NCLAT New Delhi Dismisses Ksure’s Insolvency Plea Against Amrit Polychem; Finds Pre-Existing Dispute Under Mobilox Test
Pranav B Prem
The National Company Law Appellate Tribunal (NCLAT), Principal Bench, New Delhi, comprising Justice Ashok Bhushan (Chairperson) and Barun Mitra (Technical Member), has dismissed an appeal filed by Korea Trade Insurance Corporation (Ksure) challenging the order of the NCLT, Mumbai Bench, which rejected its insolvency application against Amrit Polychem Pvt. Ltd. (APL) on the ground of a pre-existing dispute between the parties.
Background
Amrit Polychem Pvt. Ltd. had placed three purchase orders with JT Corporation (JTC), South Korea, for the supply of chemicals. To secure JTC against any risk of buyer default, the appellant Ksure, a Korean government-owned export credit agency, insured JTC under a trade credit insurance policy. While APL made payment for the second consignment, a dispute arose concerning the first shipment, which, according to APL, was not delivered by JTC. APL claimed that due to non-delivery, it suffered losses and therefore adjusted those losses against the amount payable for the third consignment.
Subsequently, under the insurance policy, Ksure reimbursed JTC and received an assignment of debt through a Letter of Assignment (LoA) dated 27.06.2018. Acting as assignee, Ksure issued a demand notice under Section 8 of the Insolvency and Bankruptcy Code (IBC) to APL, demanding payment of USD 2,46,600 (approximately ₹1.72 crore). APL, in reply to the demand notice, disputed the claim, reiterating that the first shipment had not been delivered and that the losses were duly adjusted. Ksure then filed a Section 9 application before the NCLT, Mumbai Bench, seeking initiation of the Corporate Insolvency Resolution Process (CIRP) against APL. The NCLT, however, dismissed the application, holding that there was a pre-existing dispute and that the matter was not fit for admission under the IBC. Ksure subsequently filed the present appeal before the NCLAT, New Delhi.
Contentions
The appellant argued that the outstanding amount was undisputed, as the respondent had not raised any contractual claim against JTC prior to the issuance of the demand notice. It was contended that upon assignment, Ksure stepped into the shoes of JTC and was legally entitled to recover the dues. The appellant also submitted that the respondent’s claims were afterthoughts aimed at avoiding payment obligations.
On the other hand, Amrit Polychem Pvt. Ltd. maintained that a genuine dispute existed well before the issuance of the demand notice. It relied on multiple email communications exchanged between APL and JTC, which showed that APL had raised objections regarding non-delivery of the first consignment and the consequent adjustment of payments. The respondent argued that the Letter of Assignment executed between JTC and Ksure could not override the underlying commercial dispute, as Ksure was fully aware of it before acquiring the debt.
Tribunal’s Observations
The Appellate Tribunal observed that the email trail between APL and JTC clearly demonstrated the existence of disputes prior to the initiation of insolvency proceedings. The bench noted that APL had consistently claimed that the first shipment was not delivered and that the losses had been adjusted against the subsequent transaction. “The correspondence on record clearly indicates that there was a dispute regarding non-delivery of goods under the first invoice and adjustment of the same against the third shipment,” the bench recorded.
It further held that Ksure, having stepped into the shoes of JTC through the assignment, could not claim ignorance of these pre-existing disputes. The tribunal emphasized that the reply to the Section 8 notice clearly denied liability and thus fulfilled the ‘existence of dispute’ test under Section 9 of the IBC. The Bench relied on the Supreme Court’s judgment in Mobilox Innovations Pvt. Ltd. v. Kirusa Software Pvt. Ltd. (2018) 1 SCC 353, which held that where there is a “plausible contention” requiring further investigation and not a patently feeble legal argument, the existence of such dispute bars admission of a Section 9 application. Applying this principle, the NCLAT concluded that the dispute in the present case was genuine and pre-existing.
The Tribunal upheld the order of the NCLT, observing that the claim arose from a contractual dispute predating the demand notice, and thus the IBC could not be invoked to recover such amounts. It ruled that the Adjudicating Authority had rightly rejected the Section 9 application, as the existence of dispute was established prior to the initiation of insolvency proceedings. Accordingly, the NCLAT dismissed Ksure’s appeal, affirming that “the appellant was well aware of the pre-existing dispute before stepping into the shoes of the supplier through assignment.” However, the Bench granted liberty to the appellant to pursue its claim before an appropriate civil forum in accordance with law.
Appearance
For Appellant: Mr. Sarthak Varma, Sr. Advocate with Mr. Manish Dhir Mr. Shantanu Parmar, Mr. Balram, Mr. Vivek Tyagi, Advocates.
For Respondent: Mr. Abhijeet Sinha, Sr. Advocate with Ms. Prachi Johri, Mr. Saikat Sarkar, Ms. Heena Kochar, Ms. Mrigangi Parul, Advocates.
Cause Title: Korea Trade Insurance Corporation (Ksure) v. Amrit Polychem Pvt. Ltd
Case No: Company Appeal (AT) (Insolvency) No. 1383 of 2023
Coram: Justice Ashok Bhushan (Chairperson), Barun Mitra (Member-Technical)
