Foreign entity can file plea for initiation of corporate insolvency resolution process under Section 9 IBC: NCLT

The National Company Law Tribunal, Mumbai Bench has held that in view of Section 3(23) of Insolvency & Bankruptcy Code, 2016, even a foreign entity can file a petition for initiation of corporate insolvency resolution process under Section 9 IBC. (Forever Glory Trading Limited vs Global Powersource (India) Limited).The Tribunal has also held that contract of warranty constitutes a separate contract between a corporate debtor and an operational creditor and thus invocation of warranty claims can not be set up as a pre-existing dispute..The order was passed by a bench of Member (Judicial) Suchitra Kanuparthi..Forever Glory Trading Limited, the Operational Creditor/Petitioner had filed a section 9 IBC plea against Global Powersource (India) Limited, Corporate Debtor for a default amount of USD 2,90,260 which amounted to Rs 2,10,87,389..The Petitioner was a company incorporated under the laws of Angilla and supplied batteries to various clients globally..In 2015, the Corporate Debtor issued several Purchase Orders to the Petitioner and subsequently, separate contracts were signed for dealing with the sale of batteries and other relating to warranty claim, if any..Later, certain orders were placed in 2016 as well..It was the Petitioner’s grievance that while it honoured all the Purchase Orders raised by the Corporate Debtor, the Corporate Debtor failed to make the payments towards certain orders..In 2017, the parties agreed to a Payment Agreement, pursuant to which the Corporate Debtor agreed to clear all the pending dues in the next few months. It was also agreed that the certain invoices would be settled against the Corporate Debtor’s warranty claim in terms of the warranty agreement..After making one instalment, the Corporate Debtor again defaulted on the payment as it raised issues relating to the warranty claims.Later, a second Payment Agreement between the Corporate Debtor and the Petitioner came into existence. Receiving no money from the Corporate Debtor, the Petitioner first issued a Demand Notice under Section 8 of IBC to the Corporate Debtor and then proceeded to file the insolvency plea..In response to the insolvency plea, the Corporate Debtor submitted that from March 2017 onwards, the Petitioner had not acknowledged the warranty claims and there were thus disputes between the parties with respect to setting off warranty claims..The Corporate Debtor thus argued that there was a pre-existing dispute with respect to breach of warranty claims between the parties. .In view of the agreements between the parties, emails of Corporate Debtor admitting the claim and payment of a certain amount to the Petititioner pursuant to the claim, the NCLT concluded that there was a clear contractual liability on the Corporate Debtor to pay the Petitioner. .It further held that the claim of warranty was collateral to the main contract of supply of batteries and was a separate contract between the Corporate Debtor and the holding company of the Petitioner. .The NCLT perused section 13(3) of Sale of Goods Act 1930 and stated, .Sale of Goods Act, defines the term warranty as a stipulation collateral to the main contract..The communication regarding warranty claims cannot be set up as a dispute of notice as raised by the Corporate Debtor, the claims of warranty shall separately be considered by LCB (holding company).NCLT.Since the liability of payment of outstanding dues was admitted, NCLT held that there was no dispute in relation to the Section 9 plea. .It further held, .The objection that the Petitioner is a foreign entity and cannot file the present petition is not tenable in view of Sec 3(23(g) and 25)of I & B code, wherein, the definition of person includes person resident outside IndiaNCLT.In view of the above, the NCLT concluded that the Section 9 plea for initiation of corporate insolvency resolution process against the Corporate Debtor deserved to be admitted..Moratorium was imposed under Section 14 IBC and Anand Gopikishan Mundada was appointed as the insolvency resolution professional. .The Petitioner was represented by Advocate Nausher Kohli instructed by Rajarshi Chakrabarti, Keanan Nagporwala and Rushil Mathur from Kochhar & Co..Corporate Debtor was represented by Advocate Kalpesh Joshi..Read the Order: