Tribunal affirms dismissal of Section 9 application citing pre-existing disputes and need for further investigation.

The Appellate Tribunal upheld the Adjudicating Authority's decision to dismiss the Section 9 application due to pre-existing disputes and the requirement for additional investigation into the business arrangement and settlement agreement. The Tribunal found no merit in the appeal and affirmed that the original order did not justify intervention. The appeal was dismissed without costs.

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Issues Involved:
1. Whether the Corporate Debtor acknowledged the debt owed to the Operational Creditor.
2. Whether the goods were supplied on a Sale or Return basis.
3. Whether there was a pre-existing dispute between the parties before the issuance of the demand notice.
4. Validity and implications of the alleged settlement agreement dated 01.05.2019.

Issue-wise
Detailed Analysis:

1. Acknowledgment of Debt:
The Appellant argued that the Corporate Debtor acknowledged the debt through signed invoices and confirmation of accounts, including acknowledgment in the audited balance sheet for the year ending March 2020. The Adjudicating Authority, however, found that the ledger account signed by the Corporate Debtor did not constitute a specific admission of liability. The absence of dates and specific words admitting the liability, along with the possibility of the signature being obtained before the alleged settlement, led the Authority to disregard the ledger as an acknowledgment of debt.

2. Sale or Return Basis:
The Corporate Debtor contended that the goods were supplied on a Sale or Return basis as per a draft Memorandum of Understanding (MoU) exchanged via email. The Appellant denied any such arrangement, claiming no signed agreement existed. The Adjudicating Authority noted the email evidence indicating a draft MoU but did not make a definitive finding on this issue, stating that the matter required further investigation beyond its scope.

3. Pre-existing Dispute:
The Adjudicating Authority found that there were disputes between the parties prior to the issuance of the demand notice. The Corporate Debtor's defense, based on the alleged Sale or Return arrangement and the subsequent settlement agreement, indicated a pre-existing dispute. The Authority referenced the Supreme Court's decision in Mobilox Innovations Pvt Ltd vs Kirusa Software Pvt Ltd, which mandates that any plausible contention requiring further investigation constitutes a pre-existing dispute, warranting the rejection of a Section 9 application.

4. Settlement Agreement:
The Appellant argued that the alleged settlement dated 01.05.2019, based on an unsigned calculation sheet, should not be considered valid. The Corporate Debtor maintained that the settlement was agreed upon in the presence of police personnel and that the amount mentioned was for unsold stock under the Sale or Return arrangement. The Adjudicating Authority noted the existence of this settlement and concluded that the dispute over its validity and terms required thorough investigation, thus falling outside the scope of the Section 9 proceedings.

Conclusion:
The Adjudicating Authority dismissed the Section 9 application on the grounds of pre-existing disputes and the need for further investigation into the nature of the business arrangement and the settlement agreement. The Appellate Tribunal upheld this decision, finding no merit in the appeal and confirming that the impugned order did not warrant interference. The appeal was dismissed with no order as to costs.

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