Operational Creditor's Application Dismissed for Genuine Disputes

The Tribunal dismissed the application under Section 9 of the Insolvency and Bankruptcy Code, 2016, due to the existence of genuine disputes between the parties. The operational creditor failed to substantiate their claims adequately, and the Tribunal emphasized the importance of rejecting applications in the presence of genuine disputes, following the precedent set in "Mobilox Innovative Private Limited vs. Kirusa Software Private Limited." The application was dismissed without costs.

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Issues Involved:
1. Application under Section 9 of Insolvency and Bankruptcy Code, 2016.
2. Alleged default and non-performance by the corporate debtor.
3. Existence of genuine disputes between the parties.
4. Compliance with procedural requirements under the IB Code, 2016.
5. Jurisdiction and limitation period.

Detailed Analysis:

1. Application under Section 9 of Insolvency and Bankruptcy Code, 2016:
The application was filed by the operational creditor, a limited company, under Section 9 of the Insolvency and Bankruptcy Code, 2016 (IBC, 2016), read with Rule 6 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016. The operational creditor sought the initiation of the Corporate Insolvency process against the corporate debtor, a private limited company.

2. Alleged Default and Non-Performance by the Corporate Debtor:
The operational creditor placed an order on 26.05.2018 for the supply and installation of a Waste Water Recycle System. The corporate debtor was required to complete the installation by 17.09.2018. The operational creditor claimed that the corporate debtor supplied and installed an under-capacity plant that did not meet the desired parameters. Despite several communications, the corporate debtor failed to rectify the defects, leading to a demand notice issued on 04.12.2020.

3. Existence of Genuine Disputes Between the Parties:
The corporate debtor contended that there were genuine disputes, including the operational creditor's failure to achieve the parameters of COD and internal issues that prevented the corporate debtor’s engineers from operating the plant. The corporate debtor also highlighted that the operational creditor was in default of a payment of Rs. 9,05,650/-. The Tribunal found that there were genuine disputes substantiated by email communications and correspondences prior to the demand notice, referencing the Supreme Court judgment in "Mobilox Innovative Private Limited vs. Kirusa Software Private Limited," which mandates the rejection of an application if a genuine dispute exists.

4. Compliance with Procedural Requirements Under the IB Code, 2016:
The operational creditor complied with Section 9(3)(b) and (c) of the IB Code, 2016, by filing the necessary affidavit and bank letter evidencing non-payment of the operational debt. However, the Tribunal emphasized that the existence of a genuine dispute overrides procedural compliance.

5. Jurisdiction and Limitation Period:
The Tribunal confirmed its jurisdiction as the registered office of the corporate debtor is situated in Vadodara, Gujarat. The application was filed within the limitation period, as the date of default was 10.09.2018, and the application was filed on 11.01.2021.

Conclusion:
The Tribunal dismissed the application on the grounds of the existence of genuine disputes between the parties, as evidenced by prior communications and the inability of the operational creditor to substantiate their claims adequately. The Tribunal reiterated the principle from the Supreme Court judgment in "Mobilox Innovative Private Limited vs. Kirusa Software Private Limited" that an application must be rejected if a genuine dispute exists. The application was dismissed without costs.

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