Dispute on Contractual Conditions on Place of Delivery and Obligation on Transport of Goods is “Pre-Existing Dispute” under IBC: NCLAT
Dispute on Contractual Conditions on Place of Delivery and Obligation on Transport of Goods is “Pre-Existing Dispute” under IBC, rules NCLAT
The New Delhi Bench of the National Company Law Appellate Tribunal (NCLAT) held that the dispute on contractual conditions on place of delivery and obligation on transport of goods is “pre-existing dispute” under the Insolvency and Bankruptcy Code, 2016 (IBC). The appeal arose from the order passed by the Adjudicating Authority (National Company Law Tribunal, Ahmedabad...
The New Delhi Bench of the National Company Law Appellate Tribunal (NCLAT) held that the dispute on contractual conditions on place of delivery and obligation on transport of goods is “pre-existing dispute” under the Insolvency and Bankruptcy Code, 2016 (IBC).
The appeal arose from the order passed by the Adjudicating Authority (National Company Law Tribunal, Ahmedabad Bench) (“Adjudicating Authority”) in the matter of Sanam Fashion & Design Exchange Ltd. (Appellant/Operational Creditor) Vs. Ktex Nonwovens Pvt. Ltd. (Corporate Debtor) for initiation of Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor under Section 9 of the Insolvency & Bankruptcy Code (IBC), 2016. Adjudicating Authority vide its order dated 10.08.2023 had rejected the prayer of Operational Creditor to initiate the CIRP against the Corporate Debtor/ Respondent.
The Counsel for the appellant has submitted that the finding of the Adjudicating Authority regarding the aforesaid advance not being treated as operational debt under Section 5 (21) of the IBC is erroneous. In this regard has cited the Judgment of the Supreme Court in ‘Consolidated Construction Consortium Ltd. Vs. Hitro Energy Solutions Pvt. Ltd.’ which clarified that the definition of Operational Debt encompasses amount paid in advance for the purchase of goods and services.
It was further stated that pursuant to the above, the purchase order was executed between the parties on 16.03.2020 and the appellant remitted USD 200,000 to the respondent for delivery of 10 tonnes of Non-Woven white fabric and that the mode of delivery was by Air. The appellant submits that a conjoint reading of email and the PO makes it evident that the appellant was to receive the goods from the Respondent.
The counsel for the respondent submitted that the Respondent was under the bonafide belief that the Appellant would collect the goods from ex-works Rajkot and thereby it continued to store the goods manufactured specifically for the appellant in their warehouse for a period of 3 years as shown through the email exchanges between the parties from March, 2020 onwards.
A Three-Member Bench comprising Justice Rakesh Kumar Jain] Member (Judicial), Naresh Salecha, Member (Technical) and Indevar Pandey, Member (Technical)observed that “In the instant case, there was a pre-existing dispute between the parties regarding contractual conditions relating to place of delivery and obligation of parties for transport of goods and therefore the application for CIRP against Corporate Debtor cannot be allowed. The matter has been correctly decided by the Adjudicating Authority in this regard.”
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