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of <h1>NCLAT dismisses appeal, upholds decision on CIRP initiation based on genuine pre-existing dispute.</h1> The National Company Law Appellate Tribunal (NCLAT) dismissed the appeal, upholding the decision of the Adjudicating Authority to decline initiating ... Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of debt - Existence of dispute - Adjudicating Authority has dismissed the Application under Section 9 observing that there was a preexisting dispute between the Parties prior to the issuance of Demand Notice - HELD THAT:- As subject matter of the case relates to ‘Existence of a Dispute’, we are of the view that the case has to be decided on the touchstone of what the Hon’ble Supreme Court has observed in Mobilox Innovations Private Limited vs. KIRUSA Software Pvt. Ltd. [2017 (9) TMI 1270 - SUPREME COURT], where it was held that Going by the test of “existence of a dispute”, it is clear that without going into the merits of the dispute, the appellant has raised a plausible contention requiring further investigation which is not a patently feeble legal argument or an assertion of facts unsupported by evidence. The afore-noted e-mail communication dated 29.11.2018, 15.12.2018 and 17.12.2018 read together with the Minutes of the Meeting held on 16.11.2018, which is prior to the issuance of the Demand Notice dated 29.03.2019, establishes that there is plausible contention which requires further investigation and that the ‘Dispute’ is not patently feeble, legal argument or an assertion of fact unsupported by evidence. We hold that the dispute truly exists in fact and is not spurious, hypothetical or illusory. The IBC proceedings are ‘summary’ in nature and this is not a substitute for debt enforcement Procedure. There are no illegality or infirmity in the order of the Ld. Adjudicating Authority - appeal dismissed. Issues Involved:1. Pre-existing dispute between the parties.2. Delay in filing the appeal.3. Payment and dishonor of cheques.4. Quality and quantity of supplied materials.5. Application of legal principles from previous Supreme Court judgments.Issue-wise Detailed Analysis:1. Pre-existing dispute between the parties:The primary issue in this case was whether there was a pre-existing dispute between the Operational Creditor and the Corporate Debtor prior to the issuance of the Demand Notice. The National Company Law Appellate Tribunal (NCLAT) observed that there were several e-mails and minutes of meetings indicating disputes regarding the quality of the Gypsum supplied. These communications occurred before the Demand Notice dated 29.03.2019. The Tribunal relied on the principle laid down by the Supreme Court in 'Mobilox Innovations Private Limited vs. KIRUSA Software Pvt. Ltd.' which mandates that the existence of a dispute must be pre-existing, i.e., before the receipt of the demand notice or invoice.2. Delay in filing the appeal:The Tribunal condoned the delay in filing the appeal for reasons cited in the affidavit. The appeal was disposed of at the 'Admission Stage' itself without issuing notice to the Respondent.3. Payment and dishonor of cheques:The Operational Creditor claimed that the Corporate Debtor had issued two cheques amounting to Rs. 4,00,000 and Rs. 2,00,000, which were dishonored upon deposit. However, these amounts were subsequently paid through RTGS. The Tribunal noted that despite the dishonor of cheques, the payments were made, and the issue of dishonored cheques was resolved.4. Quality and quantity of supplied materials:The Tribunal examined the contention regarding the quality and quantity of the Gypsum supplied. The Corporate Debtor had raised issues about expired materials and delayed supplies. The e-mails and minutes of meetings indicated that the Corporate Debtor had communicated these issues to the Operational Creditor before the Demand Notice was issued. The Tribunal noted that the dispute was genuine and not spurious, hypothetical, or illusory.5. Application of legal principles from previous Supreme Court judgments:The Tribunal relied on the Supreme Court's judgment in 'Mobilox Innovations Private Limited vs. KIRUSA Software Pvt. Ltd.' and 'Transmission Corporation of Andhra Pradesh Limited vs. Equipment Conductors and Cables Limited.' These judgments emphasize that if there is a pre-existing dispute, the adjudicating authority must reject the application for initiating Corporate Insolvency Resolution Process (CIRP). The Tribunal found that the dispute between the parties required further investigation and was not a mere bluster.Conclusion:The Tribunal concluded that there was a plausible contention requiring further investigation and that the dispute was not patently feeble or unsupported by evidence. The IBC proceedings are summary in nature and not a substitute for debt enforcement procedures. Therefore, the Tribunal upheld the decision of the Adjudicating Authority in declining to initiate CIRP against the Corporate Debtor. The appeal was dismissed with no order as to costs.
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