2022 (2) TMI 148 - AT - Insolvency and Bankruptcy

Appeals Dismissed in Section 9 Application Rejection Judgment Emphasizes Pre-existing Dispute Resolution

The Appeals were dismissed as no error was found in the rejection of the Section 9 Application. The judgment emphasized the importance of resolving ... Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational creditors - existence of debt and dispute or not - time limitation - HELD THAT:- The Operational Creditor before the Adjudicating Authority claim extension of limitation on the basis of account confirmation dated 01.04.2017 allegedly signed by one Devpal the Accountant of the Corporate Debtor. The Corporate Debtor in reply has disputed the claim of the Appellant and has filed a criminal complaint regarding forgery of the document dated 01.04.2019 on which First Information Report has been registered and criminal proceedings are pending. When the very basis of the claim of the Operational Creditor that their Application is within time is under cloud and is disputed by the Corporate Debtor, no error has been committed by the Adjudicating Authority by not placing reliance on account confirmation document dated 01.04.2017 for giving extension of the limitation to the Operational Creditor. The allegation of supply back of the material is being disputed. The claim of supply back of the material was raised by the Corporate Debtor on 05.03.2017 in response to meeting dated 18.02.2017. The notice under Section 8 was issued by the Operational Creditor on 20.03.2019 i.e. much after the claim of the Corporate Debtor to supply back the material which was in 2017 i.e. two years thereafter. The Operational Creditor disputing the claim of supply back of the similar material itself is a dispute which is clearly mentioned in the reply notice of the Corporate Debtor. These issues could not have been gone into the proceeding under Section 9 and there being pre-existing dispute between the parties the Application under Section 9 filed by the Appellant has rightly been rejected. No case has been made out to interfere with the order passed by the Adjudicating Authority rejecting Section 9 Application - Appeal dismissed. Issues:Appeal against rejection of applications under Section 9 of the Insolvency and Bankruptcy Code, 2016 based on time limitation and pre-existing disputes.Analysis:1. The Appellant, an Operational Creditor, supplied Wheat Straws to the Corporate Debtor between 21.04.2016 to 10.09.2016, raising invoices totaling &8377; 60,71,538. A demand notice under Section 8 was issued on 20.03.2019 for outstanding &8377; 35,71,097 plus interest. The Corporate Debtor disputed the claim, mentioning a meeting on 18.02.2017 where it was proposed to supply back similar material, supplied on 05.03.2017. The Appellant filed an Application under Section 9 dated 26.11.2019. The Adjudicating Authority rejected the Application citing time limitation and pre-existing disputes.2. The Adjudicating Authority rejected the Application under Section 9 on grounds of being time-barred and pre-existing disputes. The Appellant argued for an extension of limitation based on an account confirmation dated 01.04.2017, disputed by the Corporate Debtor due to alleged forgery. The Corporate Debtor filed a criminal complaint regarding the alleged forged document, leading to pending criminal proceedings.3. The Respondent contended that the Application was time-barred as per the Appellant's own claim of debt due on 10.09.2016 and the Application filed in November 2019. They argued that the account confirmation dated 01.04.2017 was forged, mentioning discrepancies in the document and filing a criminal complaint. The Respondent also claimed to have supplied back material on 05.03.2017, supported by returns filed in the Sales Tax Act.4. The judgment highlighted the dispute over the debt due date and the alleged supply back of material. The Adjudicating Authority rightly rejected the Application under Section 9 due to the disputed account confirmation document and the existence of pre-existing disputes between the parties. The Respondent's reply notice disputed the outstanding amount and claimed to have supplied back material, which the Appellant denied, leading to a clear pre-existing dispute.5. The Appeals were dismissed as no error was found in the rejection of the Section 9 Application. The dispute over the supply back of material and the time limitation issue were crucial factors leading to the rejection. The judgment emphasized the importance of resolving pre-existing disputes before initiating insolvency proceedings, ensuring fairness and accuracy in legal proceedings.