2022 (6) TMI 494 - Tri - Insolvency and Bankruptcy

Tribunal denies insolvency application citing genuine dispute over outstanding payments

The Tribunal rejected the application under Section 9 of the Insolvency and Bankruptcy Code, 2016 for Corporate Insolvency Process against the company due ... Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - HELD THAT:- All the debit notes are entered in the ledger account based on which the Goods & Service Department had issued two different show cause notices to the corporate debtor demanding differential input-tax credits availed on the basis of the invoices of the applicant. Further, the applicant had sent incorrect accounts by email dated 30.11.2018, 06.12.2018 and 13.12.2028 asking the respondent to confirm the same. The corporate debtor had categorically denied to accept the said accounts and in reply to various emails of the applicant, corporate debtor had raised dispute. It is clear that a dispute was in existence prior to issuance of the statutory demand notice under Section 8 of the Code. There is sufficient evidence to prove the pre-existence of dispute. Hon’ble Supreme Court held in the matter of Mobilox Innovative Private Limited vz. Kirusa Software Private Limited [2017 (9) TMI 1270 - SUPREME COURT] that in case of genuine dispute raised by the corporate debtor, the application cannot be admitted The instant application cannot be considered for admission and needs to be rejected. Issues:Application under Section 9 of Insolvency and Bankruptcy Code, 2016 for Corporate Insolvency Process against a company - Dispute over outstanding payment for supplied material - Allegations of inferior quality products supplied - Jurisdiction of the Tribunal - Existence of a genuine dispute prior to the issuance of statutory demand notice.Analysis:The application was filed under Section 9 of the Insolvency and Bankruptcy Code, 2016, seeking initiation of the Corporate Insolvency Process against the Corporate Debtor for outstanding payments. The Applicant, a proprietorship firm, supplied material to the Corporate Debtor, a company engaged in manufacturing MS Billets. The Applicant claimed a significant amount as outstanding payment, supported by detailed invoices and calculations. The Corporate Debtor, in response, raised various disputes, including allegations of inferior quality products supplied, non-legitimate payments, and issues related to GST evasion by the Applicant. The Corporate Debtor argued that no amount was legitimately payable due to adjustments made for inferior quality material supplied by the Applicant.The Tribunal examined the submissions from both parties, including documents, affidavits, and written submissions. It was noted that a significant dispute existed prior to the issuance of the statutory demand notice under Section 8 of the Code. Citing the judgement of the Hon'ble Supreme Court in a similar matter, the Tribunal emphasized that the existence of a genuine dispute is crucial, and if such a dispute is raised by the debtor, the application cannot be admitted. The Tribunal found sufficient evidence to establish the pre-existence of a dispute between the parties, as supported by various communications and actions taken by both sides.Based on the detailed analysis and the legal principles governing such matters, the Tribunal concluded that the application could not be considered for admission and needed to be rejected. The dispute over the outstanding payment and the quality of supplied material raised by the Corporate Debtor were deemed genuine and substantial, leading to the rejection and disposal of the application. The Tribunal directed the Registry to communicate the order to both the Applicant and the Corporate Debtor, thereby concluding the legal proceedings in this matter.