2022 (12) TMI 316 - AT - Insolvency and Bankruptcy

Appellate Tribunal Upholds Decision on Section 9 Application

Krishna Hi-Tech Infrastructure Pvt. Ltd. Versus Bengal Shelter Housing Development Ltd.

The Appellate Tribunal dismissed the Appeal, upholding the Adjudicating Authority's decision to reject the Section 9 application due to a pre-existing ... Maintainability of petition - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - service of demand notice - HELD THAT:- The contractual dispute between the parties if arise, during the contract provisions are made in all contracts for resolution of such disputes. The dispute between the parties are not supposed to be decided, examined and adjudicated in IBC proceeding. Only question to be looked in Section 9 Application is as to whether the objection raised by the Corporate Debtor opposing claim of the Operational Creditor is not a moonshine defense. We have looked into the emails which were sent by the Corporate Debtor and which are part of the Appeal Paper Book. We are of the view that the issues raised in these emails are not moonshine defense, the issues regarding quality of work were raised much prior to the issuance of Section 8 notice. The Adjudicating Authority did not commit any error in rejecting Section 9 application filed by the Appellant - The Adjudicating Authority had to examine the defence of the Corporate Debtor to find out if there is pre-existing dispute. If the Adjudicating Authority is satisfied on those emails, it is not necessary to refer to explanations given by the Appellant. Appeal dismissed. Issues:1. Condonation of delay in filing the physical copy of the Appeal.2. Condonation of delay in refiling the Appeal.3. Rejection of Section 9 application by the Adjudicating Authority.4. Existence of pre-existing dispute between the parties.5. Consideration of emails as evidence in the case.6. Adjudicating Authority's examination of the defense of the Corporate Debtor.7. Dismissal of the Appeal.Condonation of Delay:The judgment addressed two applications for condonation of delay in filing and refiling the Appeal, granting both based on valid reasons provided by the applicants. The delay was condoned, and the applications were disposed of accordingly.Rejection of Section 9 Application:The Appeal was filed against the Adjudicating Authority's order rejecting the Section 9 application due to a pre-existing dispute between the parties. The Adjudicating Authority highlighted various parameters of dispute, including deficiency in work, slow progress, and defective materials, leading to the rejection of the application.Existence of Pre-existing Dispute:The Adjudicating Authority's decision to dismiss the Section 9 application was based on the finding that a genuine dispute existed between the parties before the demand notice was sent by the Operational Creditor. The defense raised by the Corporate Debtor was considered valid, leading to the rejection of the application.Consideration of Emails:The judgment emphasized the importance of examining email correspondences between the parties to determine the existence of a pre-existing dispute. The emails regarding deficiencies in work and slow progress were crucial in establishing that the issues raised were not new and had been ongoing before the demand notice.Adjudicating Authority's Examination:The Adjudicating Authority's role in evaluating the defense of the Corporate Debtor to ascertain the presence of a pre-existing dispute was highlighted. The Authority's thorough examination of the emails and defense presented by the parties played a significant role in the decision-making process.Dismissal of the Appeal:Ultimately, the Appellate Tribunal dismissed the Appeal, affirming the Adjudicating Authority's decision. The Tribunal concluded that the rejection of the Section 9 application was justified as the issues raised were not considered moonshine defense, and the disputes were contractual in nature, not suitable for resolution under the IBC proceeding. The Appellant was advised to seek alternative remedies as permissible by law.