The National Company Law Appellate Tribunal has held that a dispute raised for the first time in reply to demand notice or in response to Adjudicating Authority regarding quality of goods will not amount to pre-existing dispute about operational debt under the Insolvency and Bankruptcy Code.
The Tribunal was dealing with an appeal filed by share holder of a company challenging order passed by Adjudicating Authority admitting an application filed under Section 9 of the Code by an Operational Creditor. The Authority imposed morotorium and appointed a resolution professional.
The application was filed claiming that the Operational Creditor supplied polyester staple fibre to the Corporate Debtor and an amount of Rs.4 lakhs was outstanding on that account. Though a demand notice under Section 8(1) of the I&B Code was served on the Corporate Debtor demanding the outstanding amount of Rs.4 lakhs together with interest, the company did not comply with it.
In appeal, the corporate debtor contended that there was a dispute that the goods supplied by the Operational Creditor were of inferior quality. Hence, it was argued that there existed a pre-existing dispute and the petition should not have been admitted, as per the law laid down by SC in Innoventive Industries Ltd. Vs. ICICI Bank and Ors (2018)1 SCC 407
The Tribunal noted that there was nothing on record to suggest that a claim regarding inferior quality of goods supplied were raised at any stage prior to reply to demand notice.
“In absence of even a whisper from the Corporate Debtor suggesting that the goods supplied were defective or did not conform to the agreed standard and his failure to show any communication emanated from his side intimating the Operational Creditor that the goods supplied were defective or substandard, it should not lie in his mouth that he had raised a dispute which did not warrant admission of the Operational Creditors petition under Section 9 of the I&B Code. Raising of dispute in regard to quality of goods being inferior/substandard or defective for the first time in reply to demand notice or in response to notice served by the Adjudicating Authority would not constitute a prior and pre-existing dispute contemplated under law as a defence to the initiation of Corporate Insolvency Resolution Process, more so when the contemporary record in regard to transactions between the Corporate Debtor and the Operational Creditor at the time of delivery of goods or immediately thereafter does not demonstrate raising of any dispute with respect to quality of goods supplied by the Operational Creditor”,ruled Justice Bhansi Lal Bhat, Judicial Member of the Tribunal, dismissing the appeal.
“If the voice of the fourth estate is stifled in this manner, India will become a Nazi State and the hard labour of our freedom fighters and makers of our Constitution will go down the drain.”
If the voice of the fourth estate is stifled in this manner, India will become a Nazi State, remarked Justice PN Prakash of Madras High Court while quashing a defamation complaint against India Today Tamil Weekly.
The high court quashed the complaint lodged in 2012 by the public prosecutor alleging that the article published in the Tamil weekly edition of India Today defamed then Chief Minister of Tamil Nadu J. Jayalalithaa. The article discussed the gaining of influence by Sasikala in the party affairs and removal of Sengottaiyan from the party and ministership.
The court observed that there is not even an iota of material to show that there is any imputation intending to harm the reputation of the then Chief Minister.
The judge then emphasized the role of press in a democratic society and said India would become a Nazi State if the voice of the fourth estate is stifled. The judge also observed that some occasional transgressions by the press were aberrations which deserve to be ignored in the larger interest of sustaining democracy.
The judge said: “Be it noted that the Press has got a solemn duty to place all the concatenation of events, both recent past and distant past, concerning political parties and public figures, for public consumption and for refreshing the otherwise short public memory. For doing this, if the Press is gagged, democracy in this country will be in utter peril. India is a vibrant democracy and the fourth estate is indubitably an indispensable part of it. If the voice of the fourth estate is stifled in this manner, India will become a Nazi State and the hard labour of our freedom fighters and makers of our Constitution will go down the drain. There may be some occasional transgressions by the Press; however, in the larger interest of sustaining democracy, those aberrations deserve to be ignored.”
The judge also reproduced the observations made by the high court in R. Rajagopal @ R.R. Gopal @ Nakkheeran Gopal and another vs. J. Jayalalithaa, that in a free democratic society, those who hold office in government and who are responsible for public administration must always be open to criticism.
The judge observed: “Nobody is invited with platters for coming into public life. Therefore, after voluntarily coming into public life, one cannot be heard to feign sensitiveness and trample the Press for no good reason. This Constitutional Court will be failing in its duty if such attempts by the mighty State are not resisted.”