2017 (8) TMI 424 - Tri - Insolvency and Bankruptcy

Tribunal rejects Corporate Insolvency application due to unresolved operational debt dispute

M/s Sri Pitambara Enterprises Versus M/s Valeda Herbals Pvt. Ltd.

The Tribunal rejected the application for initiation of Corporate Insolvency process under Section 9 of the Insolvency and Bankruptcy Code, 2016. The ... Corporate Insolvency process in respect of Respondent corporate debtor - Insolvency and Bankruptcy Code, 2016 - Held that:- The term “dispute' has to be given a wide meaning and shall contained all type of dispute related to amount of debt or quality of goods. In the present matter, the corporate debtor never admitted the claim of the operational creditor and had raised its own counter claim against the operational creditor. As discussed above corporate debtor has raised dispute with sufficient particulars. Hence, the amount of claim raised by the operational creditor clearly falls within the ambit of disputed claim. Section 9(5)(ii)(d) of the Code provides that adjudicating authority shall reject the application if notice of dispute has been received by the operational creditor or there is a record of dispute in the information utility. For the reasons stated above this petition fails and the same is rejected. We make it clear that any observations made in this order shall not be construed as an expression of opinion on the merit of the controversy and the right of the Applicants before any other forum shall not be prejudiced on account of dismissal of instant application. Issues Involved:1. Application for initiation of Corporate Insolvency process under Section 9 of the Insolvency and Bankruptcy Code, 2016.2. Dispute regarding the operational debt claimed by the operational creditor.3. Counterclaims raised by the corporate debtor.4. Jurisdiction and scope of the Tribunal in adjudicating disputed claims.Issue-Wise Detailed Analysis:1. Application for initiation of Corporate Insolvency process under Section 9 of the Insolvency and Bankruptcy Code, 2016:The application was filed under Section 9 of the Insolvency and Bankruptcy Code, 2016, read with Rule 6 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016, seeking initiation of Corporate Insolvency process against the corporate debtor. The operational creditor claimed an unpaid operational debt of Rs. 17,03,797/- and issued a legal notice and demand notice under Section 8 of the Code. However, the corporate debtor denied the debt and raised counterclaims.2. Dispute regarding the operational debt claimed by the operational creditor:The operational creditor was appointed as a super stockist for certain regions and claimed that the corporate debtor failed to pay the operational debt. The corporate debtor, however, disputed the claim, stating that there was no admitted debt and raised counterclaims. The Tribunal noted that the claim of the operational creditor was not admitted but disputed by the corporate debtor, which was evident from the replies to the legal and demand notices.3. Counterclaims raised by the corporate debtor:The corporate debtor raised a counterclaim of Rs. 12,87,002/- with interest against the operational creditor, asserting that the operational creditor's claim was not free from dispute. The Tribunal emphasized that the existence of a dispute, as defined under Section 5(6) of the Code, includes disputes related to the existence of the amount of debt, quality of goods or services, or breach of representation or warranty. The Tribunal referred to the case of Kirusa Software (P.) Ltd. v. Mobilox Innovations (P.) Ltd., which clarified that the term 'dispute' should be given a wide meaning.4. Jurisdiction and scope of the Tribunal in adjudicating disputed claims:The Tribunal observed that it is not the forum to examine and adjudicate the merits of the claims and counterclaims. It stated that the disputes raised by the corporate debtor were beyond the scope of the Tribunal to decide. The Tribunal noted that the claim of the operational creditor was not free from dispute and, therefore, the application under Section 9 of the Code was not maintainable. The Tribunal highlighted that Section 9(5)(ii)(d) of the Code mandates the rejection of the application if a notice of dispute has been received by the operational creditor or there is a record of dispute in the information utility.Conclusion:The Tribunal concluded that the petition failed and was rejected, emphasizing that any observations made in the order should not be construed as an expression of opinion on the merits of the controversy. The rights of the applicants before any other forum were not to be prejudiced by the dismissal of the application.