2025 (9) TMI 1545 - AT - IBC

Appeal allowed; matter remanded for fresh consideration of Section 9 claim with all affidavits and correspondence re-examined

Dr. Ghanshyam Bhambhani Suspended Managing Director of Cardiac Care and Allied Health Pvt. Ltd. Versus Ace Cardiopathy Solutions Pvt. Ltd. & Anr.

NCLAT (PB) allowed the appeal, set aside the impugned order and remanded the matter to the Tribunal for fresh consideration. The Tribunal erred in ... Admission of section 9 application - resolution of debt against the Corporate Debtor - existence of pre-existing dispute between the parties - requirement to consider additional affidavit for determining the genuineness of the pre-existing dispute or it should be ignored as a moonshine defence - HELD THAT:- For the purpose of contesting the application under Section 9, the defence available to the CD are that there is pre-existing dispute and that payment has already been made but it cannot be taken for the first time in reply to the demand notice and has to be there before demand notice is served by the OC and reply to the demand notice is filed. The Tribunal has recorded in its order that the only letter which has been relied upon by the Appellant is dated 24.09.2024 and it has been held that the said letter only talks of negotiations qua the amount to be paid by the CD to the OC, therefore, the Tribunal held in para 18 and 21 of the impugned order that except for 24.09.2024 there is no other communication / evidence on record for the purpose of determining as to whether the dispute raised by the Appellant was genuine or not. Once the letter dated 28.08.2022 has been brought on record by way of an additional affidavit and the copy of the affidavit was given to the OC which is not denied, Respondent should have come forward to contest the said affidavit and the letter dated 28.08.2022 and the Tribunal should have taken into consideration the said letter dated 28.08.2022 to determine as to whether because of the letter dated 28.08.2022 there was any pre-existing dispute between the parties for denying the admission of the application filed under Section 9 of the Code, therefore, there is an error in the impugned order of not considering not only the letter dated 28.08.2022 but also the letters dated 18.08.2022, 09.09.2022 and 09.12.2022 which are the basis for the letter written by the CD on 28.08.2022 in which the CD had raised the issue regarding the goods supplied to the hospital by the OC and which was pointed out repeatedly by Government vide their letter dated 18.08.2022, 09.09.2022 and 09.12.2022. The ends of justice would meet if the impugned order is set aside and the matter is remanded back to the Tribunal to have a relook into the entire matter after considering all the documents on record and by-passing a speaking order. The impugned order is set aside - appeal allowed. ISSUES PRESENTED AND CONSIDERED 1. Whether the adjudicating authority erred in admitting an application under Section 9 of the Insolvency and Bankruptcy Code, 2016 despite the corporate debtor raising a pre-existing dispute. 2. Whether documents brought on record by an additional affidavit (specifically a contemporaneous letter dated 28.08.2022 and earlier government correspondence) ought to have been considered by the Tribunal in determining the genuineness of the pre-existing dispute or rightly ignored as a moonshine defence. 3. Whether the respondent operational creditor was obliged to file a counter to the additional affidavit and related documents and the consequences of its failure to do so for the admission decision. 4. Whether the remedy of remand to the adjudicating authority is appropriate where relevant documentary material was on record but not considered. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Admissibility under Section 9 where a pre-existing dispute is raised Legal framework: Admission of an application under Section 9 of the Code requires that there be an undisputed operational debt; a pre-existing dispute, if genuine and existing prior to the demand notice, negates maintainability. A defence that a dispute existed must ordinarily be shown to have existed before the issuance of the demand notice and must be raised in the reply to the demand notice. Precedent Treatment: The judgment does not cite or apply any specific prior decisions; the Court proceeded on established statutory principles relating to Section 9 and pre-existing disputes. Interpretation and reasoning: The Tribunal admitted the Section 9 application on the ground that the only earlier communication relied upon by the corporate debtor in the adjudicating authority was a letter dated 24.09.2022, which the Tribunal interpreted as relating to payment modalities (negotiations) rather than any substantive defect in supplied goods. The Court examined whether other contemporaneous documents (including the letter dated 28.08.2022 and government correspondence of 18.08.2022, 09.09.2022 and 09.12.2022) were on record and relevant to show a genuine pre-existing dispute. The Court found that once the letter dated 28.08.2022 was brought on record by an additional affidavit and served on the operational creditor, the Tribunal ought to have considered it in determining whether the defence of pre-existing dispute was genuine or a moon-shine defence. Ratio vs. Obiter: Ratio - A pre-existing dispute genuinely raised by contemporaneous documents on record must be considered by the adjudicating authority before admitting a Section 9 petition; failure to consider such documents renders the admission order susceptible to interference. Obiter - Observations that the corporate debtor cannot take the plea of payment for the first