NCLAT upholds dismissal of Section 9 application citing pre-existing dispute over soya bean transactions

The NCLAT dismissed an appeal challenging rejection of an application under Section 9 of the Insolvency and Bankruptcy Code, 2016. The appellant sought resolution of an outstanding amount against the respondent. The tribunal found evidence of pre-existing dispute through WhatsApp conversations between parties regarding soya bean rate fluctuations and the appellant's decision to wait for market improvement rather than receive goods. The NCLAT upheld the lower tribunal's conclusion that a pre-existing dispute existed and that the IBC was not the appropriate forum for recovery, confirming the dismissal of the original application.

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The Appellate Tribunal heard an appeal against the dismissal of an application filed by the Appellant under Section 9 of the Insolvency and Bankruptcy Code, 2016, as the Operational Creditor against the Respondent, seeking resolution of an outstanding amount of 101,89,178.77. The dispute arose from three sale contracts executed between the parties for the supply of agricultural commodities. The Appellant alleged that despite receiving advance payments, the Respondent failed to deliver the goods on time, leading to the outstanding balance amount.The Respondent contended that it had imported the commodities and made payments to suppliers but the Appellant neglected to take delivery despite repeated requests. The Tribunal considered WhatsApp messages exchanged between the parties, indicating a pre-existing dispute. The Tribunal noted that the Appellant proposed to share the loss due to market conditions affecting the sale of commodities, and the Respondent agreed. The Tribunal concluded that the Operational Creditor could not take advantage of its own wrong and that the dispute existed in fact, not being a spurious defense. The Tribunal cited the Supreme Court's decision in Re. Mobilox Innovations Private Ltd vs Kirusa Software Private Ltd regarding the existence of a dispute.The Tribunal further observed that the Operational Creditor failed to lift the commodity due to market conditions and the change of heart of its buyer, as evidenced by the WhatsApp conversations. The Tribunal emphasized that the Corporate Debtor was financially solvent and dismissed the petition, stating that the Insolvency and Bankruptcy Code was not intended to penalize solvent companies for non-payment of disputed dues. The Tribunal held that the petition seemed to be a process of recovery by the operational creditor and was not an appropriate forum for such claims.The Appellant argued that the WhatsApp messages should meet the requirements of Section 65B of the IT Act, citing a relevant case. However, the Tribunal found that the conversation between the parties, including on WhatsApp, was not disputed by the Appellant. Therefore, the Tribunal upheld the dismissal of the application, concluding that there was a pre-existing dispute between the parties and that the Code was not the appropriate forum for the claim.In light of the above analysis and findings, the Tribunal dismissed the appeal without any order as to costs.

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