2018 (6) TMI 1382 - AT - Insolvency and Bankruptcy

Supreme Court Upholds Rejection of Insolvency Application | Genuine Dispute Overcharging | Plausible Contention

The appeal against the rejection of the application under Section 9 of the Insolvency & Bankruptcy Code, 2016 was dismissed by the Supreme Court. The ... Corporate insolvency process - application rejected on the ground of ‘existence of dispute’ - Held that:- If the dispute is frivolous unsupported by any evidence, the spurious defence is to be rejected. However, on the basis of records and evidence if there appears to be an ‘existence of dispute’, such case is to be rejected. In the present case, it is not disputed that the Respondent had issued Lawyer’s notice dated 12th December, 2015 and disputed the claim on the ground of overcharging. The ‘Operational Creditor’, was also informed that the ‘Corporate Debtor’ incurred huge loss due to overcharging. Counter claim was also made by Respondent. Such dispute having raised by Respondent in December, 2015, we are not inclined to accept the plea taken by the Appellant. We find no merit in this appeal. It is accordingly dismissed. Issues:- Appeal against rejection of application under Section 9 of Insolvency & Bankruptcy Code, 2016 based on existence of dispute.Analysis:1. The appeal was filed by the Operational Creditor against the order rejecting the application under Section 9 of the Insolvency & Bankruptcy Code, 2016 due to the existence of a dispute. The Respondent disputed the claim based on a legal notice dated 12th December, 2015, alleging overcharging by the Operational Creditor. The Adjudicating Authority found a preexisting case of overcharging based on this notice.2. The Appellant argued that the Respondent's dispute was frivolous as they had deducted Tax at Source (TDS) and deposited it with the Income Tax Department. Reference was made to the Supreme Court decision in 'Mobilox Innovations Private Limited Versus Kirusa Software Private Limited' [(2018) 1 SCC 353], emphasizing the need for a plausible contention to reject an application under Section 9. The Appellant contended that the Adjudicating Authority failed to separate spurious defense in this case.3. The Supreme Court decision in 'Innoventive Industries Ltd. Vs. ICICI Bank and Ors.' [(2018) 1 SCC 407] was cited to highlight the importance of a genuine dispute supported by evidence. The Court clarified that if a dispute exists based on records and evidence, the application can be rejected. In this case, the Respondent had raised a dispute in December 2015 regarding overcharging, informing the Operational Creditor of the incurred losses and making a counterclaim. Therefore, the Court found no merit in the appeal and dismissed it without costs.