Privity of contract crucial in insolvency proceedings; application dismissed under IBC.

The Tribunal dismissed the application for initiation of Corporate Insolvency Resolution Process under section 9 of IBC, 2016 against the Corporate Debtor for outstanding professional fees. It was held that there was no privity of contract between the Applicant and the Corporate Debtor, emphasizing the necessity of a clear debt without dispute for invoking insolvency proceedings. The Tribunal highlighted the importance of debt existence and default for initiating the process, ultimately rejecting the application and forwarding the order to IBBI for record-keeping.

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Issues:
Initiation of Corporate Insolvency Resolution Process under section 9 of IBC, 2016 against Corporate Debtor based on outstanding professional fees.

Analysis:
The Applicant, a company, sought to initiate the Corporate Insolvency Resolution Process against the Corporate Debtor, a private company, for outstanding professional fees. The Applicant claimed that bills remained unpaid despite various attempts to recover the dues. A demand notice was issued under section 8 of IBC, 2016, calling for payment of the outstanding amount. The Corporate Debtor, in response, denied the allegations, stating no contract existed between the parties for the services rendered by the Applicant.

The Corporate Debtor contended that the Applicant was engaged by the statutory auditor and not directly by the Corporate Debtor. The statutory auditor confirmed that no services were availed from the Applicant by the Corporate Debtor. The Corporate Debtor emphasized the lack of privity of contract between them and the Applicant. The statutory auditor admitted to assigning work to the Applicant in good faith but clarified that no direct engagement existed between the Corporate Debtor and the Applicant.

After reviewing the submissions and hearing both parties, the Tribunal concluded that there was no privity of contract between the Applicant and the Corporate Debtor. The Tribunal highlighted the importance of the existence of a debt and default for triggering the Corporate Insolvency Resolution Process under section 9 of IBC, 2016. As there was a dispute regarding the engagement and payment of fees, the Tribunal dismissed the application, emphasizing the need for a clear debt payable without dispute for invoking the provisions of the Code. The application was rejected, and a copy of the order was forwarded to IBBI for records.

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