emphasized the proper authorization for the insolvency application, correct delivery of the demand notice, and lack of a formal agreement with the Respondent. The Respondent relied on legal provisions and court judgments to argue against the maintainability of the insolvency application due to commercial disputes and the existence of a pre-existing dispute.4. Upon reviewing the documents and arguments, the Tribunal found evidence of a pre-existing dispute between the parties regarding delays in work completion and quality of services provided. The Respondent's complaints and emails requesting timely completion of work indicated dissatisfaction prior to the demand notice. The neutral third party's report also highlighted issues with the work's quality. As a result, the Tribunal rejected the insolvency application, concluding that a dispute existed before the notice was issued, rendering the application unsustainable under the Insolvency and Bankruptcy Code.5. The Tribunal's decision was based on the established pre-existing dispute and the lack of grounds for insolvency, leading to the rejection of the application without imposing any costs on the Petitioner. The detailed analysis of the interactions between the parties, documentary evidence, and legal arguments contributed to the Tribunal's decision to dismiss the application for corporate insolvency resolution process.