No Provision In IBC To Issue Multiple Demand Notices Before Filing Petition U/S 9 Of IBC: NCLT New Delhi

The NCLT New Delhi bench of Justice Shri Bachu Venkat Balaram Das (Judicial Member) and Shri Atul Chaturvedi (Technical Member) has held that there is no such provision in the IBC, 2016 and in the Regulation made thereunder that allows the Operational Creditor to issue multiple demand notices to the Corporate Debtor. Brief Facts This petition has been filed under section 9 of the code by M/s. Metro Tyres Limited ('Operational Creditor') seeking initiation of the insolvency resolution process against M/s. Hero Electric Vehicles Pvt. Ltd. ('Corporate Debtor'). This petition seeks to recover unpaid dues arising on account of supplying cycle tyres and tubes by the operational creditor to the corporate debtor. Contentions The petitioner submitted that the moonshine defense raised by the Corporate Debtor is devoid of merit and has been raised on the basis of field feedback which is primarily attributable towards the manner/usage of tyres. It was also submitted that Demand Notice/Form-3 was sent to the last known address/registered office of the Corporate Debtor. However regardless of the same, Corporate Debtor failed to clear the dues of the Operational Creditor and sent a baseless reply dated 25.11.2023 raising frivolous/wrong contentions. On the other hand, the respondent submitted that issues started arising after September, 2022 when the operational creditor started supplying the products of inferior quality, the defects of which only could be identified after two wheelers were sold in the market. The respondent further contended that the confirmation of balance does not preclude the Corporate Debtor from conducting a quality assessment of the products supplied by the Operational Creditor. Finally, it was submitted that record of default, as generated by Information Utility, is a sine qua non to establish the existence of authenticated default on part of Corporate Debtor. However, in the instant case, after the Operational Creditor sought to create record of default on Information Utility, the Corporate Debtor, vide its Letter dated 16.04.2024 has raised the dispute and accordingly, no record of default was generated on the Information Utility. Observations: The NCLAT in Deepak Modi v. Shalfeyo Industries Pvt Ltd (2023) has held that “law is settled on the point that there must be pure pre-existing dispute. Meaning thereby that genuine pre-existing dispute must exist in rejecting an application Section 9 of the code. In the present case it is reflected from inspection report of SGB Infra Ltd dated 16.12.2019 which is at page 147 that the Corporate Debtor was asked by the SGB Infra Ltd to remove the flooring. This fact is itself enough to draw an inference that the Corporate Debtor had accepted the delivery of granite slabs made by the Operational Creditor without raising any dispute or objection.” , the tribunal noted. While coming to the facts of the present, the tribunal noted that the Corporate Debtor, being the purchaser of goods never raised any quality issue or any sort of dispute in any manner whatsoever as per their own inspection/quality control policies immediately after the receipt of the goods and continued to purchase goods. It is only after nine months from the last invoice, the Corporate Debtor sent an E-mail dated 09.09.2023, on the basis of field feedback received by the Corporate Debtor, wherein the Corporate Debtor took a moonshine defence. “No dispute in any manner whatsoever can be raised by the Corporate Debtor at such a later stage.” it added. It further observed that though the Corporate Debtor has raised an objection of non-reconciliation of Accounts. The Respondent/Corporate Debtor have not filed any record/ documentary evidence to substantiate payment of Rs.5,00,000/- to the Operational Creditor. Therefore, it would not come in the purview of a pre-existing dispute. The tribunal rejected the argument of the corporate debtor that fresh demand notice should have been issued before filing the present petition and noted that in Ultratech Cement Ltd. Vs. Universal Journeys (India) Pvt. Ltd. and Ors.,2023 the NCLAT has held that “there is no such provision in the IBC, 2016 and in the Regulation made thereunder that allows the Operational Creditor to issue multiple demand notices to the Corporate Debtor. Hence, we are of the view that the multiple demand notices are beyond the ambit of the IBC, 2016.” Finally, the tribunal concluded that “in the facts and circumstances of the instant case, we are of the view that the Corporate Debtor has not been able to raise a plausible contention regarding the pre-existence of “dispute” between the parties. Hence, the present petition filed under Section 9 of the IBC, 2016 ought to be admitted.” Case Title: M/s. METRO TYRES LIMITED VERSUS M/s. HERO ELECTRIC VEHICLES PVT. LTD Case Number: C.P. (IB) –397(ND)/2024 Judgment Date:...

No Provision In IBC To Issue Multiple Demand Notices Before Filing Petition U/S 9 Of IBC: NCLT New Delhi

Mohd Malik Chauhan

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