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Issues: (i) Whether the date of default in payment fell within the suspension period under section 10-A of the Insolvency and Bankruptcy Code, 2016; (ii) Whether there was a pre-existing dispute regarding the quality of the goods supplied; (iii) Whether the non-payment arose from discrepancies in the documents submitted for LC discounting attributable to the corporate debtor.
Issue (i): Whether the date of default in payment fell within the suspension period under section 10-A of the Insolvency and Bankruptcy Code, 2016
Analysis: The payment terms in the transaction documents, read with the invoice and the last executed agreement, showed that payment was to be made through the letter of credit mechanism within 60 days. The default was therefore computed from the invoice date and fell after the expiry of the 60-day period. The suspension under section 10-A did not cover the relevant date of default.
Conclusion: The issue was decided against the appellant and in favour of the respondent.
Issue (ii): Whether there was a pre-existing dispute regarding the quality of the goods supplied
Analysis: A pre-existing dispute must be real and genuine. The record did not establish that any effective dispute on quality had been raised before the demand notice, and the alleged arbitration notice was not shown to have been served on the operational creditor. The asserted dispute was therefore not proved to exist in fact before initiation of insolvency proceedings.
Conclusion: The issue was decided against the appellant and in favour of the respondent.
Issue (iii): Whether the non-payment arose from discrepancies in the documents submitted for LC discounting attributable to the corporate debtor
Analysis: The documents required for discounting the LC had to be furnished for release of payment, and the corporate debtor had undertaken to arrange the process. The discrepancy in documents was linked to the corporate debtor's side, and the failure to ensure payment despite repeated reminders remained attributable to it.
Conclusion: The issue was decided against the appellant and in favour of the respondent.
Final Conclusion: The insolvency admission was sustained because the debt had become due outside the statutory suspension period, no real pre-existing dispute was established, and the default in payment was not excused.
Ratio Decidendi: For admission under sections 8 and 9 of the Insolvency and Bankruptcy Code, 2016, the default date must be outside the section 10-A suspension period and any asserted pre-existing dispute must be real, genuine, and shown to have existed before the demand notice.
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