TaxTMI 
TaxTMI 
2025 (8) TMI 575
X X X X Extracts X X X X
X X X X Extracts X X X X
....dismissed the Section 9 petition filed by the Appellant-Operational Creditor. Aggrieved by the impugned order, the present appeal has been preferred by the Appellant-Ruchira Green Earth Private Limited. 2. The brief factual matrix of the present case is that the Appellant-Operational Creditor, namely, Ruchira Green Earth Pvt. Ltd. is an MSME which was having business transactions with the Corporate Debtor-Respondent, namely KLB Komaki Pvt. Ltd. for supply of batteries. The Appellant had supplied batteries to the Respondent under purchase orders raised from time to time and issued invoices for payments. Inspite of alleged regular follow up by the Appellant, the Corporate Debtor started defaulting in making payments from August 2022. In view of unpaid invoices, the Appellant issued a Section 8 Demand Notice on 21.10.2022 on the Corporate Debtor. Since the Corporate Debtor did not reply to the Section 8 Demand Notice nor made the outstanding payments, the Appellant filed a Section 9 petition before the Adjudicating Authority on 30.11.2022 seeking initiation of CIRP of the Corporate Debtor. The Section 9 application was dismissed on 09.06.2025 by the Adjudicating Authority. Assailin....
X X X X Extracts X X X X
X X X X Extracts X X X X
....liabilities. The Ld. Sr. Counsel also asserted that the finding of the Adjudicating Authority overlooks the settled law laid down by the Supreme Court in Mobilox Innovations Pvt. Ltd. Vs Kirusa Software Pvt. Ltd. (2018) 1 SCC 353 which held that a pre-existing dispute must be genuine and one which is supported by evidence. 4. Refuting the contentions made by the Appellant, the Ld. Counsel for the Respondent, Dr. Swaroop George submitted that the Operational Creditor had been supplying faulty batteries which caused huge loss to the Corporate Debtor due to resultant loss of consumer confidence in the Corporate Debtor. Asserting that it is an irrefutable fact that regular conversation was held on the WhatsApp Group between both parties regarding the defects in the batteries supplied, it was added that the Operational Creditor in their WhatsApp messages had admitted to the faults in the battery and assured to take corrective measures. The faulty goods were however either not replaced or even if replaced continued to remain faulty. Though the Operational Creditor had assured to supply batteries free from any manufacturing defects and had even given a warranty proposal of three years ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... batteries supplied by the Appellant lacked conclusive proof. The Adjudicating Authority also failed to appreciate that the issue of indemnity bond raised by the Respondent as a ground of dispute was misplaced as this bond was executed after the goods had already been supplied and therefore inapplicable in respect of the outstanding operational debt which had already crystallised. The disputes raised by the Respondent was therefore dubbed as moonshine dispute by the Appellant. 8. Per contra, it is the case of the Respondent that in their reply filed to the Section 9 application before the Adjudicating Authority they had categorically denied and disputed the outstanding debt claimed by the Operational Creditor. At no stage had they ever admitted the debt or assured that necessary payments will be made to the Operational Creditor. It was asserted that the Appellant had misconstrued the communication dated 16.08.2022 to send current invoices to be an admission/acknowledgement of any liability on their part towards the Operational Creditor. The Learned Counsel for the Respondent further pointed out that the Corporate Debtor had raised issues with respect to deficient quality of batt....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he bona fides of the Application and undermines its maintainability. Further, the cases relied upon by the Applicant are distinguishable on facts and not applicable to the present case. (vi) These disputes in the present case are genuine and substantial, rather than being spurious, hypothetical, or illusory. It is well-settled by the Hon'ble Supreme Court in Mobilox Innovations Pvt. Ltd. v. Kirusa Software Put. Ltd., (2018) 1 SCC 353, that if there exists a genuine dispute prior to the issuance of demand notice, the Application under Section 9 is liable to be rejected. (vii) In view of the above, this Adjudicating Authority finds that the existence of a pre-existing dispute between the parties serves as a valid ground for rejecting the present Application." (Emphasis supplied) From the above findings, we note that the Adjudicating Authority has applied the test laid down in the Mobilox judgment supra in rejecting the Section 9 application by holding that the disputes raised by the Corporate Debtor was both genuine and pre-existing and not spurious, hypothetical or illusory. 