2019 (2) TMI 1839 - Tri - Insolvency and Bankruptcy

Company Petition Dismissed: Pre-existing Dispute Requires Further Investigation

The Tribunal dismissed the Company Petition filed under section 9 of the Insolvency & Bankruptcy Code, 2016 due to a pre-existing dispute between the ... Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - pre-existing dispute or not - time limitation - HELD THAT:- It is an admitted fact that the delay occurred from the side of the operational creditor, against which, the operational creditor of course says it has happened because requisite documents were not supplied. Today the ground position is, it is a fact that there is pre-existing dispute between the operational creditor and the corporate debtor before section 8 notice was issued about the operational creditor providing services to the corporate debtor, notwithstanding the merit of the contentions of either side. The corporate debtor on 20.07.2018 has replied to the section 8 notice within 10 days from the date of receipt the notice stating that operational creditor failed to provide services as agreed between them by saying that this was informed to the creditor long before section 8 notice was issued. This claim is hit by pre-existing dispute - petition is dismissed. Issues:1. Company Petition filed under section 9 of the Insolvency & Bankruptcy Code, 2016 due to default in payment by the Corporate Debtor.2. Dispute regarding services provided and payments demanded between the Operational Creditor and the Corporate Debtor.3. Interpretation of the Master Services Agreement and timelines for obtaining licenses and permissions.4. Correspondence and notices exchanged between the parties before the issuance of the Section 8 notice.5. Application of the Supreme Court's decision in Mobilox Innovations (P.) Ltd. v. Kirusa Software (P.) Ltd. regarding the existence of a dispute.Analysis:1. The Company Petition was filed under section 9 of the Insolvency & Bankruptcy Code, 2016 by the Petitioner due to the Corporate Debtor's default in paying a specific amount. The Petitioner sought the initiation of the Corporate Insolvency Resolution Process against the Corporate Debtor based on the outstanding payment.2. A dispute arose between the Operational Creditor and the Corporate Debtor regarding the services provided and payments demanded. The Operational Creditor claimed that the Corporate Debtor failed to adhere to timelines for obtaining licenses and permissions, leading to delays. On the other hand, the Corporate Debtor contended that the Operational Creditor did not provide timely services as agreed, resulting in the recall of the agreement and demand for return of documents.3. The interpretation of the Master Services Agreement and timelines for obtaining licenses and permissions played a crucial role in determining the obligations of both parties. The agreement outlined the jural relationship between the service provider and the client, emphasizing the importance of fulfilling specified timelines for starting the business by the Corporate Debtor.4. Various correspondences and notices were exchanged between the parties before the issuance of the Section 8 notice. These communications highlighted the disagreements and demands made by both the Operational Creditor and the Corporate Debtor regarding payments, services, and the return of documents, showcasing the pre-existing dispute between them.5. The Tribunal relied on the Supreme Court's decision in Mobilox Innovations (P.) Ltd. v. Kirusa Software (P.) Ltd. to assess the existence of a dispute. The Court emphasized the need for a plausible contention requiring further investigation and the presence of a genuine dispute, not a feeble legal argument. Based on this precedent, the Tribunal dismissed the Company Petition, citing the pre-existing dispute as a reason and granting liberty to the Petitioner to proceed as per the law.