2019 (6) TMI 1488 - Tri - Insolvency and Bankruptcy

Tribunal Rejects Insolvency Petition Due to Dispute

The Tribunal rejected the applicant's petition under section 9 of the Insolvency and Bankruptcy Code, 2016, citing the existence of a pre-existing dispute ... Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its debt - existence of debt and dispute or not - HELD THAT:- The statutory provisions of section 9(5)(ii)(d) of the Code mandates that the Adjudicating Authority shall reject the application if notice of dispute has been received by the operational creditor. Section 9(5)(ii)(d) refers to the notice of an existing dispute that has been received, as it has to be read with section 8(2)(a) of the Code. The moment there is existence of a pre-existing dispute, the operational debtor gets out of the rigours of the Code - Once there is 'existence of dispute' prior to issuance of notice under section 8, the petition under section 9 preferred by the operational creditor shall not be maintainable. In the present case the initial notice issued under section 8 was duly replied within the period prescribed by bringing to the notice of the operational creditor the existence of dispute. Besides the correspondences placed on record shows that the liability has been disputed from time-to-time and there is a plausible dispute pre-exists between the parties - The provisions of section 9(5)(ii)(d) of the Code clearly mandates that the Adjudicating Authority shall reject the application when notice of dispute has been received by the applicant operational creditor. In the factual scenario it is reiterated that the claim of operational debt in question is not free from dispute. Records show that dispute was raised prior to issuance of notice under section 8 of the Code. The respondent has raised dispute with sufficient particulars to qualify as a dispute as defined under sub-section (6) of section 5 of the Code - thus, the application fails and therefore the same is rejected. Issues Involved:1. Jurisdiction of the Tribunal2. Contractual Obligations and Performance3. Existence of Operational Debt4. Existence of Dispute5. Application of Section 9(5)(ii)(d) of the Insolvency and Bankruptcy Code, 2016Issue-wise Detailed Analysis:1. Jurisdiction of the Tribunal:The Tribunal has territorial jurisdiction over the NCT of Delhi, as the registered office of the respondent, M/s. Indure P. Ltd., is situated in New Delhi. This makes the Tribunal the Adjudicating Authority under sub-section (1) of section 60 of the Insolvency and Bankruptcy Code, 2016 (the 'Code').2. Contractual Obligations and Performance:The applicant, M/s. Sandvik Asia P. Ltd., entered into two contracts with the respondent on May 24, 2012. The total consideration for the supply contract was Rs. 32,42,78,970, and for the service contract, it was Rs. 2,15,00,000. The applicant claimed to have fulfilled its obligations and raised 73 invoices totaling Rs. 34,72,35,271, out of which 16 invoices amounting to Rs. 2,25,82,259 remained unpaid, along with interest of Rs. 97,86,723.3. Existence of Operational Debt:The applicant issued a demand notice under section 8 of the Code on July 28, 2018, claiming a total outstanding debt of Rs. 3,23,68,982. The respondent, however, raised objections, alleging breaches and delays by the applicant, resulting in substantial losses and damages. The respondent also claimed that the applicant failed to complete the work within the stipulated schedule and did not fulfill various contractual obligations.4. Existence of Dispute:The respondent contended that there was a pre-existing dispute regarding the claims made by the applicant. The Tribunal referred to the case of Mobilox Innovations P. Ltd. v. Kirusa Software P. Ltd., where the Supreme Court held that the adjudicating authority must reject the application under section 9(5)(ii)(d) if a notice of dispute has been received by the operational creditor. The Tribunal noted that the respondent had raised a dispute in its letter dated March 31, 2018, and various correspondences showed subsistence of disputes on issues like extension and revalidation of bank guarantees and untimely invocation of the guarantee.5. Application of Section 9(5)(ii)(d) of the Insolvency and Bankruptcy Code, 2016:The Tribunal emphasized that under section 9(5)(ii)(d) of the Code, the application must be rejected if a notice of dispute has been received by the operational creditor. The Tribunal found that the respondent had raised a dispute with sufficient particulars to qualify as a dispute under sub-section (6) of section 5 of the Code. The Tribunal concluded that the claim of operational debt was not free from dispute and that the dispute pre-existed prior to the issuance of the notice under section 8 of the Code.Conclusion:The Tribunal rejected the application filed by the applicant, stating that the existence of a dispute prior to the issuance of the notice under section 8 of the Code made the petition under section 9 not maintainable. The Tribunal clarified that any observations made in the order should not be construed as an expression of opinion on the merits of the controversy and that the rights of the applicant before any other forum would not be prejudiced by the dismissal of the application.