2021 (9) TMI 758 - Tri - Insolvency and Bankruptcy

Tribunal denies CIRP initiation due to pre-existing dispute

Surat Goods Transport Private Versus Pioneer Carbide Private Limited

Surat Goods Transport Private Versus Pioneer Carbide Private Limited - TMI Issues Involved:1. Initiation of Corporate Insolvency Resolution Process (CIRP) under Section 9 of the Insolvency and Bankruptcy Code, 2016.2. Existence of pre-existing dispute between the Operational Creditor and Corporate Debtor.3. Validity of the claims and counterclaims regarding unpaid invoices and alleged losses.4. Applicability of the law of limitation and pecuniary jurisdiction.5. Admissibility of the application based on legal and factual grounds.Issue-wise Detailed Analysis:1. Initiation of Corporate Insolvency Resolution Process (CIRP):The Operational Creditor, Surat Goods Transport Private Limited, filed a petition under Section 9 of the Insolvency and Bankruptcy Code, 2016, seeking initiation of CIRP against the Corporate Debtor, Pioneer Carbide Private Limited. The petition was based on unpaid operational dues amounting to Rs. 4,13,950.00, along with interest, totaling Rs. 5,44,344.25. The Operational Creditor issued a demand notice under Section 8 of the IBC on 3rd January 2020, which was annexed as ANNEXURE A-1.2. Existence of Pre-Existing Dispute:The Corporate Debtor argued that there was a pre-existing dispute related to a consignment of Ferro Silicon sent to SAIL, IISCO Steel Plant, which was rejected due to contamination. This led to a police case and an insurance claim, which was not settled. The Corporate Debtor claimed that the outstanding amount to the Operational Creditor would only be paid after the insurance claim was settled. The Tribunal found that there was indeed a pre-existing dispute from 04.07.2017, well before the issuance of the demand notice on 17.05.2019.3. Validity of Claims and Counterclaims:The Operational Creditor raised six invoices for unpaid operational dues, but the Corporate Debtor contended that payments were made in a consolidated manner, indicating a running account. The Corporate Debtor also highlighted a condition in the work order stating that in case of delay, the value of the consignment would be refunded after the realization of the insurance claim. The Tribunal observed that the Operational Creditor failed to provide complete bank statements, which could have proven the running account. The Tribunal concluded that the Operational Creditor was not entitled to the claimed payment due to the pending insurance claim and the pre-existing dispute.4. Applicability of Law of Limitation and Pecuniary Jurisdiction:The Corporate Debtor argued that the petition was barred by the law of limitation and pecuniary jurisdiction. The Tribunal did not explicitly address this issue in the final order but focused on the existence of a pre-existing dispute as the primary ground for rejecting the application.5. Admissibility of the Application:The Tribunal referred to several judgments, including Mobilox Innovation Pvt. Ltd. v. Kirusa Software Pvt. Ltd. and Kay Bouvet Engineering Ltd. v. Overseas Infrastructure Alliance (India) Pvt. Ltd., which established that an application under Section 9 of the IBC must be rejected if there is a record of dispute. The Tribunal found that the Corporate Debtor successfully demonstrated the existence of a dispute, which was not spurious, hypothetical, or illusory.Order:The Tribunal, after hearing both parties and examining the documents, concluded that there was an existence of a dispute prior to the issuance of the demand notice. Consequently, the application filed under Section 9 of the IBC was rejected. The Tribunal ordered the rejection of the application with no costs.