IBC Application Rejected: Disputes Require Further Investigation

The application under Section 9 of the IBC for initiation of Corporate Insolvency Resolution Process due to default in payment of operational debt was rejected. The Tribunal found that the disputes raised by the Corporate Debtor regarding the debt amount, quality of goods, and alleged coercion in obtaining signatures warranted further investigation and could not be conclusively resolved at that stage. The Tribunal emphasized the need for a thorough inquiry by the Competent Authority/Court, leading to the rejection of the application without imposing costs.

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Issues involved:
Application under Section 9 of the IBC for initiation of Corporate Insolvency Resolution Process due to default in payment of operational debt.

Detailed Analysis:
1. The application was filed by an Operational Creditor against a Corporate Debtor for default in paying operational debt of Rs. 31,66,482. The Operational Creditor sold goods to the Corporate Debtor, who failed to pay the outstanding amount despite repeated demands and a notice under Section 8 of IBC.

2. The Corporate Debtor contested the claim, stating pre-existing disputes between the parties regarding the debt amount, quality, and late delivery of goods. The Corporate Debtor argued that certain actions were coerced, creating false evidence for the petition.

3. The Corporate Debtor raised disputes in letters dated 26.07.2019 and 28.11.2019, highlighting issues with late deliveries, quality of goods, and alleged coercion in obtaining signatures. The Corporate Debtor claimed to have already paid a significant amount, disputing the remaining balance.

4. The Operational Creditor presented evidence of the Corporate Debtor's reply to the demand notice, where disputes were raised about the debt amount, quality, and late delivery of goods. The Corporate Debtor's letters prior to the demand notice also raised genuine disputes.

5. The Tribunal noted that the dispute required further investigation and could not be conclusively resolved at that stage. The Corporate Debtor's contentions about pre-existing disputes were considered valid, leading to the rejection of the application for Corporate Insolvency Resolution Process.

6. The Tribunal emphasized that it could not delve into the details of the dispute but concluded that the issues raised by the Corporate Debtor warranted a thorough inquiry by the Competent Authority/Court. Consequently, the application was rejected, and no costs were imposed.

7. The judgment highlighted discrepancies in the Operational Creditor's affidavit regarding the notice of dispute but ultimately found that the Corporate Debtor's submissions regarding the genuine disputes were more substantial. The Tribunal directed the Registry to communicate the order to both parties.

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