2024 (12) TMI 1723 - AT - IBC

Pre-existing dispute under insolvency law requires credible prior record; liability acknowledgements sustained admission of the Section 9 claim.

Operational debt and default were found to be established where communications, including WhatsApp messages, contained clear acknowledgements of liability ... Corporate Insolvency Resolution Process - Operational Creditor - Pre-existing dispute - Acknowledgment of debt through electronic communications - admission of the application under Section 9. Pre-existing dispute - HELD THAT:- The Appellate Tribunal held that the Adjudicating Authority proceeded on a perverse appreciation of the record in treating the matter as one involving a pre-existing dispute. The WhatsApp communications relied on by the appellant contained repeated assurances by the corporate debtor to clear the dues and, therefore, amounted to acknowledgment of liability and default arising from the business transactions. The plea regarding inferior quality and absence of Material Test Certificates was not accepted as a genuine pre-existing dispute, since no objection had been raised when the goods were supplied and used, and the material had been utilised without prior challenge. The reliance placed on Mobilox Innovations Private Limited Versus Kirusa Software Private Limited [2017 (9) TMI 1270 - SUPREME COURT] was held inapplicable because the facts of the present case did not disclose a plausible dispute existing before receipt of the demand notice; on the contrary, the subsequent communications admitted the amount claimed. The Tribunal further found that the Adjudicating Authority had failed to properly consider the effect of the legal notice, the reply, and the electronic communications in their true perspective. [Paras 10, 11, 12, 13, 14] The finding of pre-existing dispute was set aside, the Section 9 application was allowed, and the Adjudicating Authority was directed to appoint the Interim Resolution Professional and proceed with CIRP in accordance with law. Final Conclusion: The Appellate Tribunal held that the impugned order rejecting the Section 9 application was contrary to the evidence on record. Since the liability stood acknowledged in the parties' communications and no real pre-existing dispute was established, the application was allowed and CIRP was directed to proceed. Issues: Whether the Operational Creditor established default and absence of a pre-existing dispute so as to warrant admission of the application under Section 9 of the Insolvency and Bankruptcy Code, 2016.Analysis: The Tribunal found that the WhatsApp and other communications exchanged between the parties contained clear acknowledgements of liability and repeated assurances to pay, including after the demand notice. The alleged dispute regarding quality of goods and Material Test Certificates was not treated as a substantiated pre-existing dispute, since no timely objection had been raised before the goods were utilised and the record did not show a credible dispute existing before the demand notice. On that basis, the rejection of the Section 9 application was held to be contrary to the material on record.Conclusion: The existence of an operational debt and default was established, the defence of pre-existing dispute failed, and the application under Section 9 was held maintainable and allowed.Final Conclusion: The impugned order was set aside and the matter was directed to proceed in accordance with the insolvency resolution framework, including appointment of an Interim Resolution Professional.Ratio Decidendi: An application under Section 9 of the Insolvency and Bankruptcy Code, 2016 cannot be rejected on the basis of an alleged dispute unless a real and pre-existing dispute, supported by credible material and arising before the demand notice, is shown on record; admissions of liability and subsequent assurances to pay may establish default.