Petition for Corporate Insolvency Resolution Dismissed | Pre-existing dispute | Legitimate defense

The tribunal dismissed the petition for initiating the Corporate Insolvency Resolution Process against the respondent corporate debtor due to the presence of a pre-existing dispute between the parties before the demand notice was issued. The tribunal found the respondent's defense legitimate and not frivolous, leading to the dismissal of the petition without costs.

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Issues Involved:
1. Quantum of operational debt.
2. Alleged pre-existing dispute.
3. Validity of interest amount claimed.
4. Validity of demand notice.

Detailed Analysis:

1. Quantum of Operational Debt:
The tribunal considered the claim of the applicant regarding the operational debt. The applicant claimed an amount of Rs. 17,13,326/- towards outstanding rentals (including CAM, AHU, Electricity) for the Elante store. The tribunal held that this amount could not be considered as an operational debt as it did not fall within the definition of "Operational Debt" under the Insolvency and Bankruptcy Code, 2016. The tribunal stated that whether this amount is to be reimbursed by the respondent would be a matter of trial between the parties.

2. Alleged Pre-existing Dispute:
The respondent corporate debtor contended that there was a pre-existing dispute between the parties, which was supported by various email correspondences and replies to legal notices. The tribunal examined these documents and found that there was indeed a disagreement between the parties regarding the amount of debt. The tribunal noted that the respondent had raised disputes about the fulfillment of obligations specified in the term sheets, short supply of stocks, and the existence of outstanding debt. The tribunal referred to the Supreme Court's judgment in "Mobilox Innovative Private Limited vs. Kirusa Software Private Limited," which stated that the existence of a real dispute, not spurious or illusory, is sufficient to reject an application under Section 9 of the Code. The tribunal concluded that there was a pre-existing dispute between the parties before the issuance of the demand notice.

3. Validity of Interest Amount Claimed:
The applicant claimed an interest amount of Rs. 79,88,730/- calculated at 18% p.a. from the date of the last payment. The respondent disputed this claim, arguing that the rate of interest was not specified in the invoices or the term sheet. The tribunal did not delve into quantifying the operational debt as the principal amount due was above the minimum threshold of Rs. 1 Crore stipulated in Section 4 of the Code.

4. Validity of Demand Notice:
The respondent challenged the validity of the demand notice dated January 30, 2020, arguing that it was not in terms of the IB Code as no authorization was enclosed authorizing any director on behalf of the Operational Creditor to appoint counsel to send the notice. The respondent also argued that the requirement under Section 9(3)(c) of the IB Code was not met as the applicant did not enclose any email/letter seeking the said certificate from a financial institution. The tribunal did not specifically address these contentions in the final decision.

Conclusion:
The tribunal concluded that there was sufficient evidence of a pre-existing dispute between the parties before the issuance of the demand notice. The tribunal found that the defence raised by the respondent was not spurious, frivolous, or vexatious. Consequently, the tribunal dismissed the petition filed by the applicant for initiating the Corporate Insolvency Resolution Process against the respondent corporate debtor. The petition was dismissed with no order as to costs, and the file was consigned to the record room.

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