Delayed reply does not preclude CD from presenting evidence of a pre-existing dispute

Himatsingka Seide Limited Vs TexTtile Professional LLP (NCLT Mumbai)

National Company Law Tribunal (NCLT) has rejected an application filed by Himatsingka Seide Limited, seeking to initiate the Corporate Insolvency Resolution Process (CIRP) against Textile Professional LLP under Section 9 of the Insolvency and Bankruptcy Code, 2016 (IBC). The application, filed on July 27, 2022, claimed a total default of ₹1,29,07,257.60 based on five unpaid invoices for the supply of cotton fibre during 2021-2022.

Himatsingka Seide Limited, the Operational Creditor (OC), contended that Textile Professional LLP, the Corporate Debtor (CD), had requested the supply of cotton fibre via email dated December 6, 2021. An arrangement was allegedly made where the OC would supply the fibre, and the CD would convert it into yarn through Shree Gajanan Sahakari Soot Girni Limited, with the conversion cost borne by the OC. The OC issued invoices with a 30-day payment term and an 18% per annum interest clause for delayed payments. Following the CD’s failure to pay, the OC issued a demand notice under Section 8 of the IBC on May 13, 2022, for the outstanding amount. The OC argued that the invoices were undisputed, and the CD had not raised any concerns about the quality or quantity of goods before the demand notice. Emails from the CD in late 2021 and early 2022 were presented to contradict the CD’s claim of a pre-existing dispute. The OC also denied engaging in a mediation process with the CD.