Companies LawLegal UpdatesNCLT

NCLT : Counter Petitions are not sustainable, rejected on Scope and Jurisdiction

Drafted by Sabiha Badra, Associate DM Legal Ventures

NCLT rejected the petition filed under Indo Alusys Industries Ltd. vs. SMW Metal Pvt. Ltd. NCLT held that the dispute raised by both the parties were in their counter petitions. Hence, resolution of the Corporate Debtor is not sustainable.

As there was cross petition hence in the first petition (I B 552(ND)/2017) Indo Alusys Industries Ltd prayed for initiation of Resolution Process  against Corporate Debtor, SMW Metal Pvt. Ltd. Thereafter, another petition was filed by SMW Metal Pvt. Operational Creditor claiming the Principal amount of Rs. 2,43,34,100/- together with interest accruing thereon increasing the liability to an amount in excess of Rs. 4 Crore.

Both the companies had long standing business relations where Purchases and Sales were made on each other and a running account was maintained by them.

In December, 2015 both parties resorted to reconciliation of the accounts wherein credit notes were issued by SMW to Indo for a sum in excess of Rs. 24 Crores.

MOU was signed and payment was to be made during the period of 3 years

Sr. No. Year Amount Rs.
a. 2015 -16  8,86,67,626/-
b. 2016 -17  8,20,00,000/-
c. 2017 -18  7,80,00,000/-
Total Amount 24,86,67,626/-

The MOU was followed by an Indemnity Bond executed by SMW wherein Indo would not claim an amount beyond Rs. 2,46,34,100/- in future. Both the Companies’ Directors/Partners stood as personal Guarantors. Further agreed that Indemnity will stand good forever and shall not be revoked, cancelled or changed at any reason whatsoever in the future.

In 2014-2015 when first tranche of Rs. 8,86,67,626/- was getting adjusted SMW revoked the agreement stating the credit notes were in the nature of discount/benefit offered by SMW to Indo for subsequent purchases at competitive market rates as a special offer keeping in mind their long business relations which were never issued against any outstanding only conveyed for adjustment. Indo had failed to place adequate orders they were constrained to terminate the MOU.

NCLT observed that on the basis of averments made in the cross petitions, both the parties have duly replied to the demand notices to the respective Corporate Debtors disputing the claim. NCLT after observing the facts and circumstance held that,
“the dispute was contested prior to filing of Claim which was beyond the Scope and Jurisdiction to adjudicate or quantify the liability against each Corporate Debtor which could be adjudicated upon the touch stone of trial, looking into invoices and quantitative values of terms of settlement upon reconciliation of accounts.”
NCLT further stated that, ” resolutions of both the Corporate Debtors are not sustainable through counter Petitions as both have not categorically deposed that no dispute exists between them hence NCLT rejected both the petitions”.
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