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2023 (6) TMI 251 - AT - Insolvency and BankruptcyInitiation of CIRP - Period of limitation - Operational Creditors - date of default in payment of the dues for supply of Isobutanol by the operational creditor to the corporate debtor - period specified under section 10-A of the IBC or not - pre-existing dispute regarding the poor quality of the material supplied to the corporate debtor - dishonouring of the LC discounting by the South Indian Bank - negligence of the corporate debtor. Whether the date of default in payment of the dues for supply of Isobutanol by the operational creditor to the corporate debtor is in the period specified under section 10-A of the IBC? - HELD THAT:- The HSS Agreement, which was signed on 15.1.2020 after the creation of LC on 13.1.2020, says that the date of payment would be as given in the invoice. Further, the invoice (attached at pg. 102 of appeal paperbook, Vol.I) clearly states that the credit days are ‘060-LC collectable in 60 days’. It is thus clear that the HSS Agreement, which is the last final contract signed between the parties, clearly specifies that the payment against invoice is to be made by ‘LC which is collectable within 60 days’. Hon’ble Supreme Court in the matter of M/S BAWA PAULINS PVT. LTD. VERSUS UPS FREIGHT SERVICES (INDIA) PVT. LTD. AND ANOTHER [2022 (11) TMI 1361 - SUPREME COURT], which is cited in support by the Learned Senior counsel for Appellant, held that a letter of credit is independent of and unqualified by the contract of sale or underlying transactions. The autonomy of an irrevocable LOC is entitled to protection and as a rule, courts refrain from interfering with that autonomy. If courts interfere in such transactions, it would be prone to misuse by the applicant party to gain undue advantage leaving the issuing bank at peril in the international financial market.” The above judgment places autonomy on an irrevocable LC which is held to be entitled to protection. In the present case, we note that after the opening of LC, a HSS Agreement was entered into between the two parties, which when seen in conjunction with the sales invoice, notes that the payment is to be made through a LC within 60 days from the date of issue of invoice, which is 6.1.2020. This judgment therefore, is distinguishable on the facts of the present case, wherein an explicit HSS Agreement has been signed between the parties since the sale of Isobutanol was on high seas. It is thus clear that the date of default is 60 days from 6.1.2020, which is the date of invoice. Counting 60 days from 6.1.2020, we find that the payment was due to be made by 5.3.2020. Thus, it is clear that the date of default is not covered in the period as stipulated in section 10-A of the IBC, and therefore, section 9 application does not suffer from bar as specified in section 10-A regarding its admission and initiation of CIRP. Whether there was a ‘pre-existing dispute’ regarding the poor quality of the material supplied to the corporate debtor as defined in law? - HELD THAT:- While it is claimed by the Appellant that section 21 notice under the Arbitration and Conciliation Act, 1996 for invoking the arbitration clause under the HSS Agreement was sent through Blue Dart courier, the contents letter dated 10.6.2021 as mentioned above, very clearly show that such a document did not travel in the Blue Dart Express Ltd. network and therefore, no such notice was ever served on the operational creditor. The law propounded by the Hon’ble Supreme Court in the matter of Mobilox Innovations Private Ltd. vs. Kirusa Software Private Ltd. [2017 (9) TMI 1270 - SUPREME COURT], that the pre-existing dispute has to be ‘real’ and ‘genuine’ one, and not an ‘illusory’ or ‘hypothetical’ dispute, is followed - In the present case, the dispute was neither raised before the issue of section 8 demand notice and also the notice under section 21 of the Arbitration and Conciliation Act, 1996 was not proven to be served on the operational creditor. In such a situation, the corporate debtor cannot claim ‘pre-existence of dispute’ in the adjudication of the section 9 application. Whether the dishonouring of the LC discounting by the South Indian Bank was on account of negligence of the corporate debtor? - HELD THAT:- The operational debt should have been paid through LC facility within 60 days from 15.1.2020, and since it could not done due to discrepancies in submission of documents to the South Indian Bank, it was the responsibility of the corporate debtor to make the payments, more so when it was being repeatedly asked to do so by the operational creditor - HSS Agreement was executed on 15.1.2020 and under the General Conditions of Sale included in the HSS Agreement, the payment was to be made with 60 days from the date of bill of lading, which would be ‘date of default’ and which would not be covered in the period stipulated in Section 10-A of the IBC. The Impugned Order does not suffer from any infirmity and it does not require any interference - Appeal dismissed.
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