Application Dismissed: Dispute over Work Quality

The Tribunal dismissed the application under Section 9 of the Insolvency and Bankruptcy Code, citing the existence of a plausible dispute between the parties regarding the quality of work and materials supplied. The Tribunal's jurisdiction is limited to the provisions of the Insolvency Code, and the claim was deemed not suitable for commencement of Corporate Insolvency Resolution Process (CIRP). The application was dismissed with no order as to costs.

---

---

Issues Involved:
1. Jurisdiction of the Tribunal
2. Existence of debt and default
3. Quality and completion of work by the Operational Creditor
4. Pre-existing dispute
5. Applicability of the Insolvency and Bankruptcy Code (IBC)

Issue-wise Analysis:

1. Jurisdiction of the Tribunal:
The Tribunal confirmed its jurisdiction to handle the application as the Corporate Debtor is registered in Ernakulam, Kerala, and the application was filed under Section 9 of the Insolvency & Bankruptcy Code, 2016, read with Rule 6 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016.

2. Existence of Debt and Default:
The Operational Creditor claimed a total outstanding amount of Rs. 2,26,30,208 as principal and Rs. 4,07,093 as interest. The Corporate Debtor subcontracted HVAC and Electrification work to the Operational Creditor, who raised invoices periodically. The Corporate Debtor admitted to certain payments but disputed the total amount claimed, citing statutory deductions and retention amounts.

3. Quality and Completion of Work by the Operational Creditor:
The Corporate Debtor raised issues regarding the quality of the materials supplied and the completion of work. They argued that the Operational Creditor did not supply materials as per the BOQ specifications and failed to rectify defects. The Operational Creditor countered that testing, commissioning, and providing guarantee/warranty cards arise only at the final stage of handing over.

4. Pre-existing Dispute:
The Tribunal found that there was a pre-existing dispute between the parties regarding the quality of work and materials supplied. This dispute was evident from the email communications and correspondences produced, which showed issues raised by the Corporate Debtor much prior to the demand notice.

5. Applicability of the Insolvency and Bankruptcy Code (IBC):
The Tribunal referred to the Hon'ble Supreme Court's decision in Mobilox Innovations Private Limited v. Kirusa Software Private Limited, which mandates that an application under Section 9 must be rejected if there is a record of dispute. The Tribunal concluded that the dispute was not spurious, hypothetical, or illusory but required further investigation. Therefore, the application could not proceed under the IBC to commence CIRP.

Conclusion:
The Tribunal dismissed the application, stating that the impugned debt and alleged default were not free from the existence of a plausible dispute. The Tribunal's jurisdiction is limited to the provisions of the Insolvency Code, and the claim could be pursued under any other applicable law. The application IBA/18/KOB/2020 was dismissed with no order as to costs.

Dated the 25th day of September, 2020.

---