The court emphasized that the existence of a pre-existing dispute regarding the operational debt negates the initiation of the Corporate Insolvency Resolution Process.

JUDGMENT in C.P. (IB) No. 81/Chd/Pb/2023

2. The present petition is filed by Duke Fabrics (India) Limited (for brevity, “Operational Creditor”) under Section 9 of the Insolvency and Bankruptcy Code, 2016 against Sadan Hosiery Private Limited (for brevity, “Corporate Debtor”) seeking initiation of Corporate Insolvency Resolution Process against the Corporate Debtor, on account of default in pa yment of the Operational Debt.

3. It is averred that:

3.1.The Operational Creditor is a company registered under the provisions of the Company Act, 1956, and is engaged in the business of manufacturing, processing, dyeing, and finishing of knitted cloth and yarn.

3.2. The Corporate Debtor is a company incorporated under the Companies Act, 1956, and is engaged in the business of manufacturing knitted clothes.

3.3. The Operational Creditor had supplied fabrics and dyed fabrics on job- work basis to the Corporate Debtor for the period of 18.03.2021 to 09.12.2021 and invoices were issued with a credit period of 30 days and the Corporate Debtor failed to make the payment against the invoices even after the due credit period.

3.4. The Operational Creditor issued demand notice on 07.01.2023, calling upon the Corporate Debtor to make the payment of Rs. 1,47,70,999.06/- (Rupees One Crore, Forty-Seven Lakhs, Seventy Thousand, Nine Hundred and Ninety-Nine and Six Paise only) along with interest of 24% p.a. up to the date of payment.

3.5. The Operational Creditor received a vague and evasive reply to the demand notice from the Corporate Debtor, wherein the existence of unpaid operational debt has not been disputed and is unsubstantiated by any document or record in support of the same. Moreover, the reply was served on the Operational Creditor after the expiry of the stipulated period of 10 days as mandated under the IBC Code, 2016.

3.6. The Operational Creditor has also filed an affidavit under Section 9 (3)(b), Annexure A-4 of the petition, asserting that there is no pre- existing dispute.

4. The Corporate Debtor upon issue of notice, filed its reply dated 29.05.2023 via diary no. 00653/2 to the petition, wherein it is stated that the actual amount payable is Rs. 32.50 lacs as on 15.06.2022.

4.1. The Corporate Debtor submitted that the claim alleged by the Operational Creditor has been under dispute for the past several years, which has remained unresolved till date despite multiple meetings, negotiations, and alleged settlement entered into by the Operational Creditor. The said dispute is evidenced/documented through WhatsApp chats, WhatsApp voice calls, telephonic calls, SMS’, meetings and e-mails exchanged between the parties on different dates for settlement of dispute concerning various issues.

4.2. On 28.07.2021, through SMS message, the Respondent documented a conversation with the Dyeing Head- Mr. Vinay Yadav of the Operational Creditor, that there were issues in the timely completion of job work of yarn/fabric. SMS messages exchanged between Operational Creditor and Corporate Debtor between July 28,2021 and August 4, 2021, are annexed and marked as Annexure R-1.

4.3. Mr. Nandan Jain, General Manager- Operations of Operational Creditor asked the Corporate Debtor to clear outstanding dues of Rs. 32.50 lacs, further subject to under discussion/negotiation as indicated by Mr. Jain in the WhatsApp chat dated 15.06.2022, which is annexed as Annexure R-2.

“Pls clear outstanding of Duke Fabrics 32.50 lacs. If any issue from ur side.. Feel free for a joint meeting with Kuntal ji by today evening. Thanks”

The aforesaid message was received when the relationship between the parties had already turned strained a