2021 (8) TMI 628 - Tri - Insolvency and Bankruptcy

Tribunal denies insolvency application due to pre-existing dispute, quality issues, and debt acknowledgment.

The Tribunal rejected the application under Section 9 of the Insolvency and Bankruptcy Code, 2016, citing the existence of a pre-existing dispute raised ... Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - Time Limitation - HELD THAT:- As per Part IV from I, the debt fell due when the invoices were raised in the year 2011-12. The debt was admitted by the corporate debtor in terms of agreement dated 15.09.2014. The winding up proceedings, were initiated in the year 2016. The IBC demand notice was sent in July 2017 and the present application is filed on 22.01.2019. Hence the application is not time barred and filed within the period of limitation. The registered office of corporate debtor is situated in Delhi and therefore this Tribunal has jurisdiction to entertain and try this application - The present application is filed on the Performa prescribed under Rule 6 of the Insolvency and Bankruptcy Code, 2016 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 r/w Section 9 of the code and is complete. Existence of dispute or not - HELD THAT:- The SPA executed on 25.05.2016, was never revoked hence Ms. Radhika Singh is duly authorized to filed the present application. Moreover, there is a pre-existing dispute among the parties and the same is validated as per emails correspondences exchanged during the year 2011-2012 wherein the corporate debtor had raised dispute with regards the inferior quality of goods. The disputes have also been raised by the corporate debtor in its reply to the winding up notice and demand notice under Section 8 of IBC of the applicant. This leaves no doubt that the so called dispute raised by the corporate debtor is not merely a moonshine dispute. A conclusion can be drawn that there is ‘Preexistence dispute’ which was raised by the corporate debtor time and again in terms of the agreement executed between the parties much prior to the notice served under section 8 of I & B Code by way of its reply to statutory notice for winding up as well reply to winding up petition and also in reply to Section 8 notice under IBC. It is a fit case to reject the application under section 9 of the I & B Code. Application dismissed. Issues Involved:1. Authorization to file the application.2. Timeliness of the claim.3. Existence of a pre-existing dispute.4. Quality of goods supplied.5. Maintainability of the application under Section 9 of the Insolvency and Bankruptcy Code, 2016.Detailed Analysis:1. Authorization to File the Application:The corporate debtor contended that the application was not maintainable as it was not signed or verified by an authorized representative. The applicant countered this by stating that Ms. Radhika Singh was authorized via a Power of Attorney dated 25.05.2016, given by its sole Administrator, Aniceto Lopez Rodriguez. The Tribunal found that the SPA executed on 25.05.2016 was never revoked, thus Ms. Radhika Singh was duly authorized to file the present application.2. Timeliness of the Claim:The corporate debtor argued that the claims were time-barred as the transactions and invoices were from March 2012 to June 2012. The applicant argued that the debt was acknowledged in various correspondences and agreements, specifically the agreement dated 15.09.2014, and that the winding-up proceedings initiated in 2016 and the IBC demand notice sent in July 2017 were within the limitation period. The Tribunal concluded that the claim was not time-barred, as the debt was acknowledged by the corporate debtor in terms of the agreement dated 15.09.2014, and the subsequent legal actions were within the limitation period.3. Existence of a Pre-existing Dispute:The corporate debtor maintained that there was a pre-existing dispute regarding the quality of goods supplied and that these disputes were raised prior to the issuance of the Section 8 notice under IBC. The applicant denied any admission of quality issues and argued that the corporate debtor failed to establish any pre-existing dispute. The Tribunal found that there was indeed a pre-existing dispute, as evidenced by email correspondences and replies to statutory notices, which indicated issues with the quality of goods supplied. The Tribunal referred to the Supreme Court's ruling in 'Mobilox Innovations Private Limited Vs. Kirusa Software Private Limited,' which held that the existence of a genuine dispute requires the adjudicating authority to reject the application.4. Quality of Goods Supplied:The corporate debtor raised concerns about the quality of the goods supplied, which they argued was a significant issue leading to non-payment. The applicant refuted these claims, stating that no evidence or lab reports were provided to substantiate the quality issues. The Tribunal acknowledged the corporate debtor's claims regarding quality issues as part of the pre-existing dispute, which contributed to the decision to reject the application.5. Maintainability of the Application under Section 9 of the Insolvency and Bankruptcy Code, 2016:The Tribunal reviewed the application under the prescribed format and rules. Despite the applicant's arguments and documentation, the Tribunal concluded that the existence of a pre-existing dispute, as well as the acknowledgment of debt issues and quality disputes, rendered the application under Section 9 of the IBC as not maintainable. The Tribunal emphasized that the disputes raised were not merely moonshine but required further investigation, thus rejecting the application.Conclusion:The Tribunal rejected the application under Section 9 of the Insolvency and Bankruptcy Code, 2016, due to the existence of a pre-existing dispute raised by the corporate debtor, which was substantiated by sufficient particulars and required further investigation. The Tribunal's decision was communicated to the Applicant and the Corporate Debtor, and a copy was forwarded to the Insolvency and Bankruptcy Board of India (IBBI) for its records.