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of <h1>Appeal dismissed; Section 9 rejected for bona fide pre-existing dispute on reconciliation and quality issues before Section 8 notice</h1> <h3>M/s Samman Lal Sher Singh Pvt. Ltd. Versus M/s RS Print Solution Pvt. Ltd.</h3> M/s Samman Lal Sher Singh Pvt. Ltd. Versus M/s RS Print Solution Pvt. Ltd. - TMI ISSUES PRESENTED AND CONSIDERED 1. Whether the Adjudicating Authority correctly dismissed a Section 9 IBC petition on the ground of a 'pre-existing dispute' raised by the corporate debtor. 2. Whether communications and ledger reconciliations exchanged between parties (including an email of 08.11.2023 and subsequent part-payments) constitute an admission of liability defeating a later claim of pre-existing dispute. 3. Whether complaints or internal documents produced after a demand (e.g., journal vouchers, debit notes, e-way bills) can be treated as spurious/illusory disputes under the test in Mobilox Innovations, or whether unresolved reconciliation and contemporaneous entries can qualify as a bona fide pre-existing dispute (as per Sabarmati and related decisions). 4. Whether the Tribunal should undertake a detailed adjudication of competing factual contentions (quality of goods, corporate discounts, warehousing costs, alleged concealment) in summary Section 9 proceedings, or must decline admission where such contentions require further examination. ISSUE-WISE DETAILED ANALYSIS - 1. Validity of dismissal of Section 9 petition on ground of pre-existing dispute Legal framework: Section 8(2)(a) IBC requires the corporate debtor, within ten days of a demand notice, to notify existence of any dispute or record of pendency of suit/arbitration; Section 9 allows operational creditor to initiate CIRP on occurrence of default unless a pre-existing dispute exists. Precedent Treatment: The Mobilox Innovations test requires a dispute to be real, bona fide and pre-existing (not spurious or raised only in response to demand). Sabarmati held that unresolved account reconciliation can constitute a pre-existing dispute. Authorities have held that the Tribunal's role is summary - to determine existence of a plausible pre-existing dispute, not to finally decide it. Interpretation and reasoning: The Tribunal found documentary material (email dated 19.10.2024, ledger entries and prior reconciliation material) showing that the corporate debtor had quantified disputes (discounts, inferior goods, storage costs) prior to the Section 8 notice. The Tribunal analysed chronology: extensive prior reconciliation, part-payments totalling Rs. 4.30 crores, ledger shared on 08.11.2023 showing admitted net balance close to the parties' ledgers, and the corporate debtor's contemporaneous entries (debit notes/journal vouchers) supporting its contentions. The Tribunal treated the email of 19.10.2024 and the earlier reconciliation exchanges as evidence of an existing dispute requiring further examination, not as spurious afterthoughts. Ratio vs. Obiter: Ratio - where pre-demand communications and ledger reconciliation reveal quantifiable contentions (even if contested), summary admission under Section 9 may be barred. Obiter - observations on the credibility of particular journal vouchers or e-way bills as 'fabricated' are factual and not determinative beyond the present record. Conclusion: The Tribunal concluded there was a bona fide, pre-existing dispute; therefore dismissal of the Section 9 petition on that ground was sustainable. ISSUE-WISE DETAILED ANALYSIS - 2. Effect of reconciliation, ledger exchanges and part-payments on existence of dispute Legal framework: Reconciliation communications may be treated either as admission or as part of ongoing account settlement; Sabarmati recognises failure of reconciliation as a pre-existing dispute. Precedent Treatment: Cases diverge where courts/tribunals have found part-payments and reconciliations to negate disputes (if no contemporaneous contest was made) versus where reconciliations showing unresolved items were held to indicate disputes. Surendra Sancheti (AT) was relied upon by the operational creditor to show absence of pre-existing dispute where no prior categorical rejection of dues existed. Interpretation and reasoning: The Tribunal closely examined the 08.11.2023 ledger which the corporate debtor shared and found the admitted balance (difference ~Rs. 27,264) supported by part-payments; however, the Tribunal accepted that the ledger exchange occurred in the context of reconciliation and that the corporate debtor had contemporaneous contentions (sales returns, corporate discounts, warehousing costs) which, although not uniformly pleaded earlier, were reflected in internal entries and communications. The Tribunal held that reconciliation communications do not necessarily