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2022 (10) TMI 525 - SC - Insolvency and BankruptcyExistence of pre-existing dispute or not - Applicability of provision of Sales of Goods Act, 1930 - NCLT admitted the application - NCLAT confirmed the same - whether the appellant has raised a dispute which can be described as ‘a pre-existing dispute’ as understood by this Court in the decision in MOBILOX INNOVATIONS PRIVATE LIMITED VERSUS KIRUSA SOFTWARE PRIVATE LIMITED [2017 (9) TMI 1270 - SUPREME COURT]? - HELD THAT:- In this case, a perusal of the notice sent by first respondent and the application under Section 9 of the IBC would show that the case is premised on there being a sale, and there was a ‘debt’ owed by the second respondent under the sale. It means that the cause of action in general law would have been a suit for the price of the goods sold within the meaning of Section 55 of the Act. On 03.11.2016, undoubtedly, the second respondent in its own name has ventilated its complaint about the inferior and the poor quality of the Indonesian coal. The impact of using such coal on the boiler and about the damage being done to the boiler has been specifically articulated. Further, a request was made to stop delivery of the goods. - The supply was stopped on the basis of the communication dated 04.11.16. Pursuant to the purchase order, it is undoubtedly true, that 412 MT was delivered at the factory site of the second respondent. It is beyond challenge that no part of 412 MT has been returned by the second respondent to the first respondent - Section 59 of the Act contemplates a buyer ‘setting up’ a breach of a warranty to diminish or reduce the price or even extinguish it. If this line is accepted, it could indeed be said that the decks are not cleared for the first respondent-seller for its claim under Section 8. The factum of the filing of the suit, however, cannot be taken into consideration for the purpose of deciding whether there is a preexisting dispute under the IBC. This is for the simple reason that the suit was not filed before the receipt of the demand notice under Section 8 of the IBC. No doubt, the documentary evidence furnished by the first respondent, namely, the purchase order indicates that the price is to be paid within seven days of receipt of the goods. It is true that Section 55(2) of the Act speaks about a contract of sale where the price is payable on a day certain entitling the seller to sue for price. This is irrespective of the fact that the property in the goods has not passed and the goods have not been appropriated to the contract and whether delivery has been made or not Section 55(2) also contemplates that the buyer must wrongfully neglect or refuse to pay the price. Interestingly, it will be noticed that the law-giver has in Section 55(1) also used the words “and the buyer wrongfully neglects or refuses to pay for the goods” but the law-giver has further added the words “according to the terms of the contract” which words are not found in Section 55(2). Even proceeding on the basis that under Section 55(2) of the Act, this is a case where there is a certain day fixed for the payment of the price irrespective of the passing of the property inter alia, the law does clothe the buyer with the right to resist the suit on the basis that the refusal to pay the price is not wrongful. In other words, he can lean on Section 59 and set up a breach of warranty and seek at least the diminution of the price if not extinction of the same. That apart, he has a right to seek damages even on the same breach. The delivery of the goods and the acceptance of the goods by use of the goods by the corporate debtor being not in dispute, the impact of Section 13(2) read with Section 59 cannot at least for the purpose of determining whether there is a pre-existing dispute be ignored. The first respondent lays store by the purchase order requiring certificate of analysis in that in view of there being no challenge to the said certificate of analysis and there being no rejection of the goods which was contemplated under the purchase order at the ground site, it is contended that the dispute cannot be countenanced. The appellant would, on the other hand, seek to buttress his case with reference to the lab reports, no doubt, procured from the labs which the second respondent has set up - Overlooking the boundaries of the jurisdiction can cause a serious miscarriage of justice besides frustrating the object of the IBC. The NCLAT, has clearly erred in not appreciating the issue, bearing in mind the principles in the Act. The NCLAT has erred in its finding about the existence of a pre-existing dispute, the impugned order merits interference - Application dismissed - Appeal allowed.
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