Tribunal upholds dismissal of Section 9 application under Insolvency Code, citing pre-existing dispute

The Tribunal affirmed the rejection of the Section 9 application under the Insolvency and Bankruptcy Code, 2016 by the Ld. Adjudicating Authority, citing a pre-existing dispute, admissibility of debt and additional work claims, lack of opportunity to file a Rejoinder, and the Respondent's right to set off liquidated damages. The appeal was dismissed, and the impugned order dated 24.10.2019 was upheld, directing the Registry to upload the judgment and provide a copy to the Ld. Adjudicating Authority.

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Issues Involved:
1. Rejection of Section 9 application under the Insolvency and Bankruptcy Code, 2016 (IBC).
2. Existence of pre-existing dispute.
3. Admissibility of debt and additional work claims.
4. Opportunity to file a Rejoinder.
5. Liquidated damages and right to set off.

Issue-wise Detailed Analysis:

1. Rejection of Section 9 application under the Insolvency and Bankruptcy Code, 2016 (IBC):
The Appellant, a Sole Proprietor construction firm, filed an application under Section 9 of the IBC for the initiation of Corporate Insolvency Resolution Process against the Respondent. The Ld. Adjudicating Authority (NCLT, Principal Bench, New Delhi) rejected this application on 24.10.2019. The Appellant was aggrieved by this order and preferred an appeal.

2. Existence of pre-existing dispute:
The Respondent argued that there was a pre-existing dispute regarding the additional work and the quantum of payment. The Respondent had communicated this dispute through various correspondences and meetings. The Ld. Adjudicating Authority found that there was indeed a pre-existing dispute, as evidenced by the communications and the Respondent's Reply Affidavit. The Hon’ble Supreme Court's judgment in "Mobilox Innovations Private Ltd. Vs Kirusa Software Private Ltd." was cited, which expanded the definition of 'dispute' to include correspondences showing a dispute relating to payment of the debt.

3. Admissibility of debt and additional work claims:
The Appellant claimed a total debt of Rs. 9,22,22,917/-, out of which Rs. 7,76,50,619/- was paid, leaving a balance of Rs. 1,33,40,071/-. Additionally, the Appellant raised bills amounting to Rs. 1,42,72,787/- for additional work. The Respondent disputed the additional work claims, arguing that these were not agreed upon and were unilaterally raised by the Appellant. The Respondent also asserted their right to set off liquidated damages against the claimed amount.

4. Opportunity to file a Rejoinder:
The Appellant contended that the Ld. Adjudicating Authority erred by not providing an opportunity to file a Rejoinder to the Respondent's Reply. However, the Ld. Adjudicating Authority recorded that the Appellant chose not to file a Rejoinder, which was contested by the Appellant.

5. Liquidated damages and right to set off:
The Respondent argued that they were entitled to liquidated damages due to the delay in project completion, as per the terms of the work orders. The liquidated damages amounted to Rs. 1,58,02,918/-, which was set off against the Appellant's claim. The Respondent's right to set off was supported by the terms and conditions of the work orders and the deductions made by Gujarat State Electricity Corporation Limited (GSECL) from the Respondent's account.

Findings:
The Tribunal found that the facts admitted included the issuance of work orders, amendments, completion of work, and the raising of invoices. The Tribunal agreed with the Ld. Adjudicating Authority's finding of a pre-existing dispute and upheld the rejection of the Section 9 application based on the Supreme Court's judgment in "Mobilox Innovations Private Ltd. Vs Kirusa Software Private Ltd."

Order:
The Tribunal affirmed the impugned order dated 24.10.2019, passed by the Ld. Adjudicating Authority (NCLT, Principal Bench, New Delhi), and dismissed the appeal, finding no merit in the Appellant's claims. The Registry was directed to upload the judgment on the website and send a copy to the Ld. Adjudicating Authority.

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