Disputed operational debt petition rejected under Insolvency and Bankruptcy Code

The Adjudicating Authority rejected the petition filed under Section 9 of the Insolvency and Bankruptcy Code against the Corporate Debtor for unpaid operational debt. The decision was based on the existence of a pre-existing dispute between the parties, as evidenced by the ongoing adjudication before the MSME council and arbitration proceedings. The Corporate Debtor had responded to the demand notice disputing the claim, indicating the presence of a dispute. As a result, the petition was not admitted, emphasizing the need to resolve pre-existing disputes before initiating insolvency proceedings.

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Issues:
- Filing of petition under section 9 of the Insolvency and Bankruptcy Code, 2016 against a Corporate Debtor for unpaid operational debt.
- Dispute regarding the claimed amount due to delay in payment and subsequent legal actions taken by both parties.

Analysis:
1. Filing of Petition under Section 9 of the IB Code:
The petition was filed by 'iValue Advisors Private Limited' as the Operational Creditor against 'M/s. Srinagar Banihal Expressway Limited' as the Corporate Debtor for an unpaid operational debt amounting to Rs. 73,52,122.92. The Operational Creditor had provided project monitoring services to the Corporate Debtor as per an engagement letter dated 21.11.2014, with invoices raised until 16.02.2017. Despite part payments made by the Corporate Debtor, there was a substantial delay in full payment, leading to the operational debt accrual.

2. Pre-existing Dispute and Legal Actions:
The Respondent, Corporate Debtor, raised a counterclaim stating that the matter was already pending adjudication before the MSME council and arbitration proceedings had commenced due to a dispute over the claimed amount. The Corporate Debtor disputed the claim raised by the Operational Creditor and argued that the petition should be dismissed under Section 8(2)(a) of the IB Code due to the pre-existing dispute. The Corporate Debtor also disputed the claim in response to the demand notice, further solidifying the existence of a dispute.

3. Judgment and Decision:
After hearing both parties and reviewing the submissions, the Adjudicating Authority observed that the matter was already under consideration by the MSME facilitation council and arbitration proceedings had started due to the failure of conciliation. The Authority noted that the Corporate Debtor had responded to the demand notice by disputing the claim, indicating a pre-existing dispute. Citing previous judgments, the Authority concluded that a pre-existing dispute existed between the parties, leading to the decision not to admit the petition. Consequently, the petition (CP (IB) No.124/9/HDB/2019) was rejected, and no costs were awarded.

In summary, the judgment highlighted the importance of addressing pre-existing disputes before admitting insolvency petitions under the IB Code. The legal proceedings and actions taken by both parties were thoroughly analyzed to determine the existence of a dispute, ultimately resulting in the rejection of the petition due to the acknowledged pre-existing dispute between the Operational Creditor and the Corporate Debtor.

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