Appellate Tribunal overturns order, finds sham dispute to avoid payment under Insolvency and Bankruptcy Code. Timely communication crucial.

The Appellate Tribunal set aside the Adjudicating Authority's order in an appeal under Section 9 of the Insolvency and Bankruptcy Code, finding that the dispute raised by the Respondent was a sham to avoid payment. The Tribunal directed the admission of the Operational Creditor's Section 9 application, remanding the case for further action within 15 days. The importance of timely communication and documentation in operational debt disputes was underscored, emphasizing the distinction between genuine disputes and attempts to evade payment obligations.

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Issues:
- Appeal against order passed by Adjudicating Authority under Section 9 of IBC based on pre-existing dispute between parties.

Analysis:
1. The appeal was filed by the Appellant challenging the order passed by the Adjudicating Authority under Section 9 of the Insolvency and Bankruptcy Code, 2016, citing a pre-existing dispute between the Appellant and the Respondent. The Appellant, a B2B travel services provider, claimed that the Respondent, a travel agency, owed a total of Rs. 6,76,897 as operational debt, arising from unpaid invoices and Agency Debit Memos (ADMs) issued by the Appellant.

2. The Appellant contended that the Respondent had made partial payments against the invoices, indicating no dispute regarding the quality of services provided. The Respondent, on the other hand, argued that the Appellant, as the booking agent, was responsible for any violations and had failed to provide copies of the ADMs, leading to payment disputes.

3. The Respondent raised a dispute prior to the demand notice under Section 8, claiming no tie-up with airlines and relying on the Appellant for ticket bookings. The Adjudicating Authority considered the dispute genuine based on an email from the Respondent dated 10.01.2018, stating that payments against ADMs could only be made upon receipt of the same.

4. However, it was revealed that the Appellant had indeed supplied copies of the ADMs to the Respondent before the issuance of the demand notice, as evidenced by emails dated 19.01.2018 and 24.03.2018. The Adjudicating Authority's reliance on the non-supply of ADMs as a basis for a pre-existing dispute was deemed erroneous.

5. The Appellate Tribunal concluded that the dispute raised by the Respondent was more of a sham to avoid payment, as the ADM copies were provided in a timely manner. The impugned order was set aside, and the Section 9 application of the Operational Creditor was directed to be admitted, with the case remanded to the Adjudicating Authority for necessary actions within 15 days of the judgment.

6. No costs were awarded in the case. The detailed analysis highlighted the importance of timely communication and documentation in disputes related to operational debts under the Insolvency and Bankruptcy Code, emphasizing the need for genuine disputes to be distinguished from attempts to evade payment obligations.

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