Jain Irrigation Systems Limited vs Pragyawan Technologies Private ...

IN THE MATTER OF: Jain Irrigation Systems Ltd. ...Appellant

Versus Pragyawan Technologies Pvt. Ltd. ...Respondent Present: For Appellant: Mr. Alok Dhir, Ms. Varsha Banerjee, Mr. Karan Grover, Advocates For Respondent: Mr. Rohan Chawla, Advocate

ORDER

21.03.2023: Heard Learned Counsel for the Appellant.

2. This Appeal has been filed against the Order dated 25th January, 2023 by

which Order Section 9 Application filed by the Appellant has been dismissed by

the Adjudicating Authority on the ground of pre-existing dispute.

3. In the present case, on 10.06.2019, purchase orders were issued to the

Appellant for supply of PLB HDPE Duct. On receipt of Purchase Orders, the

Appellant issued two Performa Invoices. A letter/notice was issued on

21.11.2019 and 22.11.2019 to the Appellant. Appellant on 27.12.2019 issued a

notice under Section 8 of the I&B Code, 2016 reminding payment of the amount

and the purchase order. The corporate debtor submitted a Reply to the notice 2

dated 27.12.2019 on 04.01.2020 which has been brought on record by the

Appellant at page no. 246 of the Appeal Paper Book. In the notice of dispute

which was issued by the Corporate Debtor against the Appellant's notice under

Section 8 dated 27.12.2019 reference of notice dated 21.11.2019 delivered on

26.11.2019 and Legal Notice dated 27.12.2019 delivered on 03.01.2019 was

made and the claim of the Appellant was refuted and in paragraph 2, details

were given to the pre-existing dispute before issuance of demand notice by the

Corporate Debtor.

4. After receipt of the Section 8 Notice, Section 9 Application was filed. The

Corporate Debtor also filed a Reply to the Section 9 Application and the

Adjudicating Authority after considering the submissions of parties has

dismissed the Application under Section 9 of the I&B Code, 2016. Aggrieved by

the order, this Appeal has been filed.

5. Learned Counsel for the Appellant challenging the Order contends that the

dispute which was sought to be raised by the Corporate Debtor is a moonshine

dispute and could not have been relied for dismissing the Section 9 Application.

He submits that the inspection was itself dispensed with by the Corporate Debtor

and the Corporate Debtor sent a letter that transportation they were arranging

when the goods were supplied, the Appellant was required to be paid by the

Corporate Debtor.

6. We have considered the submissions of Learned Counsel for the Appellant

and have perused the record.

Company Appeal (AT) Ins. No. 311 of 2023 3

7. It is on record that prior to Section 8 Notice dated 27.12.2019, corporate

debtor had sent a notice dated 21.11.2019 raising various issues regarding the

supplies made by the Appellant. The notice which was made under Section 8

was replied by a detailed reply notice dated 04.01.2020. In paragraph 2 of the

said reply to Section 8 Notice, following has been stated:

"2. Pre-existing dispute before issuance of Demand Notice

That this Demand Notice issued by you on instructions of your Client is further bad in law as it is against the principles of the Code. It is settled law that no proceedings under the IBC shall hold ground if there exists any dispute pertaining to the alleged unpaid debt. In lieu of the same, we state that before the receipt of the demand notice by our Client from you on 27.12.2019 at 5.18PM via email, an email was sent out dated 21.11.2019 specifying the breach committed by your Client and a legal notice claiming breach of the two purchase orders, which are the subject matter of these proceedings, and disputes pertaining to the same was sent out by post on 27.12.2019 itself at 12.21PM and by email on 03.01.2020. The contents of the said legal notice issued by us on behalf of our client is self-explanatory and clearly indicative of a dispute, and its contents are not being reiterated herein for the sake of brevity. The same is being attached herewith as Annexure 1. It is further pertinent to mention that based on the various communications sent by our Client to your Client prior to the issuance of the notice clearly indicate that a dispute

Company Appeal (AT) Ins. No. 311 of 2023 4

subsists and since the same was not addressed by you, our Client was left with no option but to serve upon you the above-mentioned legal notice. Hence, in light of the same recourse to the provisions of IBC are totally out of place and is contrary to the very essence of the legislative intent of IBC. That it is also imperative to mention that in lieu of the above dispute, a Civil Suit has been filed having CS No. 09/2020. In lieu of the above, vide order dated 02.01.2020 of the Hon' Court of Gautam Buddh Nagar, notice has been issued to your Client for appearance before the Hon' Court at Gautam Buddh Nagar. The copy of the order has been annexed herewith as Annexure 2."

8. From the record, it does appear that prior to Section 8 Notice, issues were

raised by the Corporate Debtor including various claims against the Operational

Creditor. The submission of Learned Counsel for the Appellant that dispute is a

moonshine dispute cannot be accepted in view of the averments and statements

made in the Reply-Notice dated 04.01.2020. Section 9 Proceedings are not the

proceedings where the dispute raised by the parties arising out of contract

between the parties can be gone into and adjudicated. The scheme of Insolvency

Proceedings contemplate that the proceeding shall go on only when there is an

admitted debt and default, forum is not for deciding and adjudicating the

contractual dispute between the parties. Present is a case where prior to Section

8 Notice, letters were issued by the Corporate Debtor and in Reply to Section 8

Notice, detailed Reply has been filed rejecting the claim of the Appellant. The

claim having been disputed, present was not a case where Section 9 Application

Company Appeal (AT) Ins. No. 311 of 2023 5

could have been admitted and the Adjudicating Authority has rightly rejected the

Section 9 Application.

We do not find any error in the Order of the Adjudicating Authority, the

Appeal is dismissed.

[Justice Ashok Bhushan] Chairperson

[Barun Mitra] Member (Technical)

Basant/nn

Company Appeal (AT) Ins. No. 311 of 2023