2026 (1) TMI 568 - AT - IBC

Undisputed supply invoices for 346 ovens creating operational debt; Section 9 admission and CIRP initiation affirmed, appeal dismissed

Dominant issue: whether an operational debt and default existed and whether any pre-existing dispute defeated recovery. The NCLAT found undisputed ... Maintainability of application under Section 9 - recovery of debt - Default in the payment of operational debt - pre-existing disputes between the two parties - Whether payment to the Operational Creditor is triggered in the present case giving rise to an operational debt, and if so, whether a default has been committed by the Corporate Debtor in respect of payment of such operational debt having already become due and payable and whether the said operational debt is an undisputed debt which exceeds the threshold limit. - HELD THAT:- It is an undisputed fact that the Operational Creditor during the period 11.12.2017 to 29.04.2019 had raised six different invoices for 346 ovens. The Corporate Debtor has not disputed or denied the receipt of 346 ovens to the tune of Euro 2,13,584.50. Material on record shows that against these six invoices, only part payment amounting Euro 85,379.80 was received by the Operational Creditor in tranches and an outstanding balance amount of Euro 1,28,204.70 remained unpaid. We also notice that while releasing the part-payments, no disputes were raised by the Corporate Debtor either on the quality or quantity of goods received or on the pricing of the goods. Neither was the quantum of outstanding debt disputed. It is also noticed that the last invoice was raised by the Operational Creditor in 2019 and until 2020 when the Operational Creditor had sent the Demand Notice, there is no evidence of any dispute which had been raised by the Corporate Debtor. Hence, we do not find any error in the finding returned by the Adjudicating Authority that debt and default stood established. Whether the operational debt was encumbered in disputes which were pre-existing in nature. - We are inclined to agree with the Operational Creditor that their Agreement of 20.02.2017 was with Ambro Asia S.r.L and not with Ambro Asia Pvt. Ltd. Though both were sister concerns, however, they were independent legal entities. The terms of the said Agreement of 20.02.2017 cannot be selectively used by the Corporate Debtor to suit their convenience as they were not a signatory or executant of the said Agreement. The plea of exclusivity taken up by the Corporate Debtor basis the 2017 Agreement therefore to our mind lacks credence. In such circumstances, the bogey of violation of the Agreement with respect to exclusivity rights as a ground of pre-existing dispute appears to be frivolous and cannot be a tenable ground to establish pre-existing dispute. It is no less significant to note that there is no mention of the injunction suit proceedings by the Corporate Debtor while replying to the Section 8 Demand Notice. Quite clearly the Appellant has chosen to project this as a ground of dispute only as an afterthought. The subject matter of the aforementioned suit also did not pertain to adjudication of the six unpaid invoices and hence cannot be viewed as a pre-existing dispute. The two subject matters in the injunction suit and the present Section 9 application being different and distinct from each other, the proceedings before the Italian Court have been rightly held by the Adjudicating Authority not to be a pre-existing dispute. Thus, we are not convinced that any of the disputes raised are genuine or pre-existing. In the absence of any discernible and bonafide pre- existing dispute, admission of the Section 9 application was in no manner violative of the Mobilox judgement [2017 (9) TMI 1270 - SUPREME COURT] Thus, we are of the view that the Corporate Debtor has defaulted in the payment of operational debt, which amount had clearly become due and payable, and further in the absence of any pre-existing dispute, we find that no error has been committed by the Adjudicating Authority in admitting the application under Section 9 of IBC and initiating CIRP. We find no merit in this Appeal. Appeal is dismissed. Issues: (i) Whether the invoices and related transactions give rise to an operational debt and default such as to merit admission under Section 9 of the Insolvency and Bankruptcy Code, 2016; (ii) Whether there existed any pre-existing bona fide dispute which would disentitle admission of the Section 9 application.Issue (i): Whether the invoices and related transactions give rise to an operational debt and default such as to merit admission under Section 9 of the Insolvency and Bankruptcy Code, 2016.Analysis: The invoices were issued in the name of the corporate party, goods were received and stored by that party, part payments were made while substantial amounts remained outstanding, the invoices stipulated payment within 180 days and interest for delayed payment, and no contemporaneous denial of receipt, quantity, quality or the existence of the debt was shown. The factual matrix therefore demonstrates a principal-to-principal buyer-seller transaction rather than a mere facilitation on running account.Conclusion: The Tribunal concluded that an operational debt and default stood established; this conclusion is against the Appellant.Issue (ii): Whether there existed any pre-existing bona fide dispute which would disentitle admission of the Section 9 application.Analysis: The alleged disputes relied upon (offer to buy back a small portion of stock, emails regarding commercial differences, an injunction suit between related but distinct foreign entities, and a commercial suit filed after service of the Section 8 notice) were examined. The buy-back related to a minor fraction of supplied goods and was inconsistent with the Appellant's contradictory pleadings; the foreign injunction decree concerned a different legal entity and did not relate to the unpaid invoices; and the domestic commercial suit was filed after the demand notice. The Tribunal applied the Mobilox principle requiring a genuine pre-existing dispute and found the claimed disputes to be insubstantial or unrelated to the invoices in question.Conclusion: The Tribunal held that no bona fide pre-existing dispute existed; this conclusion is against the Appellant.Final Conclusion: On the issues decided, the admission of the Section 9 application and initiation of the corporate insolvency resolution process was upheld because debt and default were established and there was no demonstrable pre-existing bona fide dispute preventing admission.