Tribunal rejects application, citing pre-existing disputes. Genuine defense leads to case dismissal.

The Tribunal dismissed the application, citing pre-existing disputes between the parties regarding defective materials, freight charges, and financial commitments that existed before the demand notice was issued. Relying on the Supreme Court precedent, the Tribunal emphasized the need to establish the existence of a genuine dispute rather than delve into its merits. Consequently, the application was rejected as the defense was deemed genuine, leading to the dismissal of the case without costs awarded.

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Issues Involved:
1. Undated Demand Notice
2. Defective Material and Freight Charges
3. Confirmation of Balance and Reconciliation Statement
4. Financial Commitments by the Operational Creditor towards the Corporate Debtor

Issue-wise Detailed Analysis:

1. Undated Demand Notice:
The Corporate Debtor argued that the Form-III Statutory Demand Notice was undated, questioning its compliance with Section 8 of the Insolvency and Bankruptcy Code (IBC), 2016, and the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016. The Tribunal examined Section 8, which mandates that an operational creditor must deliver a demand notice of unpaid operational debt to the corporate debtor. Despite the notice being undated, the Operational Creditor provided evidence of delivery on 28/09/2019, supported by a postal tracking report. The Tribunal referred to a precedent where failure to reply to a demand notice within 10 days does not preclude the Corporate Debtor from raising the existence of a dispute in a Section 9 application. Thus, the Tribunal concluded that the undated notice did not invalidate the defense.

2. Defective Material and Freight Charges:
The Corporate Debtor contended that the Operational Creditor had supplied substandard products, resulting in significant losses and returned goods worth Rs. 21.58 Lakhs. The Operational Creditor countered this by presenting customer satisfaction records showing high scores for quality and delivery. However, the Tribunal noted that the Operational Creditor had omitted freight charges claims in its submissions, indicating an unresolved dispute over these charges.

3. Confirmation of Balance and Reconciliation Statement:
The Tribunal reviewed the reconciliation statement dated 19.03.2019, which highlighted disputes over invoices from 15.06.2017 to 18.03.2019. The remarks in the reconciliation statement, such as 'Approval not obtained' and 'invoice received after the cut-off period,' indicated the existence of disputes as per Section 8(2) of IBC, 2016. This supported the Corporate Debtor's claim of pre-existing disputes regarding the invoices.

4. Financial Commitments by the Operational Creditor towards the Corporate Debtor:
The Tribunal examined emails exchanged between the parties, revealing that the Operational Creditor was required to invest in the Corporate Debtor as per an agreement/MOU, which was last revised on 08.09.2017. The Corporate Debtor argued that the Operational Creditor's failure to honor these financial commitments led to their financial difficulties. The Operational Creditor did not deny the obligation to invest but cited outstanding dues from the Corporate Debtor as the reason for non-payment. The Tribunal found that these financial disputes existed prior to the issuance of the Form-III Demand Notice.

Conclusion:
The Tribunal concluded that there were pre-existing disputes between the parties, including issues related to defective materials, freight charges, and financial commitments, which existed before the issuance of the demand notice. Citing the Supreme Court's decision in Mobilox Innovations Private Limited vs. Kirusa Software Private Limited, the Tribunal emphasized that it need not examine the merits of the dispute but only determine the existence of a genuine dispute. Consequently, the Tribunal dismissed the application filed by the Operational Creditor, stating that the defense was not spurious, hypothetical, or illusory.

Order:
The application IBA/820/2020 was dismissed, with no costs awarded.

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