Tribunal affirms rejection of Section 9 application under IBC citing genuine pre-existing dispute.

The Tribunal upheld the Adjudicating Authority's decision to reject the Section 9 application under the IBC due to a genuine pre-existing dispute between the parties regarding material supply delays and debit notes issuance. The court emphasized the need for a plausible contention for further investigation and ruled that the dispute was not spurious. As a result, the appeal was dismissed without costs.

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Issues Involved:
1. Pre-existing dispute between the parties.
2. Non-payment of outstanding dues.
3. Dishonoured cheque.
4. Section 9 application under IBC.
5. Admissibility of operational debt.
6. Validity of debit notes and invoices.
7. Evidence of email communications.
8. Running account and payment disputes.
9. Legal precedents and interpretation.

Detailed Analysis:

1. Pre-existing Dispute Between the Parties:
The primary issue in this case revolves around the existence of a pre-existing dispute between the Operational Creditor (Appellant) and the Corporate Debtor (Respondent). The Adjudicating Authority, in its Impugned Order dated 03.03.2021, concluded that there was a pre-existing dispute regarding the delay in the timely supply of materials/goods, which led to the issuance of debit notes and affected the quantum of operational debt. The email communications between the parties from 28.02.2018 to 26.09.2018 substantiated this fact.

2. Non-payment of Outstanding Dues:
The Appellant claimed outstanding dues amounting to Rs. 32,08,640, including Rs. 22,75,120 towards the principal amount and Rs. 9,33,520 towards interest, with an additional interest of Rs. 76,270 accrued from 16.06.2019 to 19.09.2019. Despite several reminders and a statutory demand notice issued under Section 8 of the IBC on 18.06.2019, the Respondent did not make the payment, leading the Appellant to file an application under Section 9 of the IBC.

3. Dishonoured Cheque:
The Respondent issued a cheque for Rs. 15,00,000, which was dishonoured with the remark "payment stopped by drawer." The Appellant argued that this cheque was part of the payment for the goods received. The dishonoured cheque further complicated the payment dispute between the parties.

4. Section 9 Application Under IBC:
The Appellant filed a Section 9 application under the IBC, seeking the initiation of the Corporate Insolvency Resolution Process (CIRP) against the Respondent. The Adjudicating Authority rejected this application, citing the pre-existing dispute as the primary reason.

5. Admissibility of Operational Debt:
The Appellant argued that the Respondent had admitted a debt amount of Rs. 11.25 lakhs, which exceeded the threshold debt of Rs. 1 lakh required for a Section 9 application. However, the Respondent contended that the operational debt could not be bifurcated to exclude disputed invoices and only consider the remaining invoices for establishing the operational debt.

6. Validity of Debit Notes and Invoices:
The Respondent raised debit notes amounting to Rs. 12.5 lakhs for the extra price paid for purchasing raw materials from the open market due to the Appellant's failure to supply materials on time. The Appellant disputed these debit notes, arguing that the delay was due to Allied Strips Ltd., a third-party supplier.

7. Evidence of Email Communications:
The email communications between the parties played a crucial role in establishing the pre-existing dispute. Emails dated 19.02.2018, 26.02.2018, 03.07.2018, 04.07.2018, and 25.10.2018 highlighted the ongoing dispute regarding the supply of materials, the issuance of debit notes, and the acceptance of payment terms.

8. Running Account and Payment Disputes:
The Respondent argued that the payments were being made on a running account basis, evidenced by the cheque for Rs. 15 lakhs and subsequent cheques totaling Rs. 10,25,119. The Appellant contended that these payments were part of the total outstanding amount and not specific to any particular invoices.

9. Legal Precedents and Interpretation:
The judgment referenced the Hon'ble Supreme Court's decision in Mobilox Innovations Pvt. Ltd. vs. Kirusa Software Pvt. Ltd. (2018 1 SCC 353), which emphasized that the adjudicating authority must determine if there is a plausible contention requiring further investigation and that the dispute is not a spurious defense. The court must reject the application if a genuine dispute exists.

Conclusion:
The Tribunal concluded that the pre-existing dispute between the parties regarding the supply of materials and the issuance of debit notes was genuine and not illusory. Therefore, the Adjudicating Authority did not err in rejecting the Section 9 application based on the pre-existing dispute. The appeal was dismissed, and there was no order as to costs.

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