amount to unequivocal admission that removes all disputes where specific adjustments and set-offs remained contested. Ratio vs. Obiter: Ratio - reconciliation does not automatically extinguish a pre-existing dispute when the reconciliation itself records unresolved quantifiable claims; Obiter - skepticism about why certain entries were not earlier formally communicated rests on factual inferences. Conclusion: Ledger exchanges and part-payments did not conclusively negate the corporate debtor's claim of a pre-existing dispute; the Tribunal treated the reconciliation context as supporting existence of disputes requiring adjudication. ISSUE-WISE DETAILED ANALYSIS - 3. Treatment of post-demand or late-produced documents (journal vouchers, e-way bills) vis-à-vis the Mobilox test Legal framework: Mobilox requires the dispute to be pre-existing and bona fide; post-demand concocted disputes are spurious. The Court must separate grain from chaff at the admission stage without conducting a mini-trial. Precedent Treatment: Mobilox disallows purely spurious or afterthought disputes; Sabarmati allows unresolved reconciliations to defeat Section 9. Subsequent AT decisions apply these principles factually. Interpretation and reasoning: The Tribunal considered timing and provenance of documentary material. Although the operational creditor argued journal vouchers and e-way bills were fabricated immediately after demand (and withdrawal of e-way bills supported that inference), the Tribunal found that the corporate debtor had earlier raised issues orally and via internal vouchers and that the email of 19.10.2024 pre-dated the Section 8 notice sent on 25.10.2024 (Section 8 notice issued later). Given that some contested entries pre-dated the demand notice and reconciliation remained unresolved, the Tribunal concluded the Mobilox test was not met for labeling the dispute wholly spurious. The Tribunal emphasized that the summary jurisdiction precludes resolving factual disputes that require detailed examination. Ratio vs. Obiter: Ratio - late-produced documents are not ipso facto spurious if there is contemporaneous evidence or plausible contention showing dispute pre-dated demand; Obiter - detailed credibility findings about specific documents (e.g., GST compliance) would require fuller trial/evidence. Conclusion: The Tribunal held that the material could not be dismissed as merely spurious under Mobilox; the existence of pre-demand contentions and unresolved reconciliation rendered the dispute fit to bar Section 9 admission. ISSUE-WISE DETAILED ANALYSIS - 4. Scope of summary adjudication in Section 9 proceedings when factual counterclaims/counter-contentions exist Legal framework: Adjudication at Section 9 stage is summary; the Tribunal must ascertain whether a plausible pre-existing dispute exists requiring further investigation, not determine final truth of competing factual claims. Precedent Treatment: Courts/tribunals have repeatedly held that where disputes are prima facie plausible and require factual investigation, Section 9 admission should be refused; only where a dispute is patently feeble or a clear sham should admission proceed. Interpretation and reasoning: The Tribunal applied this principle, observing that the counterclaims (corporate discounts, quality of goods, warehousing costs, alleged concealment) were specific, quantified in communications, and entailed factual matrix beyond summary determination. The Tribunal therefore refrained from deciding these contentions on merits and upheld the Adjudicating Authority's refusal to admit the Section 9 petition. Ratio vs. Obiter: Ratio - summary proceedings should be refused where the defense/commercial dispute is plausible and pre-existing; Obiter - comments as to parties' motives or tactical conduct are circumstantial and not dispositive. Conclusion: The Adjudicating Authority correctly declined to admit the petition because the disputes necessitated detailed adjudication outside the scope of summary Section 9 proceedings. OVERALL CONCLUSION The Tribunal affirmed that (i) pre-existing disputes existing prior to the Section 8 demand notice and reflected in reconciliation communications can bar Section 9 admission; (ii) part-payments and ledger exchanges do not necessarily extinguish bona fide disputes; (iii) post-demand documents are not automatically spurious where contemporaneous evidence shows plausible pre-demand contentions; and (iv) summary jurisdiction prevents resolution of complex factual disputes at the admission stage. Accordingly, the Tribunal found no infirmity in the Adjudicating Authority's dismissal of the Section 9 petition and dismissed the appeal, permitting the operational creditor to pursue other remedies available under law.
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