time in reply to the demand notice, which reflects established principle but is not the main ground of decision here. Conclusions: The admission under Section 9 cannot stand where relevant contemporaneous documents raising a dispute were on record but not considered by the Tribunal. The matter must be re-examined with those documents in view. Issue 2 - Treatment of additional affidavit and contemporaneous correspondence (28.08.2022 and related letters) Legal framework: The adjudicating authority must consider all material/evidence on record that bears upon the existence of a pre-existing dispute; procedural fairness requires that affidavits and annexures placed on record be noticed and decided upon. Precedent Treatment: No specific cases were relied upon; the Court applied principles of record-consideration and fair adjudication inherent in IBC adjudicatory practice. Interpretation and reasoning: The Court found that the corporate debtor filed an additional affidavit (dated 21.03.2024) which placed the letter dated 28.08.2022 on record (Annexure R11). The operational creditor was given a copy and did not contest that affidavit; the Tribunal's order did not reflect consideration of that affidavit or the 28.08.2022 letter. The Court reasoned that the 28.08.2022 letter, read with the government letters of 18.08.2022, 09.09.2022 and 09.12.2022, formed the factual matrix showing repeated complaints about supplied goods and therefore could be determinative of whether a pre-existing dispute existed. The Tribunal's reliance solely on the 24.09.2022 communication and characterization of other material as absent was thus an error of omission. Ratio vs. Obiter: Ratio - When an affidavit containing relevant documents is filed and served, the adjudicating authority must take it into account; failure to do so vitiates the admission order. Obiter - Contentions about whether the affidavit was reflected in tribunal orders or written submissions were treated as matters of record proof and contestability but did not override the obligation to consider filed material. Conclusions: The Tribunal should have considered the additional affidavit and the 28.08.2022 letter together with earlier government correspondence in determining the genuineness of the pre-existing dispute; its failure to do so justified remand. Issue 3 - Obligation of operational creditor to file a counter to additional affidavit and consequences of non-reply Legal framework: Procedural fairness under the Code contemplates that parties be given opportunity to contest affidavits and annexures; where material is placed on record and served, the opposite party may file a counter-affidavit to dispute authenticity, relevance or substance. Precedent Treatment: Not cited; the Court treated the matter as one of procedural propriety rather than novel law. Interpretation and reasoning: The Court observed that the operational creditor did not file a counter-affidavit to the additional affidavit that introduced Annexure R11 (28.08.2022), despite receipt of a copy. Given this absence of contest, the Tribunal ought to have considered the document on its face value in adjudicating admissibility. The Court also addressed the operational creditor's contention that the additional affidavit was not taken on record or referred to in written submissions, by noting that the appellant had referred to the affidavit in the grounds of appeal and the respondent had not denied its filing. Ratio vs. Obiter: Ratio - Failure to contest an affidavit containing material documents after service disentitles the contesting party from subsequently relying on the absence of that material to sustain admission; the adjudicating authority must consider the material unless formally struck from record. Obiter - The Court's comments on 'afterthought' arguments by a party do not form the core holding but inform credibility and procedural propriety. Conclusions: Non filing of a counter to the additional affidavit meant the Tribunal should have considered the affidavit and annexures; the omission contributed to setting aside the impugned order. Issue 4 - Appropriateness of remand where relevant material was not considered Legal framework: Appellate tribunal powers include setting aside and remanding orders where judicial or procedural error has occurred and a fresh, fair consideration is necessary; remand is appropriate when factual assessment has not been undertaken on all relevant material. Precedent Treatment: None specifically cited; applied general appellate principles. Interpretation and reasoning: Having found that material documents raising a pre-existing dispute were on record and not considered, the Court determined that remand to the Tribunal for fresh consideration, with direction to permit the respondent to file a counter-affidavit, best serves the ends of justice. The Court explicitly refrained from expressing any opinion on the merits, leaving all substantive issues open for the Tribunal to decide after hearing both parties and considering all documents. Ratio vs. Obiter: Ratio - Where an adjudicatory body admits a Section 9 petition without considering material documents on record relevant to a pre-existing dispute, appellate interference by setting aside and remanding for fresh consideration is warranted. Obiter - The Court's timeline direction (preferably within three months) and return of deposited amount are consequential directions rather than core legal holdings. Conclusions: Remand ordered for re-examination of admissibility and merits by the Tribunal after considering all documents and allowing the respondent opportunity to file counter-affidavit; deposit to be returned and costs borne by parties.