Petition u/s 9 of IBC cannot be Rejected merely on General Dispute raised based on Single Whatsapp Message: NCLAT [Read Order]

The National Company Law Appellate Tribunal (NCLAT) has held that a petition under section 9 of the Insolvency Bankruptcy Code (IBC) cannot be rejected merely on general dispute raised based on a Single WhatsApp message

Leena Salot , the Appellant, challenged the order passed by the Adjudicating Authority by which a petition under section 9 of the Insolvency and Bankruptcy Code, 2016 (“Code”) was dismissed. A Petition under Section 9 of the Code, was filed for initiation of the CorporateInsolvency Resolution Process (“CIRP”) against the Respondent, on account of the Respondent's failure to pay the outstanding operational debt amounting to Rs. 1,36,06,646.70.

The Appellant submitted that no notice of dispute, either with regard to the quality of the products or the invoice amounts, was raised by the Respondent within the stipulated period as per the invoices or at any subsequent time. No valid or specific dispute has ever been raised by the respondent concerning any particular product or invoice.

It was also argued that the Respondent has merely made a general assertion regarding the alleged unsatisfactory quality of goods, attempting to establish a frivolous dispute through a WhatsApp message that is vague and does not specify the exact invoice or product to which the purported dispute pertains.

The Respondent submitted that the Appellant has failed to provide any proof of supply in support of its claims for payment in its Section 9 application. Additionally, in cases where goods were supplied, some consignments were found to be defective, as demonstrated by the Respondent's Quality Test Reports, and therefore, the Appellant is not entitled to payment for such defective goods.

The bench of Justice Rakesh Kumar Jain (Judicial Member), Mr. Naresh Salecha (Technical Member) and Mr. Indevar Pandey (Technical Member) observed that the reply that was given was vague and merely stated that since arbitration proceedings had been initiated by the Appellant, the petition should be dismissed on the ground of a being a pre-existing dispute between the parties.

The Tribunal held that the debt and default are clearly established, and the debt has also been acknowledged in the ledger accounts. Further held that the WhatsApp message which is presented a record of pre-existing dispute vaguely refers to dispute in 2018 and fails to refer to any specific invoice or the amount which have been questioned in the message. This Whatsapp message cannot create a foundation for treating whole series of transactions as pre-existing disputes. The court set aside the impugned order and allowed the appeal.

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates