Admitted Operational Debt Cannot Be Defeated by Feeble Pre-Existing Dispute: NCLAT Delhi

Sharad Chandra Goel Vs Tarannom Shargh International Transportation Company (NCLAT Delhi)

Summary: NCLAT Delhi dismissed the appeal filed by the suspended director of Lark Logistics Private Limited against the NCLT New Delhi Bench-IV order dated 20.06.2022 admitting an application under Section 9 of the Insolvency and Bankruptcy Code, 2016 filed by Tarannom Shargh International Transportation Company and initiating CIRP against the Corporate Debtor. The Operational Creditor claimed outstanding operational dues of USD 3,16,217 (Rs.2,45,72,796) arising from unpaid invoices. The Corporate Debtor contended that serious pre-existing disputes existed regarding discrepancies and overcharging in invoices and the Operational Creditor’s refusal to transport certain consignments, which allegedly caused demurrage, loss of clients and business.

Applying the test laid down by the Supreme Court in Mobilox Innovations Pvt. Ltd. v. Kirusa Software Pvt. Ltd., NCLAT examined whether an operational debt exceeding the statutory threshold was due and payable, whether default had occurred and whether a genuine pre-existing dispute existed. The Tribunal noted the Corporate Debtor’s earlier statements of account, agreement acknowledging outstanding balances, email correspondence and its admission that payments had been withheld because of the Covid-19 pandemic, market conditions and financial difficulties. The Corporate Debtor had also admitted that business transactions proceeded without disputes until mid-2019. NCLAT found no material showing that the Corporate Debtor had categorically rejected the outstanding dues before issuance of the Section 8 demand notice.