The NCLT, Mumbai Bench opined that a petition under Section 9 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as “IBC”) is not maintainable if there exists a pre-existing dispute between the parties.

In the present case, the parties entered into a yearly clearance and forwarding Agent Agreement against which even the Corporate Debtor had counterclaims. Therefore, the Bench ruled that this was evidence of the fact that there existed pre-existing dispute between the parties.

Brief Facts:

The present application has been preferred under Section 9 IBC to seek the commencement of the Corporate Insolvency Resolution Process (“CIRP”) against the Corporate Debtor (Respondent).

Contentions of the Operational Creditor (Petitioner):

It was submitted that the parties entered into a yearly clearance and forwarding Agent Agreement which was extended from time to time. The Petitioner was appointed as an Agent for the goods manufactured/distributed by the Respondent and the Respondent was liable to pay service charges at the decided rates.

On failure of the Respondent to pay the monthly payments, the Petitioner terminated the Agreement. Thereafter, the Respondent took away the stocks lying with the Petitioner.

Further, it was submitted that a demand notice was issued, against which the respondent replied that the amount stated was not correct and that they paid the entire invoice amount.

Contentions of the Corporate Debtor (Respondent):

It was argued that there existed a pre-existing dispute between the parties. Moreover, the invocation of the Bank Guarantee is not an operational debt.

Observations of the Tribunal:

The Tribunal examined the material on record and observed that the Respondent has several counterclaims in terms of the Agreement between the parties. Further, the amount as claimed by the Corporate Debtor exceeded the amount claimed to be in default. Therefore., there was enough evidence of a pre-existing dispute between the parties.

The Bench ruled that as per the specific bar under Section 9 IBC, the present petition was not maintainable as there existed pre-existing dispute.

The decision of the Tribunal:

Based on the aforementioned findings, the Tribunal dismissed the petition accordingly.

Case Title: Kay Emm Biomedicals Pvt. Ltd. v. Transasia Bio-medicals Ltd.

Coram: Mr. Prabhat Kumar (Technical Member), Mr. Kishore Vemulapalli (Judicial Member)

Case No.: CP (IB) No. 207/MB-IV/2021

Advocates for Petitioner: Advs. Mr. Vishal phal, Ms. Sunita Sonawane

Advocates for Respondent: Advs. Mr. Avinash Khanolkar, Mr. Abhijeet Deshmukh, Mr. Aatir Saiyed, Mr. Harsh Sharma

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