Travel agent's insolvency petition against company rejected due to pre-existing dispute over Section 9 application

NCLAT Principal Bench dismissed appeal challenging rejection of Section 9 IBC application. Tribunal held appellant travel agent and respondent company had operational creditor-corporate debtor relationship based on credit card ticket issuance arrangements and undertakings for debit notes. However, pre-existing dispute existed as respondent disputed demand notice dated 22.08.2018 through reply on 08.09.2018, with police complaints and criminal case pending. Court found dispute was plausible, not spurious or hypothetical. Since Section 9 requires undisputed debt and pre-existing dispute prevented CIRP initiation, Adjudicating Authority correctly rejected application.

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Issues Involved:

1. Relationship of Corporate Debtor and Operational Creditor.
2. Pre-existing dispute between the parties.

Summary:

Issue 1: Relationship of Corporate Debtor and Operational Creditor

The primary issue was whether the Appellant (M/s Akbar Travels of India Private Limited) and the Respondent (M/s Ritco Travels & Tours Private Limited) had a relationship of Corporate Debtor and Operational Creditor. The Appellant issued "Sold Outside Ticketed Outside" (SOTO) tickets on the request of the Respondent, who provided credit card details for payment. The Respondent undertook full responsibility for any debit notes issued by airlines against these transactions. The Tribunal concluded that the Appellant and Respondent had the relationship of an Operational Creditor and Corporate Debtor, as the Respondent had given unconditional undertakings to pay for any debit notes.

Issue 2: Pre-existing dispute between the parties

The second issue was whether there was a pre-existing dispute that would disallow the initiation of Corporate Insolvency Resolution Process (CIRP) u/s 9 of the Insolvency and Bankruptcy Code, 2016. The Appellant issued a demand notice u/s 8 of the Code, which the Respondent disputed, claiming the transactions were fraudulent and that the Appellant had sent goons to intimidate them. The Tribunal referred to the judgment in Mobilox Innovations Private Limited Vs. Kirussa Software Private Limited, (2018) 1 SCC 353, which outlines the conditions for triggering CIRP. It was established that there was a plausible pre-existing dispute, supported by emails and police complaints. Consequently, the Tribunal concluded that the Section 9 petition could not proceed due to the pre-existing dispute.

Conclusion:

For CIRP u/s 9 of IBC, 2016 to be initiated, the debt must be due, unpaid, and undisputed. The Tribunal found that there was no contract between the parties and a pre-existing dispute existed. Therefore, the Adjudicating Authority rightly rejected the Section 9 Application, and the appeal was dismissed with no order as to costs.

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