NCLT Mumbai Bench Dismisses Insolvancy Petition Citing Pre-existing Dispute.
The NCLT Mumbai Bench dismissed an insolvency petition filed by Caryaire Equipment against Weatherspell Aircon, citing a pre-existing dispute over defective goods.
The National Company Law Tribunal (NCLT), Mumbai Bench, dismissed a petition filed by Caryaire Equipment India Pvt Ltd ("Operational Creditor") seeking initiation of Corporate Insolvency Resolution Process (CIRP) against Weatherspell Aircon Engineers Pvt Ltd. ("Corporate Debtor") under the Insolvency and Bankruptcy Code, 2016 (IBC).
The petition, filed by the Operational Creditor, claimed an outstanding debt of ₹28,68,782 from the Corporate Debtor. The Operational Creditor, engaged in manufacturing and selling air distribution products, alleged that the Corporate Debtor, a provider of heating, ventilation, and air conditioning solutions, had failed to make payments for goods received.
What is Corporate Insolvency Resolution Process (CIRP)?
As per indiafiling.com "Corporate Insolvency Resolution Process is a recovery mechanism for creditors. If a corporate becomes insolvent, a financial creditor, an operational creditor, or the corporate itself may initiate CIRP. After making an application then CIRP is initiated. CIRP is the process through which it is determined whether the person who has defaulted is capable of repayment or not (IRPs will evaluate the assets and liabilities to determine the repayment capability). If a person is not capable of repaying the debt the company is restructured or liquidated."
To learn more about Corporate Insolvency Click here to learn from Insolvency and Bankruptcy Board of India.
In this case the Corporate Debtor, however, refuted the claims and argued that the petition lacked merit due to a pre-existing dispute. The Corporate Debtor highlighted delays in the delivery of goods by the Operational Creditor, which impacted their project timelines and resulted in financial losses. Further, they alleged that the delivered goods were defective and did not meet the specified requirements, leading to complaints from their clients and causing reputational damage. The Corporate Debtor presented email correspondence as evidence of their communication with the Operational Creditor regarding the defective goods, specifically mentioning issues with color, thickness, powder coating quality, and alignment.
The NCLT, after reviewing the submissions and evidence, acknowledged the existence of a pre-existing dispute between the parties and held that "23. We take a note that since the claim in question is under dispute and not an admitted debt, this tribunal has no jurisdiction to entertain the present matter."
The Bench further observed that "24. Accordingly, we have no hesitation to hold the present petition is not maintainable in account of Pre-existing dispute as it is necessary to look into the email communications between the parties which is annexed by the Corporate Debtor in their Reply in the current petition."
The tribunal noted that the email exchanges corroborated the Corporate Debtor's claims of defective goods and their communication regarding the same to the Operational Creditor. The tribunal concluded that since the claimed debt was disputed and not an admitted debt, it lacked the jurisdiction to entertain the insolvency petition. Consequently, the petition filed by Caryaire Equipment India Pvt Ltd against Weatherspell Aircon Engineers Pvt Ltd was dismissed.
Coram: Justice V.G Bisht,(Retd) Hon’ble Member (Judicial) & Mr.Prabhat Kumar Hon’ble Member (Technical)
Dated: 14-06-2024
Between: Caryaire Equipment India Pvt Ltd . …(Operational Creditor/Applicant)
Versus
Weatherspell Aircon Engineers Pvt Ltd. …(Corporate Debtor/Respondent)
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