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Judgment
[Per: Arun Baroka, Member (Technical)]
Brief facts:
This is an appeal under Section 61 of the Insolvency and Bankruptcy Code, 2016 filed by Shree Govind Alloys Private Limited (hereinafter, “Appellant” or “Operational Creditor”) against the Impugned Order dated 07.08.2023, passed by the Company Law Tribunal, Cuttack Bench (hereinafter, “Adjudicating Authority -AA”) in Company Petition (I.B.) No. 25/CB/2022.
Adjudicating Authority had dismissed the Application under Section 9 of the Insolvency and Bankruptcy Code, 2016 (hereinafter, “Code”) filed by the Appellant before the Adjudicating Authority against Shivom Minerals Limited (hereinafter, “Respondent” or “Corporate Debtor”).
Case of the appellant and the respondent is mentioned in the paras 2 and 3 of the impugned order and is not being reproduced for brevity.
Briefly speaking, it is not disputed that the Appellant and respondent had been dealing in the business of sale and purchase of iron ore fines and sponge iron lumps since 2017, mainly through oral arrangements and payments were being made in a running account. Respondent had argued before the Adjudicating Authority that Appellant had an agreement for purchase dated 02.03.2019 for lifting of huge quantities of materials of about 10,000 MTs. But the Appellant lifted small quantity only, as the market prices had come down and did not lift the rest of the quantities.
When a dispute arose with respect to the lifting of huge quantities of materials, both parties had reached an agreement through oral mediation and this was being contested by Appellant. This has been dealt in by the AA from paragraphs 4 to 13 in the impugned order of the Adjudicating Authority.
Appellant was heard by us and we also perused the appeal and written / oral submissions of both parties before the Adjudicating Authority.
Issues relating to facts as raised in the appeal have been appropriately dealt by the Adjudicating Authority basis the documentary evidence available on record. We are not going into the detailed facts herein as many of the submissions are based on oral business dealings, which cannot be fully substantiated. We do not find any fault in the order issued by the Adjudicating Authority basis the facts of the case.
Appellant has also raised an issue relating to law, that Adjudicating Authority exceeded its jurisdiction by deciding the Section 9 Application on the basis of preponderance of probabilities. We are not going to dwell on this issue herein, as the reasons for which the Section 9 Application has been dismissed are explained in detail by the Adjudicating Authority, which is dealt in subsequent paragraphs while deciding on the issue of pre-existing dispute and while going through the impugned order we can say that it not just based on preponderance of probabilities alone but many other circumstantial factors.
The main point for consideration before the Adjudicating Authority was whether there is a pre-existing dispute on the basis of the submissions of both the parties and this has been dealt in detail by the Adjudicating Authority in his impugned order.
The Adjudicating Authority has relied upon the judgment of Apex Court in Mobilox Innovations Private Limited vs. Kirusa Software Private Limited (2018) 1 SCC 353. The relevant para of Apex Court’s order is extracted here:
“…. 40. 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 such notice must bring to the notice of the operational creditor the “existence” of a dispute or the fact that a suit or arbitration proceeding relating to a dispute is pending between the parties. Therefore, all that the adjudicating authority is to see at this stage is whether there is a plausible contention which requires further investigation and that the “dispute” is not a patently feeble legal argument or an assertion of fact unsupported by evidence. It is important to separate the grain from the chaff and to reject a spurious defence which is mere bluster. However, in doing so, the Court does not 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….”
Based on the above, AA concluded that the respondent after the receipt of the statutory demand notice dated 11.02.2022 replied on 03.03.2022 raising a dispute. The Adjudicating Authority has gone into the circumstances of their business dealings, which was mainly basis oral arrangements and which cannot be fully substantiated and accordingly have come to the conclusion that the dispute raised by the respondent is plausible and not a patently feeble legal argument. Thus, when the Appellant received the reply to Section 8 demand notice raising a dispute, the Section 9 petition could not have been proceeded under I&B Code against the respondent.
The Adjudicating Authority concluded, that to determine the contention of the respondent that the Sale Order dated 02.03.2019 was placed by the Petitioner in pursuance to an oral agreement dated 05.04.2018, to decide whether private mediation was held and settlement was arrived therein and whether petitioner agreed to forfeit Rs. 4 crores security deposit by the respondent and to decide the genuineness of the invoices and Sale Orders relied by the respondent requires, further investigation is required which can be decided only after examining the witnesses. Accordingly, AA concluded that in this scenario pre-existing dispute is existing.
In the above mentioned scenario, the inference by the Adjudicating Authority that there is a pre-existing dispute, cannot be faulted by us.
We do not find any grounds to interfere in the order of the Adjudicating Authority for not allowing proceedings under Section 9 of I & B Code, 2016. The Appeal is dismissed accordingly.