NCLAT held that in the present case there being a pre-existing dispute relating to quality of product supplied by the Operational Creditor


NCLAT held that in the present case there being a pre-existing dispute relating to quality of product supplied by the Operational Creditor referred in the email dated 30th September, 2016, the Adjudicating Authority without deciding the issue whether it was accepted to pay the amount or not is not competent to admit application under Section 9, there being a pre-existing dispute. For the reason aforesaid NCLAT set aside the NCLT’s order.

Case Reference

Case Citation : 03/2019(IBC)03
Case Name : Suman Chakraborty Vs. Anhui Technology Imp. & Exp. Co. Ltd.
Company Appeal : Company Appeal (AT) (Insolvency) No. 1090 of 2019
Appellant : Suman Chakraborty
Respondent : Anhui Technology Imp. & Exp. Co. Ltd.
Order Date : 07-Jan-20
Court/Bench : NCLAT New Delhi
Present for Appellant : Mr. Abhigyan Choudhury and Mr. Ateendra Saumya Singh, Advocates.
Present for Respondents : Mr. Pranav Chadha, Mr. Arvind Kumar Gupta and Ms. Henna George, Advocates for R-1. Mr. Amit Bhatnagar and Mr. Gautam Singhal, Advocates for IRP.
Chairperson : Justice S. J. Mukhopadhaya
Member (Judicial) : Justice Bansi Lal Bhat
Member (Technical) :
Brief about the decision

The demand notice u/s 8(1) was issued by the Operational Creditor on 10th June, 2017, the email dated 30th September, 2016 is much prior to demand notice, which shows that quality material was not supplied and it was substandard. Though by letter dated 14th February, 2017, the Corporate Debtor has said that they will make payment but letter dated 10th July, 2017 shows that sales proceeds could not be realized by the Corporate Debtor because they faced lot of problems in the material supplied by the Operational Creditor for bad quality and short supply. Submission made by learned counsel for Operational Creditor that the Corporate Debtor admitted the claim, cannot be adjudicated by the Adjudicating Authority in an application u/s 9 of Code as it cannot decide the claim or counter claim being not Court of competent jurisdiction. It is required to be seen that prior to issuance of demand notice under Section 8(1) is there any dispute.

NCLAT held that in the present case there being a pre-existing dispute relating to quality of product supplied by the Operational Creditor referred in the email dated 30th September, 2016, the Adjudicating Authority without deciding the issue whether it was accepted to pay the amount or not is not competent to admit application under Section 9, there being a pre-existing dispute. For the reason aforesaid NCLAT set aside the NCLT’s order.

judgment read here

                                                                                                                              O R D E R

07.01.2020: Pursuant to application under Section 9 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as ‘I&B Code’) filed by ‘Anhui Technology Imp. & Exp. Co. Ltd.’ (Operational Creditor) Corporate Insolvency Resolution Process having initiated by the Adjudicating Authority (National Company Law Tribunal), New Delhi by impugned order dated 19th September, 2019 against ‘M/s Pantel Technologies Pvt. Ltd.’ (Corporate Debtor), same is under challenge on the ground that there was a pre-existing dispute.

2. Learned counsel appearing on behalf of the Appellant – Shareholder referred to email dated 30th September, 2016 and other documents to suggest that faulty materials were supplied by the Operational Creditor, which reads as follows:-(see pdf)

3. On the other hand according to learned counsel appearing on behalf of the Respondent (Operational Creditor) by Letter of Guarantee dated 14th February, 2017, the Corporate Debtor confirmed payment without any objection and delay, which is as follows:-(ss pdf)

4. Reliance has also been placed by learned counsel for the Respondent on Letter dated 10th July, 2017 to support that the Corporate Debtor was ready to pay the dues, as extracted below:-(see pdf)

5. Another email dated 18th July, 2017 has been cited by learned counsel for
the Respondent, which is as follows:-(see pdf)

6. From the record we find that the demand notice under Section 8(1) was issued by the Operational Creditor on 10th June, 2017, the email dated 30th September, 2016 (as quoted above) is much prior to demand notice, which shows that quality material was not supplied and it was substandard. Though by letter dated 14th February, 2017, the Corporate Debtor has said that they will make payment but letter dated 10th July, 2017 shows that sales proceeds could not be realized by the Corporate Debtor because they faced lot of problems in the material supplied by the Operational Creditor for bad quality and short supply.

7. Submission made by learned counsel for the Respondent – Operational Creditor that the Corporate Debtor admitted the claim, cannot be adjudicated by the Adjudicating Authority in an application under Section 9 of I&B Code as it cannot decide the claim or counter claim being not Court of competent jurisdiction. It is required to be seen that prior to issuance of demand notice under Section 8(1) is there any dispute.

8. In the present case there being a pre-existing dispute relating to quality of product supplied by the Operational Creditor referred in the email dated 30th September, 2016, the Adjudicating Authority without deciding the issue whether it was accepted to pay the amount or not is not competent to admit application under Section 9, there being a pre-existing dispute.

9. For the reason aforesaid we set aside the impugned order dated 19th September, 2019 and dismiss the application under Section 9 filed by the Respondent – Operational Creditor. The Corporate Debtor is released from the rigour of Corporate Insolvency Resolution Process and will function through its Promoters and Directors. The Interim Resolution Professional will hand over the assets and records to the Promoter/ Directors immediately. The case is remitted to the Adjudicating Authority to decide the fee and cost incurred by the Interim Resolution Professional and to decide about the person who will pay the amount, preferably within three weeks. The appeal is allowed with aforesaid observations and directions. No costs.

[Justice S. J. Mukhopadhaya]
Chairperson
[Justice Bansi Lal Bhat]
Member (Judicial)


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