2017 (3) TMI 1701 - Tri - Companies Law

Corporate insolvency process - invoking the provisions of Section-9 Insolvency and Bankruptcy Code 2016 - Proof of dispute - Held that - Under Section 8 (i) 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 show the 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 applicant sent a demand notice which was duly received by the respondent. A reply has also been duly filed where serious dispute has been raised. As such, on a perusal of documents submitted before us by the applicant, we are unable to fathom any material on record to dislodge the stand of the respondent as already discussed in the preceding paras. Hence, we are inclined to reject the above Petitions. The remedy of the applicant above named lies elsewhere and not under the provisions of the IBC.

Summary

Issues:
1. Application under Section 9 of the Insolvency and Bankruptcy Code, 2016 (IBC) by M/s. Philips India Limited against Goodwill Hospital and Research Centre Limited for outstanding dues.

Analysis:
1. The applicant, M/s. Philips India Limited, filed two applications invoking Section 9 of the IBC against the respondent, claiming outstanding dues amounting to ?11,19,869.00 along with interest. The respondent, Goodwill Hospital and Research Centre Limited, was alleged to be a 'Corporate Debtor' as per the contract for maintenance of health care equipment. The applicant asserted that despite fulfilling its obligations, the respondent failed to make full payment, leading to the claim.

2. The respondent disputed the claim, denying the outstanding debt and alleging unsatisfactory performance by the applicant in maintaining the medical equipment. The respondent highlighted negligence on the part of the applicant in upkeeping the equipment, causing financial loss and inconvenience. The respondent's reply raised substantial dispute regarding the quality of services provided by the applicant, as per the terms of the contract.

3. The Tribunal examined the documents and arguments presented by both parties. It noted the absence of evidence certifying satisfactory completion of work by the applicant as per the contract terms. Additionally, the Tribunal questioned the delay in raising the claim by the applicant post partial payment received in 2014, raising doubts on the timeliness and validity of the claim.

4. The Tribunal referred to Section 9 of the IBC, emphasizing the requirement for the operational creditor to establish the absence of dispute or record of dispute with the operational debtor. In this case, the respondent's reply clearly disputed the claim, highlighting issues with the quality of services provided by the applicant, thus qualifying as a legitimate dispute under the IBC.

5. Ultimately, the Tribunal rejected both applications filed by the applicant operational creditors, citing the lack of substantial evidence to disprove the respondent's disputes. The Tribunal's decision was in line with a previous judgment, emphasizing the importance of resolving disputes before triggering insolvency proceedings under the IBC.

6. The Tribunal clarified that its decision did not reflect an opinion on the merits of the underlying controversy and ensured that the applicants' rights to pursue remedies through other forums were preserved. The parties were directed to bear their own costs, considering the nuances of the IBC and the rejection of the applications.