2018 (8) TMI 1863 - Tri - Insolvency and Bankruptcy

Tribunal dismisses Insolvency Code application due to genuine dispute, suggests exploring alternative legal options

The tribunal dismissed the application under Section 9 of the Insolvency and Bankruptcy Code, citing the existence of a genuine dispute between the ... Maintainability of application - Initiation of Corporate Insolvency Resolution Process - existence of dispute between the Operational Creditor and the Debtor - HELD THAT:- After careful perusal of the submissions made by the Learned Advocate for the Debtor in my opinion the Dispute raised by him is not a hypothetical or illusory; but it is a pre-existed real dispute between the Operational Creditor and the Debtor. It is worth to place on record that the Operational Creditor had knowledge of this Dispute. Hence, my conscientious view is that this Petition/Application is not fit for commencement of CIRP. If the remedy in any other law is available to the Operational Creditor the same can be availed, however, as far as the Insolvency Code is concerned the scope of 'admission' of a claim is limited one. Any observation, legal or factual, shall not prejudiced the rights of the Operational Creditor, if to be exercised under any other Law. Application dismissed. Issues:1. Application filed under Section 9 of the Insolvency and Bankruptcy Code.2. Dispute regarding non-payment of operational debt by the debtor.3. Previous insolvency petition and its impact on the current application.4. Validity of the demand notice issued by the operational creditor.5. Existence of a genuine dispute between the parties.Issue 1: Application filed under Section 9 of the Insolvency and Bankruptcy CodeThe petitioner, an operational creditor, filed an application invoking Section 9 of the Insolvency and Bankruptcy Code against the debtor for non-payment of a substantial amount of operational debt, along with interest.Issue 2: Dispute regarding non-payment of operational debt by the debtorThe operational creditor contended that the debtor failed to pay the outstanding amount despite multiple follow-ups and a demand notice under Section 8 of the Code. The debtor disputed the claim, arguing that the operational creditor did not fulfill its obligations and that the financial assistance received was not due to the creditor's efforts.Issue 3: Previous insolvency petition and its impact on the current applicationThe debtor raised the defense of res judicata, claiming that a previous insolvency petition was dismissed for non-prosecution. The debtor argued that the current application should be rejected based on the earlier proceedings.Issue 4: Validity of the demand notice issued by the operational creditorThe operational creditor issued a demand notice post the withdrawal of the previous petition. The debtor challenged the validity of this notice, stating that it was issued despite the pendency of the earlier petition, rendering it null and void.Issue 5: Existence of a genuine dispute between the partiesThe tribunal examined the submissions from both parties and found that a genuine dispute existed between the operational creditor and the debtor. The tribunal emphasized the importance of a plausible contention requiring further investigation and rejected the application under Section 9 due to the existence of a real dispute.In conclusion, the tribunal dismissed the current application, citing the presence of a genuine dispute and the lack of merit for commencing Corporate Insolvency Resolution Process (CIRP). The tribunal highlighted that the remedy under the Insolvency Code was not suitable in this case, and the operational creditor could pursue other legal avenues if available. The application was dismissed without any order as to costs.