Application rejected under Section 9 of Insolvency and Bankruptcy Code due to pre-existing dispute

The Tribunal rejected the application under Section 9 of the Insolvency and Bankruptcy Code, 2016, due to the existence of a pre-existing dispute between the parties regarding the operational debt. The Tribunal emphasized that the debt was not free from dispute and cited legal precedents to support its decision. The order clarified that the rejection of the application should not prejudice the applicant's rights before any other forum.

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Issues Involved:
1. Jurisdiction of the Tribunal.
2. Existence of Operational Debt.
3. Pre-existing Dispute.
4. Admissibility of the Application under Section 9 of the Insolvency and Bankruptcy Code, 2016.
5. Allegations of Forged and Fabricated Documents.
6. Legal Provisions and Precedents.

Detailed Analysis:

1. Jurisdiction of the Tribunal:
The Tribunal noted that the respondent company, M/s. Laxmi Foils Private Limited, has its registered office in New Delhi. Thus, the Tribunal has territorial jurisdiction over the NCT of Delhi to adjudicate the application under Section 9 of the Insolvency and Bankruptcy Code, 2016.

2. Existence of Operational Debt:
The applicant, M/s. Duke Sponge and Iron Private Limited, claimed that the corporate debtor had a running account and had failed to pay an outstanding balance of Rs. 84,85,505/- for goods supplied, along with additional compounded interest, totaling Rs. 2,59,63,546/-. The last payment was received on 02.01.2016, and the operational creditor served a demand notice on 12.12.2018.

3. Pre-existing Dispute:
The respondent argued that there was a pre-existing dispute evidenced by debit notes dated 31.03.2015 and 15.04.2016, which were allegedly acknowledged by the petitioner. The Tribunal emphasized that under Section 9(5)(ii)(d) of the Code, the application must be rejected if there is a notice of dispute received by the operational creditor before the Section 8 notice.

4. Admissibility of the Application under Section 9 of the Insolvency and Bankruptcy Code, 2016:
The Tribunal referred to Section 9(5) of the Code and the precedent set by the Supreme Court in Mobilox Innovations Private Limited, which mandates rejection of the application if there is a pre-existing dispute. The Tribunal found that the respondent had raised a dispute prior to the Section 8 notice, indicating a plausible contention that required further investigation.

5. Allegations of Forged and Fabricated Documents:
The petitioner alleged that the debit notes were forged and fabricated, claiming they were received for the first time with the reply dated 28.12.2018. The Tribunal noted that the petitioner did not provide evidence of any FIR or action taken against the alleged forgery, thus leaving the matter open to trial and enquiry.

6. Legal Provisions and Precedents:
The Tribunal highlighted the inclusive definition of "dispute" under Section 5(6) of the Code, which covers all disputes on debt, default, etc. The Tribunal reiterated that it is not the forum to adjudicate the merits of the dispute but to ascertain if a real dispute exists. The Tribunal cited the case of K. Kishan vs. M/s. Vijay Nirman Company Pvt. Ltd., reinforcing that an insolvency petition cannot proceed if the debt is disputed within the parameters laid down in Mobilox Innovations.

Conclusion:
The Tribunal concluded that there was a pre-existing dispute between the parties, and the operational debt in question was not free from dispute. Therefore, the application under Section 9 of the Code was rejected. The Tribunal clarified that the observations made in the order should not prejudice the applicant's rights before any other forum.

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