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The Corporate Debtor argued that they were not afforded an opportunity of hearing during the consideration of the Section 9 application filed by the Operational Creditor, thereby denying them the chance to state their case and defend themselves. The Corporate Debtor claimed that no notice of hearing on 06.09.2021 and 07.10.2021 was served upon them by either the Operational Creditor or the Registry of NCLT, New Delhi. The record showed that the matter was first taken up on 25.02.2020, with various dates of hearing subsequently listed, but the Corporate Debtor did not appear after 11.03.2020. The Adjudicating Authority proceeded ex-parte against the Corporate Debtor on 06.09.2021, directing that a copy of the order be served on the Corporate Debtor. However, there was no document submitted to show that this order was served on the Corporate Debtor. The Tribunal found that the statement of the Ld. Counsel for the Appellant that the Corporate Debtor had appeared intermittently after 11.03.2020 but not filed a reply was not supported by the record. Therefore, the Tribunal concluded that the Adjudicating Authority's decision to proceed ex-parte was not based on facts on record.
Issue 2: Alleged pre-existing dispute between the partiesThe Corporate Debtor claimed that there were flaws and deficiencies in the services provided by the Operational Creditor, which were brought to their notice by ICAR. The Corporate Debtor argued that the Operational Creditor did not install the required hardware of CCTV cameras at many venues and deleted the CCTV footage in haste, leading to the termination of the contract by ICAR. The Corporate Debtor contended that there was a pre-existing dispute regarding the services provided, and mutually agreed payments were made after deductions for deficient services. The Tribunal noted that the allegations of dispute raised by the Corporate Debtor in their reply to the demand notice dated 15.01.2020 could be looked into after getting a proper reply to the Section 9 application from the Corporate Debtor. The Tribunal emphasized that the compliance of the order dated 06.09.2021 to make the Corporate Debtor aware that the case had been proceeded ex-parte against them and an opportunity to make a representation to file a reply was significant in adjudicating the Section 9 application.
Issue 3: Admission of Section 9 application under the Insolvency and Bankruptcy Code, 2016The Operational Creditor argued that the notice of Section 9 application was issued by the order of the Adjudicating Authority on 25.02.2020, and the matter was posted for hearing on 11.03.2020. The Operational Creditor claimed that the Corporate Debtor appeared before the Adjudicating Authority on 11.03.2020, but there was no appearance on behalf of the Corporate Debtor on subsequent dates. The Operational Creditor also contended that the dispute raised by the Corporate Debtor in their reply to the demand notice was a sham and imaginary dispute. The Tribunal referred to the Judgment of the Hon’ble Supreme Court in the matter of Mobilox Innovations Private Ltd vs Kirusa Software Private Ltd, which stated that any dispute which is a sham need not be taken into consideration in examining the Section 9 application. The Tribunal concluded that the Adjudicating Authority had committed an error in proceeding ex-parte against the Corporate Debtor without communicating the order dated 06.09.2021 to them. The Tribunal held that it would serve the ends of justice if the Corporate Debtor was provided an opportunity to submit their reply in the Section 9 application. Therefore, the Tribunal allowed the appeal, set aside the impugned order dated 13.10.2021, and remanded the case to the Adjudicating Authority for giving notice to the Corporate Debtor and affording them an opportunity to submit a reply.
Conclusion:The Tribunal allowed the appeal, set aside the impugned order dated 13.10.2021, and remanded the case to the Adjudicating Authority for giving notice to the Corporate Debtor and affording them an opportunity to submit a reply. The Tribunal did not provide any opinion regarding the pre-existing dispute between the parties and directed that the Corporate Debtor shall be free from the rigors of the Corporate Insolvency Resolution Process and other provisions of IBC.
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