2024 (1) TMI 89 - AT - Insolvency and Bankruptcy

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 ... Maintainability of application - initiation of CIRP - existence of pre-existing dispute or not - Respondent stated that there were clear pre-existing disputes with the Appellant and he sent e-mail dated 10.05.2021 much prior to demand notice sent by the Appellant under section 8 of the Code. HELD THAT:- The fact that Air India being one of the largest airlines operating large number of flights on Domestic routes was one of the significant revenue contributor and Air India not allowing players in the airline business using the Amadeus Software under the GDS might have impacted the business of the Respondent. Attention has been drawn by the Respondent that the Appellant never replied to the e-mail of the Respondent dated 10.05.2021 and the Appellant never addressed the issue of termination of its software by Air India and Jet Airways. The e-mail dated 10.05.2021 sent by the Respondent to the Appellant under title of “Intimation of breach of contract” much prior to issue of demand notice under Section 8 of the Code, is nothing but pre-existing disputes and thus the dispute is squarely covered by the judgement of the Apex Court in Mobilox Innovations [2017 (9) TMI 1270 - SUPREME COURT]. The Adjudicating Authority after considering all documents and facts correctly held that there was a pre-existing dispute and the appeal raises no valid grounds to controvert the said finding - there are no error in the Impugned Order under challenge - appeal dismissed. 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.