NCLAT Affirms NCLT New Delhi Order Rejecting Insolvency Plea Against Bajaj Appliances

The National Company Law Appellate Tribunal (NCLAT) at New Delhi has recently dismissed an insolvency plea against Bajaj Appliances Ltd., holding that a pre-existing dispute barred initiation of proceedings under the Insolvency and Bankruptcy Code.

A coram of Judicial Member Justice N. Seshasayee and Technical Member Arun Baroka upheld the National Company Law Tribunal, Delhi's October 18, 2023, order rejecting the application filed by T.J. Communication Pvt. Ltd.

T.J. Communication claimed it acted as a clearing and forwarding agent for Bajaj Appliances from March 18, 2019, to August 2, 2019, for the storage and distribution of LED televisions in Punjab. After termination of the arrangement, it was alleged that Rs. 2,15,115 towards expenses and Rs. 21 lakh as a security deposit remained unpaid, totaling Rs. 25.34 lakh with interest.

After issuing a demand notice, the company moved the Tribunal seeking initiation of the corporate insolvency resolution process.

Bajaj Appliances opposed the plea. It contended that the agent had agreed to invest Rs.51 lakh as security but had paid only Rs.21 lakh. It also alleged that goods returned after termination were damaged and caused losses. According to the company, Rs. 7.06 lakh was settled as payable by the agent and was to be adjusted against the security deposit.

The Appellate Tribunal noted that Bajaj Appliances had issued a legal notice dated November 25, 2019, raising these disputes before the operational creditor sent its demand notice dated November 27, 2019, later revised to December 2, 2019.

Agreeing with the adjudicating authority, the tribunal relied on the following finding,

“A wholesome perusal of the e-mail Correspondence dated 02.08.2019, 03.08.2019, 30.08.2019, 04.09.2019, gives an impression to this Adjudicating Authority that some negotiations were going on between the parties consequent to the termination of the C& F Agreement and therefore, the said e-mail correspondence cannot be considered as an acknowledgement of debt on the part of the Corporate Debtor.”

The Appellate Tribunal further observed:

“This court is not to look into the issues relating to the existence and the reasons of dispute.”

It also held:

“We further find that the disputes raised are not moonshine or frivolous disputes which have been created to avoid admission of Section 9 Application.”

Holding that a genuine dispute existed prior to the demand notice, the tribunal found no infirmity in the earlier order and dismissed the appeal.