Operational creditor's insolvency petition dismissed due to pre-existing disputes over lease agreement and payment obligations under Section 9

NCLAT Principal Bench dismissed appeal challenging rejection of Section 9 petition for CIRP initiation. The operational creditor's petition was dismissed due to pre-existing disputes between parties regarding lease agreement and outstanding dues. Documentary evidence including communications and police complaints established ongoing disputes over leased premises possession and payment obligations. The tribunal held that existence of pre-existing dispute, regardless of merit, disqualifies operational creditor from initiating CIRP under Section 9. Additional grounds for dismissal included failure to meet Rs. 1 crore threshold and discrepancies in claimed amounts.

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Issues Involved:

1. Pre-existing dispute between the parties.
2. Threshold limit of the operational debt.
3. Validity of the invoices and GST compliance.
4. Possession of the leased premises and related obligations.

Issue-wise Detailed Analysis:

1. Pre-existing Dispute Between the Parties:

The core issue addressed by the Appellate Tribunal was whether a pre-existing dispute existed between the parties at the time of filing the Section 9 Petition, which would bar the initiation of the Corporate Insolvency Resolution Process (CIRP) under the Insolvency and Bankruptcy Code, 2016. The Tribunal found that disputes existed long before the Section 8 demand notice was issued on 10.06.2021. The Operational Creditor had acknowledged in a letter dated 27.10.2020 that the Corporate Debtor had offered to vacate the premises, but insisted on a 3-month advance notice as per the lease deed. The Corporate Debtor had also communicated multiple times about vacating the premises, which was substantiated by police complaints and other communications. The Tribunal concluded that these disputes were substantial and pre-existing, rendering the Section 9 Petition non-maintainable under the Code. This aligns with the precedent set in Mobilox Innovations Pvt Ltd vs Kirusa Software Pvt Ltd, where it was held that a pre-existing dispute disqualifies an Operational Creditor from initiating CIRP.

2. Threshold Limit of the Operational Debt:

The Appellant's claim was challenged on the grounds that it did not meet the threshold of Rs. 1 crore as prescribed under Section 4 of the Code. The Tribunal noted that there were discrepancies in the amounts claimed by the Appellant, which, when adjusted for prior payments, advance rent, and security deposits, could potentially fall short of the requisite threshold. The Corporate Debtor argued that the Appellant had fabricated invoices to meet the threshold, and the Tribunal found merit in this argument, further supporting the dismissal of the Petition.

3. Validity of the Invoices and GST Compliance:

The validity of the invoices and GST compliance was another critical issue. The Corporate Debtor provided evidence that the GST numbers of the Operational Creditor were cancelled due to default in return filing, and the invoices submitted were found to be forged. The Tribunal considered the letter from the GST authorities, which confirmed that the GST invoices were non-est in the eyes of law, as no GST had been paid following the cancellation of the GST registration. This lack of GST compliance further weakened the Appellant's case.

4. Possession of the Leased Premises and Related Obligations:

The Tribunal addressed the issue of possession of the leased premises and related obligations. The Corporate Debtor had offered possession of the premises as early as 01.08.2020, but the Appellant continued to claim rent up to 24.08.2021. The Tribunal found that the liability for rent ceased upon the offer of possession, and any subsequent claim for rent was untenable. The actual physical possession was handed over on 24.08.2021, as confirmed by a compromise letter before the police authorities. The Tribunal upheld the Adjudicating Authority's interpretation that the rent claim beyond the offer of possession was flawed.

Conclusion:

The Tribunal concluded that the Appeal lacked merit, as the Appellant failed to demonstrate any error in the Adjudicating Authority's decision to dismiss the Section 9 Petition. The existence of a pre-existing dispute, failure to meet the threshold limit, invalid invoices, and the issue of possession all contributed to the dismissal of the Appeal.

Order:

The Appeal was dismissed, and the Impugned Order of the National Company Law Tribunal, Chandigarh Bench, dated 01.03.2024, was upheld. The Appellant was directed to bear the costs of the Appeal.

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