JUDGEMENT

(Physical Mode) [Per: ShreeshaMerla, Member (Technical)] 1. Challenge in this Appeal is to the Impugned Order dated 31/03/2023, passed in CP(IB) 316/BB/2021 passed by the National Company Law Tribunal, whereby the ‘Adjudicating Authority’ has admitted the Application filed under Section 9 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as ‘the Code’), observing as follows: As regards the contention that there are pre- existing disputes as to the debts claimed, admittedly, the Applicant prior to filing this application, had initiated proceedings before MSME Council seeking the same amount claimed as outstanding but the said application was dismissed by the MSME Council simply on the ground that the subject matter of claim is not that of a small enterprise, supply of goods or services and it pertained to supply of only raw material as a trader and there existed no other reciprocal obligations. It was held that MSMED Act, 2006 dies not provide scope for arbitration of non- MSME subject matter in dispute even if claimant is registered as MSME for other procedural reasons.

It has simply held that it has no jurisdiction to conduct the arbitration in the claim between the claimant of the Applicant and the Respondent.

It is pertinent to note that in reply to the petition filed before the MSME Council, the Respondent had admitted the debt and pleaded that it was making all sorts of efforts to settle the outstanding dues as soon as possible. In this case, the invoices are not disputed by the Respondent.

The structure of payments against the invoices is also not in dispute. The record under statement shows that a sum of Rs. 1,65,60,617/- was payable against the aforesaid invoices.

2. The Learned Counsel appearing for the Appellant has strenuously contended that the ‘Adjudicating Authority’ has not taken into consideration, the disputes which arose between the Corporate Debtor and the Operational Creditor from the year 2020 onwards, with respect to the Barter Transactions between them. The Barter Arrangement was in respect of the Operational Creditor supplying the Cotton Bales, the Corporate Debtor which in turn spins the cotton into yarn and supplies it to the Operational Creditor. It is submitted that when the disputes arose, the Operational Creditor on 18/07/2020 initiated Arbitration Proceedings before the Micro and Small Enterprises Facilitation Council (MSME Council) seeking recovery of the claimed debt said to have arisen on account of default under Invoices Nos. 85, 94, 102, 111, 112, 113 issued by the Respondent. 3. It is submitted that the MSME Council rejected the Application vide Order dated 28/09/2021 noting that ‘Adjudication of present Claim involves determination of reciprocal rights and liabilities of Barter Trading as alleged by Respondent by examining witness and voluminous evidence. The Proceedings before the Council are summary in nature and such examination of ‘Trading Transaction’ is outside the means and scope of the Council under Act 2006’. It is submitted that the MSME Council appreciated that the transactions between the Parties was in the nature of the Barter System and would require a trial to determine outstanding liabilities and therefore dismissed the Application. During the pendency of the Proceedings before the MSME Council, the Respondent had issued a ‘Demand Notice’ under Section 8 of the Code on 05/03/2021, but had claimed that the debt was due for default under Invoices Nos. 81, 84, 85, 94, 102, 111, 112, 113, despite having admitted before the MSME Council that Invoices No. 81 and 84 have already been paid to the Corporate Debtor. It is submitted that there was no reply to the Section 8 Notice on account of the illness of the Appellant’s father, who had passed away on 02/04/2021. It is submitted by the Learned Senior Counsel that the ‘Adjudicating Authority’ has erred in concluding that there was a debt and a default without taking int