The New Delhi bench of the National Company Law Tribunal ( NCLT ) has held that the Insolvency Bankruptcy Code ( IBC ), 2016 does not provide issuance of multiple demand notices before filing of petition under section 9 of IBC.
M/s. Metro Tyres Limited (the “Operational Creditor”) has filed this petition under section 9 of the code, requesting that the insolvency resolution process against M/s. Hero Electric Vehicles Pvt. Ltd. (the “Corporate Debtor”) be started. The petitioner said that the Corporate Debtor’s moonshine argument was without substance and was based on field feedback that was mostly related to tire usage and manner.
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It was argued that the Demand Notice/Form-3 was delivered to the Corporate Debtor’s last known address or registered office. Nevertheless, the Corporate Debtor neglected to pay the Operational Creditor and sent a flimsy response on November 25, 2023, bringing up irrelevant or incorrect arguments.
However, the respondent argued that problems began to emerge after September 2022, when the operational creditor began delivering lower-quality goods, the flaws of which were only discovered after two-wheelers were put on the market. The respondent also argued that the Corporate Debtor is still free to evaluate the quality of the goods provided by the Operational Creditor even after the balance has been confirmed.
Lastly, it was argued that the existence of an authenticated default on the side of the corporate debtor can only be established by the default record produced by the information utility. However, in this particular example, the Corporate Debtor raised the issue in its letter dated April 16, 2024, after the Operational Creditor attempted to produce a record of default on the Information Utility. As a result, no record of default was created on the Information Utility.
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The NCLAT in Deepak Modi v. Shalfeyo Industries Pvt Ltd (2023) has held that “law is settled on the point that there must be pure pre-existing dispute. Meaning thereby that genuine pre-existing dispute must exist in rejecting an application Section 9 of the code. In the present case it is reflected from inspection report of SGB Infra Ltd dated 16.12.2019 which is at page 147 that the Corporate Debtor was asked by the SGB Infra Ltd to remove the flooring. This fact is itself enough to draw an inference that the Corporate Debtor had accepted the delivery of granite slabs made by the Operational Creditor without raising any dispute or objection.”.
The tribunal observed that, in accordance with their own inspection and quality control procedures, the Corporate Debtor, as the buyer of the goods, never brought up any quality concerns or disputes of any kind right away after receiving the items and kept buying more. Only nine months had passed since the last billing when the corporate debtor wrote an email on September 9, 2023, based on field input that they had received, in which they offered a moonshine defense.
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The Corporate Debtor has objected to the non-reconciliation of accounts, it further said. No documentation or records have been submitted by the Respondent/Corporate Debtor to support the payment of Rs. 5,00,000 to the Operational Creditor. As a result, it would not be covered by an existing dispute.
A two-members, Justice Shri Bachu Venkat Balaram Das ( Judicial Member ) and Shri Atul Chaturvedi ( Technical Member ) of the tribunal concluded that the Corporate Debtor has not been able to raise a plausible contention regarding the pre-existence of “dispute” between the parties. Hence, the present petition filed under Section 9 of the IBC, 2016 ought to be admitted.
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