NCLT Mumbai: No Bar On Clubbing Multiple Purchase In A Single CIRP Petition Under IBC

The National Company Law Tribunal (NCLT), Mumbai Bench, comprising of Ms. Reeta Kohli (Judicial Member) and Ms. Madhu Sinha (Technical Member) held that Multiple Purchase Orders can be clubbed in a single Corporate Insolvency Resolution Process ('CIRP') application under Section 9 of Insolvency and Bankruptcy Code, 2016 ('IBC') and the same is maintainable.

Background Facts

Clean Flow Cooling Tower Solutions Pvt. Ltd. (Corporate Debtor) had for its production business of major cooling tower components engaged with MM Aqua Technologies Ltd. (Operational Creditor) and had raised five Purchase Orders dated 28.11.2016, 13.01.2017, 04.05.2018, 20.08.2018, and 27.11.2018 for the supply of various materials.

The total sum of these Delivery Invoices amounted to Rs. 26.37 Lakhs for which the Operational raised five delivery invoices. However, the Corporate Debtor has made a payment of only Rs. 9.23,083.50 Lakhs and thus, the balance Principal and Interest amount is due and payable by the Corporate Debtor.

It was alleged by the Corporate Debtor that the material received was deformed, however, the Operational Creditor had replied that such deformity in the delivered material arose on account of placing the material under direct sunlight at the Corporate Debtor's Site. In line with this, the Operational Creditor had issued 3 Demand Notices.

The Operational Creditor filed an application to initiate CIRP against the Corporate Debtor under Section 9 of the IBC for a default of Rs. Rs. 21,20,155/- (Principal Amount of Rs. 17,14,593/- plus interest on principal amount of Rs. 4,05,562/- till 15.10.2019). This application was filed on 18.03.2020 before the notice to raise the Pecuniary Jurisdiction of the NCLT from Rs. 1 Lakh to Rs. 1 Crore.

NCLT Verdict:

The NCLT Mumbai held that Multiple Purchase Orders can be clubbed in a single company application under Section 9 of IBC and the same is maintainable.

It observed that nothing in IBC barres filing of a single Petition covering several Purchase Orders of the same Operational Creditor and is advantageous to reduce the multiplicity of litigation. It placed reliance on the NCLAT decision in International Road Dynamics vs. D.A. Toll Road Pvt. Ltd. wherein it was held that a single Petition under Section 9 can be filed for the claims arising out of multiple agreements and the same cannot be rejected on this ground.

The Tribunal dismissed the CIRP petition since there is the existence of a pre-existing dispute between the parties. It noted that the photographs of the material supplied by the Operational Creditor evidences a significant quantum of defect. Further, the email dated 08.12.2018 proves that the Operational Creditor itself has categorically asked for the return of the goods proving that the defect was not the effect of its placement under direct sunlight.

It held that the raising of Debit Notes even before the serving of Demand notice was justified on the part of the Corporate Debtor. Further, no objections were raised by the Operational Creditor in line with the full and final payment of Rs. 98,570.88/-.

In conclusion, the NCLT based on the Supreme Court decision in Mobilox Innovations Pvt. Ltd. vs. Kirusa Software Pvt. Ltd. held that the breach of the terms and conditions of the Agreement entered into between the parties to the case before the Demand Notice is sent under Section 8 of the Code qualifies to be a Pre-existing dispute and, thus, a CIRP petition under Section 9 on the ground of existence of such a Pre-existing Dispute is not maintainable.

Case Title: MM Aqua Technologies Ltd. vs. Clean Flow Cooling Tower Solutions Pvt. Ltd.

Case No.: C.P. (I.B) No. 861/MB/2022

Counsel for the Operational Creditor: Advocate Iqra Khan

Counsel for the Corporate Debtor: Kajol Punjabi

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