New Delhi, The National Company Law Appellate Tribunal (NCLAT) has dismissed an appeal filed against alternative energy firm Eastman Auto & Power in an insolvency case and upheld the order passed by the NCLT.
A two-member bench observed that the existence of a dispute with Vave India Energy Solutions, its operational creditor, before the issue of notice under Section 8 of the Insolvency & Bankruptcy Code, qualifies as a “pre-existing dispute”.
“The NCLT is not required to go into the merits of the dispute, including the chance of success of either side, and it is sufficient for rejection of the application under section 9 of IBC, 2016, if a genuine dispute exists prior to issue of notice under section 8 of IBC, 2016,” said the appellate tribunal.
Earlier, the Delhi bench of the National Company Law Tribunal, on October 13, 2023, dismissed the plea on the same ground of pre-existing dispute.
The operational creditor subsequently challenged the order before the appellate tribunal, which also upheld the NCLT order.
“The NCLT has rightly rejected the application of the Operational Creditor. We find no reason to interfere with the order of the NCLT. Accordingly, the appeal is dismissed,” according to the order.
Vave India Energy Solutions alleged a default of Rs 1.02 crore, along with interest at 18 per cent per annum. It submitted that it had entered into an agreement on January 2, 2018, with Eastman Auto & Power for the supply of inverter batteries of different models and capacities.
As per the said agreement, the operational creditor used to place purchase orders on the corporate debtor for inverter batteries to be manufactured and supplied by it. On the basis of the purchase orders issued by Vave India Energy, Eastman Auto & Power would manufacture and supply the inverter batteries.
On August 12, 2019, Eastman Auto & Power offered the issue of a credit note promising monthly payments of Rs 10 lakhs per month, in place of the defective inverter batteries. The corporate debtor acknowledged its liability to pay for defective 2,697 batteries, but failed to pay the admitted amount of Rs 1.02 crore, the petitioner claimed.
Later, Eastman Auto & Power sent an email dated December 8, 2022, addressed to the operational creditor, stating that a credit note was obtained under economic coercion and that the warranty obligations for the batteries had already expired.
Subsequently, on December 28, 2022, a notice under Section 8 of the IBC, 2016, was issued by the operational creditor to the corporate debtor.
However, taking note of the email dated December 8, 2022, issued prior to the notice under Section 8, the application was rejected under Section 9 of the IBC, 2016, on the ground of a pre-existing dispute. PTI
