2023 (4) TMI 781 - AT - Insolvency and Bankruptcy

Tribunal upholds dismissal of Operational Creditor's application citing pre-existing dispute under MSME Act

Arpana Packaging Pvt. Ltd. Versus Regma Ceramics Pvt. Ltd.

The Tribunal upheld the National Company Law Tribunal's decision to dismiss the Operational Creditor's application due to a pre-existing dispute, ... Maintainability of application - Initiation of CIRP - Corporate Debtor failed to make repayment of its dues - pre-existing disputes - Plea of petitioner/appellant/operational Creditor is that the Adjudicating Authority/ National Company Law Tribunal, Division Bench-I, Chennai had merely placed Reliance, upon the reference, under Section 18 of the Micro, Small and Medium Enterprises Development Act, 2006, dated 07/10/2020, made by the Petitioner/ Appellant/ Operational Creditor, addressed to the Chairperson of the Micro, Small and Medium Enterprises Facilitation Council, Puducherry and that itself, will not be a Decisive Factor, for the Petitioner/ Appellant/ Operational Creditor, for the Adjudicating Authority/ National Company Law Tribunal, Division Bench-I, Chennai, to arrive at a Conclusion that there was a Dispute/ amounting to Pre existing dispute, coming within the Definition of the Dispute, as per Section 5(6) of the Insolvency and Bankruptcy Code, 2016. HELD THAT:- A Perusal of the Ingredients of Section 18(3) of the MSME Act, unerringly, points out and also empowers that the Facilitation Council, to arbitrate the dispute, under the Provisions of the Arbitration. In the Instant case, the very fact that the Petitioner/ Appellant/ Operational Creditor, had approached the Chairperson of Micro, Small Enterprises Facilitation Council, Puducherry, to reference dated 07/10/2020, in regard to the non payment of amount, as per the provisions of Section 15 of the Micro Small and Medium Enterprises Act, 2006, by the Respondent/ Corporate Debtor, itself indicates that there has been a Dispute, and in fact, that the amount which was not paid, is now the subject matter of Controversy/ the issue being pending for Resolution, one way or the other, before the said Authority, viz, Chairperson of the Micro Small Enterprises Facilitation Council, Puducherry. Taking into account, the entire gamut of the facts and circumstances of the instant case, in an Holistic Fashion, comes to an Irresistible and Inescapable Conclusion that the view arrived at, by the Adjudicating Authority, ultimately, in the instant Case, that there is a Pre existing dispute, and by placing reliance upon the principles laid down by the Hon’ble Supreme Court of India in Mobilox Innovations Pvt. Ltd. V Kirusa Software Pvt. Ltd. [2017 (9) TMI 1270 - SUPREME COURT], is free from any Legal Infirmites, in the eye of Law. Resultantly, the Appeal, sans Merits. Appeal dismissed. Issues Involved:1. Pre-existing Dispute2. Invocation of MSME Act3. Admission of LiabilitySummary:Pre-existing Dispute:The Appellant, an Operational Creditor, challenged the Impugned Order dated 13/02/2023 by the National Company Law Tribunal (NCLT), Division Bench-I, Chennai, which dismissed the Appellant's application due to a 'pre-existing dispute.' The NCLT referenced a pending case before the MSME FC Pondicherry and cited the Supreme Court judgment in Mobilox Innovations Pvt. Ltd. Vs. Kirusa Software (P) Limited, which emphasized that an application is liable to be dismissed if a pre-existing dispute exists.Invocation of MSME Act:The Appellant argued that the invocation of Section 18 of the Micro, Small and Medium Enterprises Development Act, 2006, does not preclude them from initiating a Section 9 application under the Insolvency and Bankruptcy Code (IBC). The Appellant cited a previous order by the National Company Law Appellate Tribunal (NCLAT) in Company Appeal (AT) (CH) (Ins) 1142 of 2019, which stated that moving MSME Authorities does not imply a pre-existing dispute under IBC. The Tribunal, however, noted that the context of 'dispute' under MSME Act is different from that under IBC.Admission of Liability:The Appellant contended that the Respondent had admitted liability by making a partial payment and maintaining a running account. Despite the reference to MSME Facilitation Council, the Appellant argued that the amount due was still payable by the Respondent. The Tribunal, however, found that the reference to the MSME Council itself indicated a dispute, making the amount in question a subject of controversy pending resolution.Conclusion:The Tribunal concluded that the NCLT's decision to dismiss the application due to a pre-existing dispute was legally sound and free from infirmities. Consequently, the appeal was dismissed without costs, and the connected pending IA No. 331 of 2023 was closed.