2017 (3) TMI 1554 - Tri - Insolvency and Bankruptcy

Corporate Insolvency Resolution Process - Insolvency and Bankruptcy Code, 2016 - Held that - As evident from the expression includes which immediately succeeds the word dispute . Moreover, under Section 8 of the Code adequate room has been provided for the NCLT to ascertain the existence of a dispute. A demand notice by an operational creditor to an operational debtor must be sent who has not paid operational dues and has committed default. Section 8(2) further clarifies that the corporate debtor is obliged to bring to the notice of the Operational Creditor within 10 days of the receipt of notice, the existence of a dispute and record of the pendency of the suit or arbitration proceeding filed before the receipt of such notice or invoice in relation to such dispute. The other option is to pay the demanded amount. In the instant case the Petitioner sent a demand notice which was duly received by the company but the reply was also filed which has been delayed by four days where dispute has been raised. As such on a perusal of documents submitted before us by the petitioners, we are unable to fathom any material on record to dislodge the same as already discussed in paragraph supra. Hence we are inclined to reject the above petitions. Hence the remedy of the Petitioners above named lies elsewhere and not under the provisions of the Code. Before parting we make it clear that any observations made in this order shall not be construed as an expression of opinion on the merit of controversy as we have refrained from entertaining the application at the initial stage itself. Therefore, the right of the applicants before any other forum shall not be prejudiced on account of dismissal of instant applications. For the reasons aforestated we reject the applications/petitions filed by the petitioners/operational creditors without any costs.

Summary

Issues:
1. Petition seeking Corporate Insolvency Resolution Process under Section 9 of the Insolvency and Bankruptcy Code, 2016 against a company.
2. Dispute regarding non-payment of outstanding balances by the company to operational creditors.
3. Interpretation of provisions of the Code related to rejection of application in case of a dispute.

Analysis:

Issue 1: Petition for Corporate Insolvency Resolution Process
The petitioners filed petitions seeking to initiate the Corporate Insolvency Resolution Process against the company under Section 9 of the Insolvency and Bankruptcy Code, 2016. The petitions detailed the non-payment of outstanding balances owed by the company to the operational creditors, citing work orders, bills, and notices of demand served.

Issue 2: Dispute over Outstanding Balances
The company, in response, disputed the claims of the operational creditors, alleging defective and poor quality of work as reasons for non-payment. The company denied the liability and sent a reply to the notice of demand. The tribunal noted the lack of documentation certifying the quantum and quality of work done by the petitioners, which is crucial in determining the amount payable. The existence of a dispute was highlighted based on the reply sent by the company, leading to a rejection of the petitions.

Issue 3: Interpretation of Code Provisions
The tribunal referred to Section 9(5)(d) of the Code, which allows for the rejection of the application if a notice of dispute has been received. The definition of "dispute" under Section 5(6) was analyzed, emphasizing that a dispute can be proven through pending suits or arbitration related to the debt amount, quality of goods, or breach of representation. The tribunal found that the company's reply disputing the claim constituted a valid dispute, leading to the rejection of the petitions under the Code.

In conclusion, the tribunal rejected the petitions filed by the operational creditors, stating that the remedy for the petitioners lies elsewhere and not under the provisions of the Code. The rejection was based on the existence of a dispute raised by the company and the lack of sufficient evidence provided by the petitioners to counter the dispute. The tribunal clarified that the dismissal of the applications does not prejudice the right of the applicants to seek remedy through other forums.