Tribunal upholds dismissal of appeal challenging Section 9 Application under Insolvency and Bankruptcy Code

The Tribunal dismissed the appeal challenging the Impugned Order that rejected the Section 9 Application under the Insolvency and Bankruptcy Code, 2016. It held that a pre-existing dispute existed between the parties regarding withheld payment for project delays, citing 'Mobilox Innovations Pvt. Ltd. Vs. Kirusa Software Pvt. Ltd.' The Tribunal emphasized that commercial solvency of the Respondent was not a determining factor for admitting the petition, following 'Swiss Ribbons Pvt. Ltd. & Anr. Vs. Union of India & Anr.' The appeal was dismissed, and pending applications were closed.

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Issues Involved:
1. Pre-existing dispute between the parties.
2. Commercial solvency of the Respondent Company.

Summary:

Pre-existing Dispute:
The appeal challenges the Impugned Order dated 16/01/2020, which dismissed the Application filed under Section 9 of the Insolvency and Bankruptcy Code, 2016 by the Appellant, an Operational Creditor. The Appellant argued that despite timely supply of goods and raising invoices, 3% of the total invoice value remained unpaid, which was acknowledged by the Respondent in an email dated 26/08/2015. The Appellant issued a Demand Notice under Section 8 of the Code, which was not responded to by the Respondent. The Appellant contended that the Adjudicating Authority erroneously held that there was a pre-existing dispute due to the Respondent's claim of withholding the amount as liquidated damages. The Tribunal, however, noted that the Respondent had consistently communicated through emails that 3% of the payment was withheld pending final sign-off and due to delays in project execution, thereby establishing a pre-existing dispute. The Tribunal referenced the Supreme Court's judgment in 'Mobilox Innovations Pvt. Ltd. Vs. Kirusa Software Pvt. Ltd.' to emphasize that the existence of a genuine dispute necessitates the rejection of the Section 9 Application.

Commercial Solvency:
The Appellant argued that the Adjudicating Authority's finding that the Respondent Company is commercially solvent and hence Section 9 Petition cannot be admitted is perverse. The Respondent countered that the Demand Notice was not delivered to the correct address and that there was a pre-existing dispute regarding liquidated damages. The Tribunal upheld the Adjudicating Authority's decision, stating that the Code is not a substitute for a recovery forum and emphasized the importance of determining default over the company's solvency. The Tribunal cited the Supreme Court judgment in 'Swiss Ribbons Pvt. Ltd. & Anr. Vs. Union of India & Anr.' to highlight that the Code's primary focus is on the revival and continuation of the corporate debtor rather than mere recovery for creditors.

Conclusion:
The Tribunal dismissed the appeal, concluding that there was a pre-existing dispute and the Respondent's commercial solvency was not a relevant factor for admitting the Section 9 Application. All pending interlocutory applications were also closed.

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