Operational creditor's Section 9 application rejected due to pre-existing disputes requiring detailed investigation beyond summary jurisdiction

The NCLAT Principal Bench dismissed an operational creditor's appeal challenging rejection of a Section 9 application for initiating CIRP. The operational creditor issued a demand notice, but the corporate debtor raised disputes regarding validity of claims and contractual breaches including improper issuance of proforma invoices instead of debit notes. The NCLAT held that pre-existing disputes existed between parties regarding the operational debt, which required detailed investigation beyond the summary jurisdiction of the adjudicating authority. Since disputed amounts cannot form basis for Section 9 proceedings under IBC, the original rejection was upheld and appeal dismissed.

---

---

Issues Involved:
1. Existence of pre-existing dispute regarding operational debt.
2. Obligation to pay fees under the Mandate Letter.
3. Validity of Demand Notice u/s 8 of IBC.
4. Calculation of fees payable.
5. Role of the Appellant in securing the loan facility.

Summary:

1. Existence of Pre-existing Dispute Regarding Operational Debt:
The core issue for consideration was whether there was a pre-existing dispute between the parties regarding the operational debt. The Adjudicating Authority found that disputes existed concerning the calculation of fees, the entity responsible for payment, and the role of the Appellant in securing the loan facility. The Tribunal upheld this finding, noting that the disputes required further investigation and could not be resolved in a summary jurisdiction u/s 9 of IBC.

2. Obligation to Pay Fees Under the Mandate Letter:
The Appellant argued that the Corporate Debtor was obligated to pay fees as per the Mandate Letter dated 14.07.2021 for advisory services rendered. The Adjudicating Authority concluded that the obligation to pay the fees was on the SPV and not on the Corporate Debtor, as the loan was sanctioned to VNMP10PL. This was upheld by the Tribunal, which found ambiguity in the terms of the Mandate Letter regarding the entity responsible for payment.

3. Validity of Demand Notice u/s 8 of IBC:
The Respondent contended that the Demand Notice was defective as it did not mention the date of default and was not served at the correct address. The Tribunal found that the Demand Notice was effectively served, and the Operational Creditor was entitled to file an application u/s 9 of IBC. However, the existence of pre-existing disputes negated the admission of the Section 9 application.

4. Calculation of Fees Payable:
There was a dispute over the calculation of fees, with the Appellant claiming 1.5% of the sanctioned amount, while the Corporate Debtor argued it was 1.5% of the processing fee. The Tribunal found that the Adjudicating Authority did not err in holding this as a ground of dispute, noting that the fee percentage claimed by the Appellant was significantly higher than industry standards.

5. Role of the Appellant in Securing the Loan Facility:
The Appellant claimed to have played a crucial role in securing the loan facility for Package X Project. The Respondent countered that IDBI Capital was engaged for this purpose and had been paid for its services. The Tribunal found that there was a dispute regarding the Appellant's role in securing the loan, which contributed to the pre-existing dispute.

Conclusion:
The Tribunal concluded that the Adjudicating Authority correctly rejected the Section 9 application on the grounds of pre-existing disputes. The appeal was dismissed, and the Appellant was advised to seek other remedies available under the law.

---