Dismissed Insolvency Code Section 9 Appeals Reopened Due to Lack of Reasoning and Violation of Natural Justice

The appeals involved applications under Section 9 of the Insolvency and Bankruptcy Code, 2016, dismissed by the National Company Law Tribunal, Mumbai Bench, due to alleged pre-existing disputes highlighted by an email. The Tribunal found the dismissal orders lacking reasoning and violating natural justice principles. Consequently, all appeals were allowed, orders set aside, and matters remanded for fresh consideration with a requirement for a speaking order. Parties were directed to appear before the Adjudicating Authority on 01st December 2022.

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Issues Involved:
1. Dismissal of applications under Section 9 of the Insolvency and Bankruptcy Code, 2016 due to alleged pre-existing disputes.
2. Validity of demand notices served under Section 8 of the Insolvency and Bankruptcy Code, 2016.
3. Interpretation and implications of the email dated 01.03.2017 as evidence of pre-existing disputes.
4. Requirement for a speaking order by the Adjudicating Authority.

Issue-wise Detailed Analysis:

1. Dismissal of Applications under Section 9 of the Insolvency and Bankruptcy Code, 2016 due to Alleged Pre-existing Disputes:
The appeals concern five applications dismissed by the Adjudicating Authority (National Company Law Tribunal, Mumbai Bench) on 13.08.2021. The applications were filed under Section 9 of the Insolvency and Bankruptcy Code, 2016 by the Appellant (Indiabulls Distribution Services Ltd.) against various Respondents (Xrbia Developers). The dismissal was based on the ground of a pre-existing dispute, purportedly highlighted by an email dated 01.03.2017. The Tribunal observed that the relationship between the parties was governed by similar agreements dated 09.03.2016, which stipulated the conditions under which the Appellant would be entitled to brokerage.

2. Validity of Demand Notices Served under Section 8 of the Insolvency and Bankruptcy Code, 2016:
In each case, the Appellant served a demand notice dated 19.02.2019 in compliance with Section 8 of the Code. In the case of Xrbia Eiffel City II, no reply was filed by the Respondent to the demand notice, whereas in other cases, replies were filed after a period of six months. The Appellant argued that the demand notices were valid and the delayed replies (or lack thereof) indicated no pre-existing dispute.

3. Interpretation and Implications of the Email Dated 01.03.2017 as Evidence of Pre-existing Disputes:
The Adjudicating Authority dismissed the applications based on an email dated 01.03.2017, which was claimed to indicate a pre-existing dispute. The email, included as Annexure A-7 in the appeal, contained data regarding customer interactions and outstanding commissions. However, the Tribunal found that the email did not clearly establish any pre-existing dispute. The Respondent's counsel failed to provide a satisfactory explanation of how the email constituted a pre-existing dispute.

4. Requirement for a Speaking Order by the Adjudicating Authority:
The Tribunal noted that the impugned order by the Adjudicating Authority was non-speaking, lacking clear reasoning or specific findings on how the email dated 01.03.2017 indicated a pre-existing dispute. The Tribunal emphasized the necessity for a speaking order, which should detail the rationale behind the decision, ensuring compliance with the principles of natural justice.

Conclusion:
The Tribunal concluded that the impugned orders were in violation of the principles of natural justice due to their non-speaking nature. Consequently, all five appeals were allowed, and the impugned orders were set aside. The matters were remanded back to the Adjudicating Authority for fresh consideration, directing it to provide detailed reasons and pass a speaking order. The applications were restored to their original numbers, and the parties were directed to appear before the Adjudicating Authority on 01st December 2022. The registry was instructed to send a copy of the order to the concerned Adjudicating Authority for compliance.

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