RAJRATAN BABULAL AGARWAL versus SOLARTEX INDIA PVT. LTD.& ORS.

Citation: [2022] 7 S.C.R. 755 · Decided: 13-10-2022 · Supreme Court of India · Bench: K.M. JOSEPH · Disposal: Appeal(s) allowed

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Judgment (excerpt)

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RAJRATAN BABULAL AGARWAL
v.
SOLARTEX INDIA PVT. LTD.& ORS.
(Civil Appeal No. 2199 of 2021)
OCTOBER 13, 2022
[K. M. JOSEPH AND RISHIKESH ROY, JJ.]
Insolvency and Bankruptcy Code, 2016 – s.9 – Application
under – Corporate Insolvency Resolution process – ‘Pre-existing
dispute’ – Application filed by first respondent u/s.9 of IBC against
the second respondent – Case premised on there being a sale, and
a ‘debt’ owed by the second respondent under the sale – The third
respondent was the Interim Resolution Professional – Appellant is
an ex-director of the second respondent – NCLT rejected the version
of the appellant that there existed a pre-existing dispute and admitted
application filed by first respondent u/s.9 of IBC against the second
respondent – Order affirmed by NCLAT – Whether the appellant
raised a dispute which can be described as ‘a pre-existing dispute’
as understood by Supreme Court in the decision in Mobilox
Innovations Private Limited v. Kirusa Software Private Limited case –
Held: In Mobilox case, the Supreme Court took the view that one of
the objects of the IBC in regard to operational debts is to ensure
that the amount of such debts which is usually smaller than the
financial debts does not enable the operational creditor to put the
corporate debtor into the insolvency resolution process prematurely
– It was further declared that it is for this reason that it is enough
that a dispute exists between the parties – The standard with reference
to which a case of a pre-existing dispute under the IBC must be
employed cannot be equated with even the principle of
preponderance of probability which guides a civil court at the stage
of finally decreeing a suit – Once this subtle distinction is not
overlooked, on facts, the NCLAT clearly erred in finding that there
was no dispute within the meaning of the IBC – The approach of
the NCLAT cannot be sustained – Application filed by the first
respondent against the second respondent under s.9 accordingly
rejected – Sale of Goods Act, 1930 – Doctrines/Principles – Principle
of preponderance of probability.
[2022] 7 S.C.R. 755
755
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SUPREME COURT REPORTS
[2022] 7 S.C.R.
Mobilox Innovations Private Limited v. Kirusa Software
Private Limited (2018) 1 SCC 353 : [2017] 10 SCR
1006 – relied on.
Balwant Singh and Others v. Anand Kumar Sharma and
Others (2003) 3 SCC 433 : [2003] 1 SCR 653;
Ahmadsahab Abdul Mulla (2) (dead) v. Bibijan and
Others (2009) 5 SCC 462 : [2009] 5 SCR 476 and
Mangilal Karwa v. Shantibai AIR 1956 Nag 221 –
referred to.
Case Law Reference
[2017] 10 SCR 1006
relied on
Para 2
[2003] 1 SCR 653
referred to
Para 21
[2009] 5 SCR 476
referred to
Para 57
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 2199
of 2021.
From the Judgment and Order dated 27.05.2021 of the National
Company Law Appellate Tribunal, New Delhi in Company Appeal (AT)
(Insolvency) No. 546 of 2020.
Kavin Gulati, Sr. Adv., Anish Agarwal, Tejas Agarwal, Avi Tandon,
Ms. Vanshika Gupta, Ms. Meghna Tandon, Mayur K., Advs. for the
Appellant.
Manoj Harit, Vikram Hegde, Shantanu Lakhotia, Ms. Deepanwita
Priyanka, Advs. for the Respondents.
The Judgment of the Court was delivered by
K. M. JOSEPH, J.
1. By the impugned order, the National Company Law Appellate
Tribunal (hereinafter referred to as ‘NCLAT’ for brevity) has dismissed
the appeal filed by the appellant challenging the order passed by the
National Company Law Tribunal (hereinafter referred to as ‘NCLT’ for
brevity) dated 28.05.2020. By the said order, the NCLT admitted an
application filed by the first respondent under Section 9 of the Insolvency
and Bankruptcy Code, 2016 (hereinafter referred to as ‘IBC’) against
the second respondent. The third respondent was appointed as the Interim
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Resolution Professional and a moratorium followed. The appellant is an
ex-director of the second respondent.
2. The question which falls for decision is 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 v. Kirusa Software Private Limited1. NCLT has
rejected the version of the appellant that there exists a pre-existing dispute
which stands affirmed by the NCLAT.
3. The facts necessary for resolution of the lis can be stated as
follows:
On 24.09.2016, there were two High Seas Sale Agreements. One
was between respondent No. 2 and one Rawalwasia Textile Industries
Private Limited. Th

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