Pre-existing dispute under IBC Sections 8-9 must genuinely relate to claimed operational debt; franchisee disputes with related proprietorship (same owner) do not bar Section 9 where supply transaction distinct, delivery undisputed timely, notice by advocate valid.

JUDGMENT

Per: Justice Md. Faiz Alam Khan: J.

The instant appeal has been preferred by the Appellant (Indu Jain, sole Proprietor of M/s IB Jewels) feeling aggrieved by the impugned order dated 09.08.2024 passed by the Ld. NCLT, Mumbai Bench – VI in C.P. (IB) No. 3626/MB-VI/2019 whereby the petition filed by the Appellant under Section 9 of the Insolvency and Bankruptcy Code, 2016 (in short ‘Code’) has been rejected.

2. Ld. Counsel for the Appellant submits that the Appellant is the Operational Creditor and is the sole proprietor firm IB Jewels which is engaged in the business of wholesale trade of diamond jewellery and the proprietor of IB Jewels, namely, Indu Jain is the proprietor of two distinct proprietary concerns, namely, IB Jewels (OC) and Brij Ratnam.

3. It is further submitted that while IB Jewels is the wholesale supplier of rough and uncut diamond jewellery, Brij Ratnam is a retail supplier of finished jewellery and both these proprietorship have separate GST registrations and Bank accounts. The IB Jewels sells rough and uncut diamond jewellery among other parties to the Birla Jewels Ltd. (Respondent/CD) and vide three invoices of date 16.06.2019 for Rs. 26,52,781/-, invoice dated 20.06.2019 for Rs. 11,81,272/- and Invoice dated 20.06.2019 for Rs. 11,47,868/-. The uncut diamond jewellery was delivered by the Appellant to the CD/Respondent.

4. It is further submitted that as submitted earlier the CD used to finish goods and sell them to its franchisees including Brij Ratnam. The Agreement between the OC/IB Jewels and CD/Birla Jewels Ltd. is for the sale of goods supply of which has been evidenced by the aforesaid invoices.

5. It is further submitted that a franchisee agreement dated 05.12.2018 was executed between the CD/Birla Jewels Ltd. and the other proprietary concern, namely, Brij Ratnam owned by the proprietor of the Appellant (Indu Jain) and that was an independent business and agreement which was not having any concern with the supply of the rough and uncut diamond jewellery by the Appellant to the Respondent / CD.

6. It is further submitted that certain disputes had arisen between the franchisee – Brij Ratnam and CD/ Birla Jewels Ltd. under the franchisee agreement dated 05.12.2018 and Birla Jewels Ltd./CD terminated the aforesaid franchisee agreement dated 05.12.2018 by giving termination notice dated 12.08.2019 and reply of which was given by the franchisee Brij Ratnam through their attorneys Laxmikumaran and Sridharan attorneys vide reply notice dated 27.08.2019.

7. It is further submitted that the CD failed to make payments of the aforesaid three invoices pertaining to supply of rough and uncut diamond jewellery to the CD, the delivery of which was accepted by the Respondent / CD and the supply of which was never objected and there was no controversy with regard to the amount covered under these invoices and as per the terms and conditions of the aforesaid invoices, a credit period of only 45 days was available to the CD to make the payment which was subsequently increased to 60 days, however, no payment was made by the CD and thus a default with regard to these three invoices occurred on