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IBC: Raising of dispute only after demand notice or notice from NCLT is not pre-existing dispute

In Rajeev K Aggarwal Vs Panipat Texo Fabs Pvt. Ltd., the appellant as a shareholder of the Corporate Debtor assailed the order of moratorium and appointment of the IRP before the NCLAT on the ground that the goods against which the Corporate Debtor had failed to pay were defective and substandard and the same was communicated to the Operational Creditor and the NCLT had refused to accept the dispute.

The NCLAT on perusing the records found that while raising the dispute at this late stage, the appellant had not been able to substantiate the claim with any evidence. Agreeing with the NCLT that this appeal is a mere sham to delay the process, the NCLAT held that raising of dispute in regard to quality of goods being inferior/substandard or defective for the first time in reply to demand notice or in response to notice served by the Adjudicating Authority would not constitute a prior and pre-existing dispute contemplated under law as a defence to the initiation of Corporate Insolvency Resolution Process, more so when the contemporary record in regard to transactions between the Corporate Debtor and the Operational Creditor at the time of delivery of goods or immediately thereafter does not demonstrate raising of any dispute with respect to quality of goods supplied by the Operational Creditor.


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