The National Company Law Appellate Tribunal (NCLAT), New Delhi Bench dismissed a petition filed by Nike India to initiate insolvency proceedings against one of its dealers.
The Tribunal upheld the orders of the National Company Law Tribunal (NCLT), which on December 22, 2022, rejected the footwear and apparel maker’s plea to initiate the insolvency proceedings against its distributor on the ground of pre-existing dispute.
Nike India, an operational creditor had issued a notice under Section 8 of the Insolvency and Bankruptcy Code (IBC), claiming an amount of Rs 3.15 crores. In its reply, Nike India’s claim was disputed by Enkay Brand Distribution.
On this, the Nike India commented that it was a “moonshine” since in the distributorship Agreement between the parties, there was no liability which could have been fastened on the ground of sale on a lower price by the Corporate Debtor (distributor) and further under the agreement between the parties, no further claim could have been raised.
However, after going through the reply filed by the Nike India, the NCLAT noted that it raises issues pertaining to a pre-existing dispute between the parties and further said that the distributorship agreement between parties is not disputed and Nike India has claims against the Corporate Debtor.
Under section 8 of IBC, an operational creditor, on the occurrence of a default, sends a demand notice of unpaid debt to the corporate debtor. IBC says corporate debtors shall reply within a period of ten days of the receipt of the demand notice.
“Appellant is free to take recourse to the mechanism as provided in the Distributorship Agreement for the realisation of its dues,” the Bench said
The Two- Member Bench of Justice Ashok Bhushan, Chairperson and Barun Mitra, Member (Technical) observed that the present matter is not a case, where Section 9 (insolvency) proceedings under IBC can be initiated when a dispute is raised in reply to the Section 8 notice.
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