Tribunal upholds dismissal of CIRP petition due to pre-existing disputes and invalid demand notice

The Tribunal upheld the decision of the Adjudicating Authority to dismiss the petition for Corporate Insolvency Resolution Process (CIRP) under the Insolvency and Bankruptcy Code, 2016. The existence of pre-existing disputes between the parties, evidenced by communications regarding defective goods, rendered the initiation of CIRP impermissible. Additionally, the Tribunal deemed the service of the Demand Notice invalid due to non-receipt and lack of proper acknowledgment of debt, as highlighted by disputed ledgers. The appeal was dismissed, affirming the original decision.

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Issues Involved:
1. Existence of pre-existing disputes between the parties.
2. Validity of the service of the Demand Notice.
3. Acknowledgement of debt by the Respondent/Corporate Debtor.

Summary:

1. Existence of Pre-existing Disputes:
The Appellant filed a petition under Section 9 of the Insolvency and Bankruptcy Code, 2016 (IBC) to initiate the Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor, which was dismissed by the Adjudicating Authority due to pre-existing disputes. The Respondent/Corporate Debtor contended that the goods supplied were defective and communicated this through multiple emails dated 07.08.2014, 27.03.2015, 01.02.2016, 25.03.2016, and 08.04.2016. The Adjudicating Authority found these emails to be evidence of a pre-existing dispute, thus making the initiation of CIRP under IBC impermissible.

2. Validity of the Service of the Demand Notice:
The Appellant served a Demand Notice dated 01.11.2017 under Section 8 of the IBC, which was returned with the remark "Left." The Respondent argued that this did not amount to valid service. The Tribunal cited precedents where non-receipt of the notice or its return with such remarks does not constitute valid service, thereby supporting the Respondent's claim.

3. Acknowledgement of Debt:
The Appellant presented ledgers and Sales Tax Forms as evidence of the acknowledged debt. However, the Respondent disputed the authenticity of these documents, arguing that they did not bear the authorized signatures or the official seal. The Tribunal noted that even if the ledgers were considered, they could not be taken as an acknowledgment of debt due to the existence of disputes highlighted in the emails. The Tribunal also referenced the case "V Padmakumar v. Stressed Assets Stabilisation Fund (SASF)" to assert that representation of debt in financials does not amount to acknowledgment of debt.

Conclusion:
The Tribunal affirmed the decision of the Adjudicating Authority, holding that the pre-existing disputes between the parties before the issuance of the Demand Notice made the initiation of CIRP under IBC impermissible. The appeal was dismissed, and the impugned order dated 05.07.2021 was upheld.

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