TaxTMI 
TaxTMI 
2026 (3) TMI 991
X X X X Extracts X X X X
X X X X Extracts X X X X
....ispute. 2. The brief facts of this case as noted in the order dated 13.10.2023 of Ld. NCLT are as under: i. The application under Section 9 was filed by the Operational Creditor seeking initiation of Corporate Insolvency Resolution Process (hereinafter referred to as the 'CIRP') of Eastman Auto & Power Limited (hereinafter referred to as the 'Corporate Debtor') for the alleged default on the part of the Corporate Debtor in clearing the debt of Rs. 1,02,70,985/- along with interest @ 18% per annum. ii. It is the submission of the Operational Creditor that the Operational Creditor and the Corporate Debtor had entered into an Agreement dated 02.01.2018 for supply of inverter batteries of different models and capacity by the Corporate Debtor to the Operational Creditor. iii. In terms of said agreement, the Operational Creditor used to place purchase orders on the Corporate Debtor for inverter batteries to be manufactured and supplied by the Corporate Debtor. On the basis of the purchase orders issued by the Operational Creditor, the Corporate Debtor would manufacture and supply the inverter batteries to the Operational Creditor and raise an invoice in this....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ional Creditor alleging coercion in issue of credit note. iii. The Respondent did not produce any contemporaneous document to demonstrate that the credit note was issued under coercion. The Appellant had been continuously following up with the Respondent through emails dated 18.11.2022 and 01.12.2022 and it was only on 08.12.2022 that the Respondent for the first time raised the defence of coercion. iv. The Appellant denied that any coercion was used and denied that the issue of non-lifting of 10,000 batteries was reason for issue of credit note. The Appellant denied the Respondent's plea that since the Appellant allegedly did not lift 10,000 batteries, the Respondent was coerced into issuing the credit note. v. The Ld. Counsel for the Appellant relied upon the following judgments to state that the Ld. NCLT was required to see whether the dispute is genuine or is patently feeble legal argument, as it was important to separate the grain from the chaff and to reject a defence which is a mere bluster: • Mobilox Innovations Pvt. Ltd. vs. Kirusa Software Pvt. Ltd. [(2018) 1 SCC 353] (Para 51); • Saraswati Wire and Cable Industries vs.....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... vii. The Respondent had issued arbitration notice in January 16, 2023 to resolve outstanding disputes between the parties and application under Section 9 was an attempt to circumvent the arbitration process. viii. All the contentions of the Appellant raised in the present appeal have already been dealt by the Ld. NCLT in the impugned order and petition under Section 9 was rejected on the valid grounds of pre-existing dispute. The Respondent prayed that the appeal may be dismissed. 5. We have heard the Ld. Counsels for the Appellant and the Respondent and have perused the records. 6. The Corporate Debtor was supplying batteries to the Operational Creditor. There is no dispute regarding this sale, other than the claims arising out of warranty. The Corporate Debtor had given credit note on 07.11.2019 of Rs. 1,02,70,985/-. Apparently, the Operational Creditor had not pursued the matter till November 2022, and is relying on the emails dated 18.11.2022 and 01.12.2022. No correspondence of the intervening period has been placed on record. On 08.12.2022, the Respondent, Corporate Debtor had written to the Appellant that credit note was given under coercion. The Respondent h....
X X X X Extracts X X X X
X X X X Extracts X X X X
....itted that these batteries were not taken up by the Operational Creditor. It was in this background that the Corporate Debtor had sent the email dated 08.12.2022 and had stated that credit note was given under coercion. The Corporate Debtor had disputed its liability to make payment prior to issue of notice under Section 8 of IBC, 2016. 9. The guidelines provided by the following judgments is that the Adjudicating Authority is not required to go into the merits of the dispute, including the chance of success of either side and it is sufficient for rejection of the application under section 9 of IBC, 2016 if a genuine dispute exists prior to issue of notice under section 8 of IBC, 2016: i. In Ruchira Green Earth Private Limited, though its authorized Representative Mr. Para v. KLB Komaki Private Limited, reported in 2025 SCC OnLine NCLAT 1256 (Para 22 & 23), it was held as under: "22. It is well settled that in Section 9 proceedings, the Adjudicating Authority is not supposed to enter into final adjudication with regard to existence of dispute between the parties regarding operational debt. What has to be looked into is whether the defence raises a dispute which....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t need to be satisfied that the defence is likely to succeed. The Court does not at this stage examine the merits of the dispute except to the extent indicated above. So long as a dispute truly exists in fact and is not spurious, hypothetical or illusory, the adjudicating authority has to reject the application." (Emphasis supplied) iii. In the case of Rajratan Babulal Agarwal v. Solartex India (P) Ltd., reported in (2023) 1 SCC 115, the Hon'ble Supreme Court has held as under: "74. Again, following what this Court held in Mobilox, we do not have to go to the extent of finding that the second respondent is likely to succeed. Still further, finding guidance from Mobilox, the examination of the merits need not transcend the limited extent which we have undertaken which is to find that the case of the second respondent is not to be brushed aside as spurious, hypothetical or illusory. We cannot find that the dispute as projected by the appellant on behalf of the second respondent does not exist. In the teeth of the e-mails which we have adverted to, and the inference sought to be drawn in particular as also the lab reports produced, no doubt, from the second respon....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... is used it will only indicate the existence of a dispute prior to the receipt of a demand notice under Section 8 IBC, and the correctness or its truthfulness is a matter of evidence. In short, the respondent has succeeded in raising a dispute describable as "pre-existing dispute". In that view of the matter once we find that the Tribunals have rightfully held that there existed a "pre-existing dispute" between the parties there cannot be an order of remand of the matter to the Tribunal for reconsideration of Section 9 application under IBC." (Emphasis supplied) v. In M/s S.S. Engineers v. Hindustan Petroleum Corporation Limited & Ors., Civil Appeal No. 4583 of 2022 (Para 31 & 32), the Hon'ble Supreme Court has held as under: "31. The NCLT, exercising powers under Section 7 or Section 9 of IBC, is not a debt collection forum. The IBC tackles and/or deals with insolvency and bankruptcy. It is not the object of the IBC that CIRP should be initiated to penalize solvent companies for non- payment of disputed dues claimed by an operational creditor. 32. There are noticeable differences in the IBC between the procedure of initiation of CIRP by a financial cr....