NCLAT upholds rejection of insolvency application citing pre-existing dispute under Mobilox Innovations precedent Section 8 IBC

NCLAT dismissed appeal challenging rejection of CIRP initiation application. Respondent had sent email dated 10.05.2021 regarding breach of contract due to Air India and Jet Airways terminating Amadeus Software under GDS, significantly impacting respondent's airline business revenue. This email was sent prior to appellant's demand notice under Section 8 of IBC. NCLAT held the email constituted pre-existing dispute under Mobilox Innovations precedent, making CIRP application non-maintainable. Adjudicating Authority correctly found pre-existing dispute existed, and appellant failed to establish grounds to challenge this finding.

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Issues Involved:
1. Whether there was a pre-existing dispute between the parties.
2. Whether the Appellant's claim under Section 9 of the Insolvency and Bankruptcy Code, 2016 was valid.

Summary:

1. Pre-existing Dispute:
The Appellant filed an application under Section 9 of the Insolvency and Bankruptcy Code, 2016, which was dismissed by the Adjudicating Authority on the grounds of a pre-existing dispute. The Appellant contested that the E-mail dated 10.05.2019 titled "Intimation of Breach of Contract" sent by the Respondent had no nexus with the GDS Agreement and was sent with the sole intention of avoiding the obligations under the GDS Agreement. The Respondent, however, argued that the Appellant violated the agreement by not providing access to all domestic airlines, specifically Air India and Jet Airways, resulting in a breach of contract and significant business losses. The Tribunal referred to the judgment in Mobilox Innovations Pvt. Ltd. Vs. Kirusa Software Private Limited, which states that if a dispute exists in fact and is not spurious, hypothetical, or illusory, the application under Section 9 must be rejected.

2. Validity of Appellant's Claim:
The Appellant argued that the Respondent's defense was not plausible and that there was no clause in the subscriber agreement obligating the provision of specific airline content. The Respondent countered by highlighting trade circulars from Air India that terminated the use of Amadeus Software for accessing Air India content, which was crucial for their business. The Tribunal noted that the email dated 10.05.2019, sent before the demand notice under Section 8, indicated a pre-existing dispute. The Tribunal found that the Adjudicating Authority correctly identified the pre-existing dispute and dismissed the application under Section 9, as the Insolvency and Bankruptcy Code is not a substitute for a recovery forum.

Conclusion:
The Tribunal affirmed the Adjudicating Authority's decision, finding no error in the Impugned Order and dismissed the appeal, concluding that the pre-existing dispute was valid and the application under Section 9 was rightly rejected.

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