Tribunal rejects CIRP petition due to pre-existing disputes, inadequate demand notice. Misrepresentation claims require further adjudication.

The Tribunal rejected the petition to initiate Corporate Insolvency Resolution Process (CIRP) as substantial pre-existing disputes required adjudication by a competent court. The Demand Notice did not meet the requirements under Section 8 of the Insolvency and Bankruptcy Code, 2016, due to the presence of disputes raised before its issuance. The relationship between the parties and misrepresentation claims needed further evidentiary adjudication. The petition was deemed not maintainable, and the Operational Creditor was advised to seek other legal remedies.

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Issues Involved:
1. Existence of pre-existing disputes.
2. Validity of the Demand Notice under Section 8 of the Insolvency and Bankruptcy Code, 2016.
3. Fiduciary relationship and misrepresentation by the Operational Creditor.
4. Admissibility of evidence and authority to affirm the affidavit.

Issue-wise Detailed Analysis:

1. Existence of Pre-existing Disputes:

The Corporate Debtor contended that there were pre-existing disputes regarding the quality and effectiveness of the 'Miteshot' pesticide supplied by the Operational Creditor, which allegedly caused damage to the tea crops. The Corporate Debtor had raised these disputes in a letter dated 29th July 2019, prior to the Demand Notice issued on 22nd November 2019. The Tribunal found that the disputes were not mere feeble arguments but required further investigation. The Tribunal referred to the Supreme Court judgment in Mobilox Innovations Private Limited vs. Kirusa Software Private Limited, which held that if a plausible contention of a dispute exists, the operational creditor's application must be rejected.

2. Validity of the Demand Notice under Section 8 of the Insolvency and Bankruptcy Code, 2016:

The Operational Creditor issued a Demand Notice under Section 8 of the Code on 22nd November 2019, claiming dues of Rs. 46,39,622/- along with interest. The Corporate Debtor replied on 11th December 2019, raising issues about the 'Miteshot' pesticide. The Tribunal noted that the disputes were raised before the Demand Notice, indicating the presence of pre-existing disputes. Hence, the Demand Notice did not meet the requirements under Section 8 of the Code.

3. Fiduciary Relationship and Misrepresentation by the Operational Creditor:

The Corporate Debtor argued that the Operational Creditor had a fiduciary relationship with it, advising on the use of pesticides and misrepresenting the effectiveness of 'Miteshot.' The Operational Creditor denied these claims, stating that it merely supplied the chemicals requisitioned by the Corporate Debtor. The Tribunal found that the relationship between the parties and the role of the Operational Creditor in advising the Corporate Debtor needed further adjudication in an evidentiary proceeding, not a summary proceeding under the Code.

4. Admissibility of Evidence and Authority to Affirm the Affidavit:

The Operational Creditor questioned the authority of the deponent of the reply affidavit from the Corporate Debtor, stating that no document of authority was annexed or relied upon. The Tribunal did not find this contention sufficient to dismiss the Corporate Debtor's claims, as the primary issue was the existence of pre-existing disputes.

Conclusion:

The Tribunal concluded that the pre-existing disputes between the parties were substantial and required adjudication by a competent court. Therefore, the petition to initiate Corporate Insolvency Resolution Process (CIRP) was not maintainable and was rejected. The Operational Creditor was advised to pursue other legal remedies if desired.

Order:

The petition C.P.(IB) No. 138/KB/2020 was rejected. The registry was directed to send email copies of the order to all parties and their counsel. Certified copies of the order could be issued upon compliance with requisite formalities.

Signed on this, the 12th day of September, 2022.

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