Application filed u/s 9 of IBC not maintainable for claim on non-delivery of export due to Pre-existing dispute: NCLT [Read Order]

The Allahabad bench of the National Company Law Tribunal ( NCLT ) has held that the application filed under Section 9 of the Insolvency and Bankruptcy Code, 2016 ( IBC ) is not maintainable for claim on non-delivery of export.

The applicant, M/s Morex Corporation Ltd. who is the Operational Creditor filed an Application to Adjudicating Authority against M/s Jindal Poly Filma Ltd. ( ‘Respondent/Corporate Debtor’ ).

The prayer made was to initiate Corporate Insolvency Resolution Process ( ‘CIRP’ ) against the Respondent/Corporate Debtor due to default in payment of total outstanding Operational Debt of Rs.3,42,60,000/- ( Rupees Three Crore Forty-Two Lakhs Sixty Thousand Only ) of which principal amount is Rs. 3,00,00,000/, interest amount is Rs. 33,60,000/ and Air freight charges are Rs.9,00,000/.

The Applicant M/s Morex Corporation Ltd. is based in Hong Kong and is in the business of import and export. Respondent M/s Jindal Poly Films is a company that is into the business of manufacture of SSMMS material and other allied business and has its registered office at 19th, K.M. Hampur, Bulandshahr Road, P.O. Gulaothi, Bulandshahr, UP.

The Applicant submitted that a purchase order was placed with the Corporate Debtor that represented the Operational Creditor for the supply of non-woven fabric ( SSMMS ) of a particular gsm and slit width ( “the contracted goods” ) in February 2020, which was to be delivered at the factory premises of M/s Yama Ribbons and Bows Company Limited, China whose office in India was coordinating the entire deal.

The Applicant stated that as agreed with the Corporate Debtor, the Order should be ready on or before 15.03.2020 and the Corporate Debtor assured timely delivery of the goods. The Applicant conveyed their requirement vide email dated 02.03.2020 which was a bulk requirement of 30MT's non-woven fabric under the shipment terms-CIF basis with an Estimated Time of Delivery on or before 15.03.2020.

A two-member bench of Sh. Praveen Gupta, Member ( Judicial ) and Sh. Ashish Verma, Member (Technical) dispute between both parties on termination of the contract as well as dispute on meeting the terms of the contract as regards completing the manufacturing of contracted goods in our opinion would fall under the category of pre-existing disputes between parties, especially when the terms of delivery for export as per the contract could not be met by the Corporate Debtor due to the reason beyond its control given the ban imposed by the Govt of India.

The two-member bench comprising Shri. Praveen Gupta ( Judicial Member ) and Ashish Verma ( Technical Member ) dismissed the present petition/application filed under Section 9 due to being a disputed operational debt of the nature of the pre-existing dispute.

Further viewed that “The date of default to be taken as 01.04.2020 being the date of cancellation of contract, as contended by the Corporate Debtor, has not been considered by us keeping in view the fact that the cancellation of the contract on 01.04.2020 has been disputed by the Corporate Debtor to show the existence of a pre-existing dispute about the operational debt claimed in the application and the same has already been adjudicated upon by us hence, the date on which dispute has arisen cannot be taken as the date of default when a particular date has already been taken by the Operation Creditor in demand notice u/s 8 and the application u/s 9 on which default by the Corporate Debtor in meeting the terms of contract i.e. 24.03.2020 as claimed by the Operational Creditor, is occurred.”

To Read the full text of the Order CLICK HERE

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