2022 (1) TMI 1072 - AT - Insolvency and Bankruptcy

Operational creditor appeal dismissed due to pre-existing dispute; lack of evidence. Principle from 'Mobilox Innovations' applied.

M/s. Equipment Planet Versus M/s. Udit Infraworld Private Limited

The Tribunal dismissed the appeal, citing a pre-existing dispute between the parties and the operational creditor's failure to substantiate the claim for ... Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - Pre-Existing Dispute between the parties or not - amount ‘due and payable’ - HELD THAT:- The facts of the present case need to be examined in the light of the law laid down by the Hon’ble Supreme Court in Mobilox Innovations Private Limited Vs. Kirusa Software Private Limited [2017 (9) TMI 1270 - SUPREME COURT] where it was held that So long as a dispute truly exists in fact and is not spurious, hypothetical or illusory, the adjudicating authority has to reject the application. When there is no denial with respect to the email dated 22.02.2018 (reproduced in para 7) there are no substantial reasons given for raising the bills for the subsequent period when there is no documentary evidence on record that the services were rendered with respect to the Work Order subsequent to 22.02.2018. Therefore, the dispute raised by the ‘Corporate Debtor’ is not a spurious or legally feeble argument but is substantiated by sufficient evidence. It is satisfied by the material on record that there is a ‘Pre-Existing Dispute’ “prior to the issuance of the Demand Notice‟ - the ratio of Mobilox Innovations Private Limited is squarely applicable to the facts of this case. There exists a dispute between the parties, we do not wish to go into the other issues raised regarding the Partnership Deed. Appeal dismissed. Issues Involved:1. Pre-existing dispute between the parties.2. Amount due and payable.3. Validity of invoices and interest calculations.4. Termination of services and its implications.5. Evidence of services rendered post-termination notice.Detailed Analysis:Pre-existing Dispute Between the Parties:The primary issue examined was whether a 'pre-existing dispute' existed between the parties prior to the issuance of the demand notice. The Tribunal referred to the judgment in ‘Mobilox Innovations Private Limited vs. Kirusa Software Private Limited’, emphasizing that an application under Section 9 of the Insolvency and Bankruptcy Code, 2016 (IBC) must be rejected if there is a record of a dispute or if the corporate debtor has notified the operational creditor of such a dispute. The Tribunal found that the email dated 22.02.2018, which instructed the operational creditor to discontinue services, constituted a pre-existing dispute. This email was not denied by the operational creditor, thereby substantiating the existence of a dispute prior to the demand notice issued on 02.07.2018.Amount Due and Payable:The Tribunal scrutinized the invoices submitted by the operational creditor. It was noted that there were discrepancies in Invoice No. 133 dated 05.02.2018, which showed different amounts in different submissions. The Tribunal also observed that the operational creditor had failed to provide convincing evidence that services were rendered for the invoices post the termination notice dated 22.02.2018. The Tribunal concluded that the operational creditor's claim for amounts due was not substantiated by adequate documentary evidence.Validity of Invoices and Interest Calculations:The Tribunal noted inconsistencies in the invoices and the interest calculations. Specifically, Invoice No. 133 dated 05.02.2018 showed different amounts in different submissions, raising questions about the authenticity of the invoices. Additionally, the interest calculated at 18% per annum was not agreed upon between the parties, further undermining the operational creditor's claim.Termination of Services and Its Implications:The Tribunal found that the services were effectively terminated by the email dated 22.02.2018. This termination was acknowledged by the operational creditor, who continued to raise invoices for the period beyond the termination date without providing evidence of services rendered. The Tribunal emphasized that the operational creditor's action of issuing invoices post-termination was not justified and lacked documentary support.Evidence of Services Rendered Post-Termination Notice:The Tribunal highlighted the lack of evidence provided by the operational creditor to substantiate the claim that services were rendered after the termination notice. The operational creditor's failure to provide documentary evidence of services rendered post-22.02.2018 significantly weakened their case. The Tribunal concluded that the operational creditor's claim was not supported by sufficient evidence, and thus, the dispute raised by the corporate debtor was not spurious or legally feeble.Conclusion:The Tribunal dismissed the appeal, finding that there was a pre-existing dispute between the parties and that the operational creditor had failed to substantiate the claim for amounts due with adequate evidence. The Tribunal held that the ratio of ‘Mobilox Innovations Private Limited’ was applicable, and the existence of a dispute prior to the issuance of the demand notice warranted the rejection of the application under Section 9 of the IBC. The appeal was dismissed with no order as to costs, and the Registry was directed to upload the judgment and send a copy to the National Company Law Tribunal, Ahmedabad Bench.