Company petition under IBC Section 9 dismissed due to valid dispute & pending arbitration. Exhaust alternative remedies.

The Tribunal found the Company Petition under Section 9 of the IBC not maintainable due to a valid dispute and pending arbitration proceedings. Emphasizing exhaustion of alternative remedies, the petition was rejected under Section 9(5)(ii)(d) read with Section 5(6) of the IBC, 2016. The Tribunal disposed of the related application (CA No. 186/2017) and suggested exploring solutions before the Arbitration Tribunal.

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Issues Involved:
1. Maintainability of the Company Petition under Section 9 of the IBC, 2016.
2. Validity of the demand notice under Section 8 of the IBC.
3. Existence of a dispute, including pending arbitration proceedings.
4. Whether the petition constitutes forum shopping.

Issue-wise Detailed Analysis:

1. Maintainability of the Company Petition under Section 9 of the IBC, 2016:
The Company Petition was filed by the Operational Creditor to initiate the Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor. The petition was opposed by the Corporate Debtor on the grounds that it was not filed in the prescribed format and suppressed material facts. The Tribunal noted that the petition was filed while arbitration proceedings were pending, which is contrary to the provisions of the IBC. The Tribunal emphasized that it would not invoke its jurisdiction unless alternative remedies like arbitration were exhausted.

2. Validity of the Demand Notice under Section 8 of the IBC:
The Corporate Debtor argued that the demand notice issued by the Operational Creditor was not in accordance with the law, as it did not follow the prescribed format in Form-3 of the IBC. The Tribunal acknowledged that the demand notice was indeed flawed and did not meet the statutory requirements. The Operational Creditor's failure to adhere to the prescribed format rendered the demand notice invalid.

3. Existence of a Dispute, Including Pending Arbitration Proceedings:
The Tribunal examined whether there was a valid dispute between the parties as defined under Section 5(6) of the IBC. It was established that the Operational Creditor had invoked the arbitration clause, and both parties had nominated their arbitrators. The arbitration proceedings were still pending, and the appointment of the third arbitrator was in process. The Tribunal noted that the existence of pending arbitration proceedings constituted a valid dispute, which precluded the initiation of CIRP under the IBC. The Tribunal referred to the Supreme Court's judgment in Mobilox Innovations Pvt. Ltd. v. Kirusa Software Pvt. Ltd., which clarified that if a genuine dispute exists, the petition must be dismissed.

4. Whether the Petition Constitutes Forum Shopping:
The Corporate Debtor accused the Operational Creditor of forum shopping by invoking multiple jurisdictions for the same debt. The Tribunal agreed with this contention, emphasizing that the Operational Creditor should not seek multiple remedies for the same issue. The Tribunal highlighted that the parties had already settled their disputes through conciliation and entered into a Minutes of Meeting, which indicated that the arbitration proceedings should be the appropriate forum for resolving any remaining issues.

Conclusion:
The Tribunal concluded that the Company Petition was not maintainable due to the existence of a valid dispute and pending arbitration proceedings. It emphasized that the Operational Creditor should exhaust alternative remedies before approaching the Tribunal. Consequently, the petition was rejected under Section 9(5)(ii)(d) read with Section 5(6) of the IBC, 2016. The Tribunal also disposed of the related application (CA No. 186/2017) and clarified that the parties could still explore solutions before the Arbitration Tribunal.

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