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2025 Supreme(Online)(NCLT) 1664
NATIONAL COMPANY LAW TRIBUNAL
Sanjiv Jain, Venkataraman Subramaniam, JJ
Sunwin Papers – Appellant
Versus
Sivadarshini Papers Pvt Ltd – Respondent
CP(IB)/269(CHE)2022
For the Appellants/Petitioners: P. Rajasekaran
For the Respondents: K. Mohit Kumar
Insolvency proceedings cannot be initiated when there is a bona fide dispute regarding the existence of a debt, as such disputes must be resolved through arbitration or civil courts.
Headnote:(A) Insolvency and Bankruptcy Code, 2016 - Section 9 - Micro, Small and Medium Enterprises Development Act, 2006 - Section 18 - Petition for initiation of Corporate Insolvency Resolution Process dismissed as maintainability was challenged due to existence of pre-existing disputes - The court emphasized that insolvency proceedings cannot substitute for debt enforcement where disputes exist, citing case law. (Paras 17-19)
(B) Arbitration - Jurisdiction - The court ruled that the operational creditor's claim was disputed and thus not an undisputed operational debt under IBC, leading to dismissal of the petition. (Paras 8-20)
Facts of the case:
The operational creditor filed a petition under IBC against the corporate debtor for unpaid dues, but disputes arose regarding the creditor's status as an MSME and the jurisdiction of the arbitrator, leading to prior arbitration proceedings.
Findings of Court:
The court found that the petition was not maintainable due to existing disputes between the parties, which were to be resolved through arbitration.
Issues: The main issues were whether the operational creditor qualified as an MSME and if the disputes were valid grounds for dismissing the petition.
Ratio Decidendi: The court held that a bona fide dispute regarding the existence of a debt must be resolved by a civil court or an arbitral tribunal, affirming that the IBC cannot be misused for enforcing disputed claims.
Result: Petition dismissed.
| Table of Content |
|---|
| 1. details of parties and claims (Para 2 , 3 , 4 , 5) |
| 2. disputes raised by respondent and procedural history (Para 6 , 8 , 9 , 10 , 11 , 12 , 15) |
| 3. court's reasoning on jurisdiction and disputes (Para 7 , 13 , 14 , 16 , 17 , 18) |
| 4. insolvency petition not maintainable due to disputes (Para 19) |
| 5. order dismissing the petition (Para 20 , 21) |
ORDER
(Heard through Hybrid Mode)
M/s. Sunwin Papers, a proprietory concern, the Operational Creditor / Petitioner has filed this petition under Section 9 of IBC for initiating CIRP against the Corporate Debtor Sivadarshini Papers Ltd, the Respondent herein.
2. Part-I of the petition sets out the details of the operational creditor i.e. Sunwin Papers. It has its office at No. 22, Chellammal Colony, 1st Street, Samundipuram, Tirupur – 641 603. Part – II of the petition sets out the details of the Corporate Debtor i.e. Sivadarshini Papers Ltd, IN No. U21010TZ2008PTC01884. It was incorporated on 27.11.2001 with share capital of Rs. 1500 Lakhs and paid up capital of Rs. 925 Lakhs. It has its registered office at No. 2/309-A, Harini Arcade, Vadavalli Post, Coimbatore – 641 041 within the jurisdiction of this Tribunal. In Part- III, the Petitioner has not proposed any name of the IRP.
3. Part – IV of the petition sets out the details of the operational debt i.e. Rs. 1,97,81,833/- (Rs. 34,92,288/- as principal and interest 39% as per Section 16 of MSMED Act) towards the raw material waste paper supply for the period from 08.09.2016 to 04.06.2018 and the date of default as 04.02.2018.
4. As per the averments made in the petition, the Petitioner / Operational Creditor being MSME registered under UdyogAadhaar Memorandum, had supplied waste paper and raw materials during the period from 08.09.2016 to 04.06.2018 to the Corporate Debtor, engaged in the business of manufacturing kraft paper and allied products for manufacturing paper products at its factory premises at Sankaramanallur South village, Kolumam. Disputes and differences arose between the parties which led to the Petitioner / Operational Creditor file a claim under Section 18 of MSME Act, 2006 in the form of a petition before Micro and Small Enterprises Facilitation Council (MSEFC) vide case No. M&SEFC/12/2018-19. Since the conciliation failed, MSEFC vide an order dated 26.07.2019 referred the case for arbitration as per Section 18(3) under the MSMED Act, 2006 to the Arbitration Centre of Hon’ble High Court of Judicature at Madras. An Arbitral Tribunal was constituted under MSMED Act comprising of the sole Arbitrator. The Petitioner filed the claim for Rs. 34,92,288/- as principal with Rs. 28,28,955/- as interest @ 39% per annum. The Respondent / Corporate Debtor filed the reply before the Arbitral Tribunal. The sole Arbitrator thereafter passed an order on 01.10.2020 holding that the Petitioner / Operational Creditor does not come within the purport of MSME Act and the Arbitral Tribunal lacks jurisdiction to decide the claim of the Petitioner. The Petitioner / Operational Creditor preferred a petition before Hon’ble High Court vide Arb. O.P. No. (Commr. Div) 195 of 2021 under Section 34 of the Arbitration and Conciliation Act, 1996 and the Hon’ble High Court vide an order dated 11.08.2022 allowed the petition setting aside the proceedings / award dated 01.10.2020. It is stated that the Respondent / Corporate Debtor did not file any objection nor filed any writ / appeal challenging the order passed in favour of the Petitioner.
5. When the Corporate Debtor did not make the payment of the amount, the Petitioner / Operational Creditor sent a statutory demand notice in Form – 3 on 04.11.2012 calling upon the Corporate Debtor to make the payments. It is stated that the Corporate Debtor instead making the payments sent reply on 12.11.2022 raising frivolous and baseless allegations alleging existence of disputes prior to receipt of statutory notice and that the Petitioner does not come within the purport of MSME Act. It is stated that Hon’bl