10. It is a well settled legal proposition that for a pre-existing dispu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e Corporate Debtor had purportedly received complaints of manufacturing defects and quality issues from their consumers/dealers of the batteries being sub-standard. This supply of defective batteries was communicated on 29.12.2021 to the Operational Creditor, a fact which has not been denied by the Appellant as noticed at page 727 of Appeal Paper Book (APB). Following the complaint, as per the Corporate Debtor, an Engineer of the Operational Creditor carried out an inspection and assured to replace the defective batteries but backtracked thereafter and replaced only limited number of batteries which also turned out to be defective. To the contrary, the Appellant in their Rejoinder Reply to the Section 9 application admitted that while they had received this message of defective batteries from the Corporate Debtor, they had replaced all defective batteries prior to sending of Demand Notice and that the complaints stood closed. 14. Quite clearly, there is clear difference of standpoint between the Corporate Debtor and the Operational Creditor as to whether the complaint with respect to defective batteries was a continuing dispute as claimed by the Corporate Debtor or the same stoo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....age replacement. (Emphasis supplied) 16. It is also clear from the above messages that the Respondent was consistently badgering the Appellant about defective batteries supplied by them and insisted on their replacement. Even before the demand notice was issued on 21.10.2022, the Corporate Debtor had sent a terse message to the Appellant that even the replaced batteries were faulty and were like "garbage". The Appellant never denied the exchange of these chats. We also notice that the Appellant had recognised the need to replace the batteries though they also tried to slip in issues relating to additional costs etc. Further when we see the Rejoinder Reply of the Appellant to the Section 9 application, we find that the Operational Creditor took a contrary stand and stated that they had never apologized for supply of faulty battery but that they had only expressed their concern as a gesture to retain the Corporate Debtor as their customer. It was also their contention that necessary remedial measures had been taken by them and that the complaint stood closed. We also find that the Appellant had thus tried to impart a new dimension and perspective to their email and WhatsA....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ability of the warranty had become a bone of contention between the two parties and this by itself goes into the root of the matter as a pre-existing dispute. 19. It is also contended by the Corporate Debtor that the Appellant also undertook by way of a duly signed and stamped Indemnity Bond dated 27.08.2022 that the Appellant would be liable for all repairs/replacement of the defective batteries already supplied, under supply and to be supplied in the future as well and that the Appellant shall compensate the Respondent for any losses caused due to the faulty batteries supplied by the Appellant. The relevant clauses of the Indemnity Bond as placed at page 70 of APB are as extracted below: WHEREAS, Indemnifier has assured Indemnified that the batteries (for electric vehicle) so already supplied and still being supplied and to be supplied in the future by Indemnifier were/are/ will be of good quality and there are no issues in the said batteries. That, believing the above representations and assurances of the Indemnifier, the Indemnified has purchased and continues to purchase the batteries so supplied by the Indemnifier and has further sold and continues to sell the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....as such is not disputed, for the Appellant to subsequently contend that this was signed under intimidation and not out of free-will is a matter that would clearly require deeper investigation and trial which is clearly beyond the scope of summary proceedings under IBC. Hence the Adjudicating Authority did not commit any error in holding the indemnity bond to be another ground of pre-existing dispute and factoring the same in rejecting the Section 9 application. 21. At this stage, we may refer to paragraph 51 of the judgment of the Hon'ble Supreme Court in Mobilox judgment supra wherein it has been held that Adjudicating Authority while rejecting a Section 9 application has to only notice whether there is a dispute pending between the parties which dispute warrants further investigation. In paragraph 51, the following was laid down: "51. It is clear, therefore, that once the operational creditor has filed an application, which is otherwise complete, the adjudicating authority must reject the application under Section 9(5)(2)(d) if notice of dispute has been received by the operational creditor or there is a record of dispute in the information utility. It is clear that s....