2019 (9) TMI 840 - AT - Insolvency and Bankruptcy

Appeal challenging petition rejection dismissed due to pre-existing disputes.

The Tribunal dismissed the appeal challenging the rejection of the petition under section 9 of the Insolvency and Bankruptcy Code. It found that ... Maintainability of petition - initiation of CIRP - pre-existing disputes or not - section 9 of the Insolvency and Bankruptcy Code - HELD THAT:- There is a pre-existing dispute about the work which were brought to the notice of the Appellant prior to the Demand Notice dated 10.05.2017. The emails dated 03.04.2017, 05.05.2017 and 09.05.2017 is by the Respondent taking step for award for imposition of penalty for damage and having taken adverse action has also not been disputed. Appeal dismissed. Issues:1. Dispute regarding pre-existing disputes between the parties.2. Claim for pending payment under Insolvency and Bankruptcy Code.3. Allegations of failure to maintain progress, termination, and damages by the Respondent.Analysis:1. The Appellant challenged the order rejecting their petition under section 9 of the Insolvency and Bankruptcy Code. The Appellant argued that there were no pre-existing disputes between the parties, as demonstrated by the facts, and that the Respondent raised false objections only after receiving demand notices.2. The Appellant claimed pending payment of approximately &8377;14.62 crores for various works done, out of a total of &8377;43 crores worth of work. The Respondent reassured payment in emails but failed to release the pending amount, leading to demand notices being issued. The Respondent's actions, including filing a summary suit, were seen as attempts to avoid legitimate claims.3. The Respondent alleged that the Appellant consistently failed to meet project deadlines due to resource inadequacy and poor quality, leading to penalties, termination, and damages. The Respondent claimed the Appellant was aware of penalties imposed by clients and failed to rectify the situation. The termination of the main contract automatically terminated the sub-contracts.4. The Respondent argued that disputes existed prior to the demand notices, as evidenced by emails and communications regarding penalties and damages. The Respondent had initiated legal proceedings before the demand notices were issued, indicating pre-existing disputes. The Respondent also raised a limitation defense, which was not decided due to the pending suit.5. The Tribunal found that pre-existing disputes regarding work were evident from communications before the demand notices. The Respondent's actions and communications indicated disputes existed prior to the demand notices, leading to the dismissal of the appeal. The Tribunal did not find merit in the Appellant's arguments and dismissed the appeal without costs.