2022 (3) TMI 414 - AT - Insolvency and Bankruptcy

Dismissal of IBC Section 9 Application Due to Lack of Authorization and Failure to Pursue Arbitration

The Tribunal affirmed the National Company Law Tribunal, Ahmedabad Bench's decision to dismiss the Application under Section 9 of the IBC. The Tribunal ... Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - Service of demand notice without authorization or not - HELD THAT:- It is also an admitted fact that clause 32 of the Agreement dated 10.11.2017 arrived between the parties, shows that such dispute has not been amicably settled within 90 days, then such a question or dispute shall be referred to any finally resolved by arbitration with arbitration rules of arbitration and conciliation act 1996. Instead of invoking Arbitration, the Appellant has filed this Application under Section 9 of the IBC. The Board Resolution passed by the Board meeting of ICI Healthcare Pvt. Ltd on 31.02.2020 (page 142 of the Appeal) authorizes Mr. Naveen Jain to represent the Company and take necessary action before the Hon’ble Court of Ahmedabad. The demand notice under Section 8 of the IBC sent by the Appellant to the Respondent on 21.08.2019 and further Application under Section 9 of the IBC was filed on 01.10.2019 much before the Board Resolution. There is no illegality in the impugned order while dismissing the Application filed by the Appellant under Section 9 of the IBC, therefore, the impugned order passed by the Ld. Adjudicating Authority (National Company Law Tribunal), Ahmedabad Bench, Ahmedabad is hereby affirmed - Appeal dismissed. Issues Involved:1. Validity of the Demand Notice and Application under Section 9 of the IBC without proper Board Resolution.2. Existence of an arbitration clause in the agreement and its effect on the filing of the Application under Section 9 of the IBC.3. Pre-existing disputes between the parties regarding the outstanding amount and termination of the agreement.Issue-wise Detailed Analysis:1. Validity of the Demand Notice and Application under Section 9 of the IBC without proper Board Resolution:The Appellant argued that the Ld. Adjudicating Authority dismissed the Application under Section 9 of the IBC on the ground that the Demand Notice was not supported by a Board Resolution, thus making the filing of the Application legally untenable. The Appellant contended that there was a Board Resolution dated 02 July 2019 authorizing Mr. Jatinder Kumar to initiate proceedings under the IBC. However, the Tribunal noted that the Demand Notice under Section 8 of the IBC was sent on 21.08.2019, and the Application under Section 9 was filed on 01.10.2019, both prior to the Board Resolution dated 31.02.2020 authorizing Mr. Naveen Jain. Therefore, the Tribunal upheld the Adjudicating Authority's decision, affirming that the Demand Notice and subsequent Application were not properly authorized.2. Existence of an arbitration clause in the agreement and its effect on the filing of the Application under Section 9 of the IBC:The Respondent highlighted that the agreement dated 10.11.2017 contained an arbitration clause (Clause 32), which mandated that any disputes arising should be settled through arbitration as per the Arbitration and Conciliation Act, 1996. The Tribunal found that the Appellant, instead of invoking arbitration, directly filed the Application under Section 9 of the IBC, which was a violation of the agreement. The Tribunal agreed with the Respondent's submission that the Appellant should have pursued arbitration before approaching the NCLT, thus supporting the dismissal of the Application on this ground.3. Pre-existing disputes between the parties regarding the outstanding amount and termination of the agreement:The Respondent argued that there were serious disputes regarding the notice of termination and the outstanding amount claimed by the Appellant. The Respondent provided evidence of payments made and stock received, which contradicted the Appellant's claims. The Tribunal noted that the Appellant had continued to receive and sell goods even after the alleged termination notice dated 18.12.2018, which indicated that the agreement was still in force. The Respondent's reply to the Demand Notice also pointed out discrepancies in the Appellant's claims, suggesting a pre-existing dispute. The Tribunal concluded that the existence of such disputes further justified the dismissal of the Application under Section 9 of the IBC.Order:The Tribunal affirmed the impugned order dated 18.12.2020 passed by the National Company Law Tribunal, Ahmedabad Bench, dismissing the Application under Section 9 of the IBC. The Tribunal held that there was no illegality in the dismissal, and the Appeal was dismissed with no order as to costs. The Registry was directed to upload the judgment on the website and send a copy to the NCLT, Ahmedabad Bench.