2018 (8) TMI 1829 - Tri - Insolvency and Bankruptcy

Admissibility of petition for CIRP - Existence of Dispute or not - HELD THAT - The debtor had replied to the statutory notice issued by the operational creditor within the stipulated time. The claim was strongly contested. As is evident from the e-mail dated October 12 2015 complaining the non-completion of work and due to non-completion appointment of another contractor. The debt claimed in this petition/application has an essence of a dispute ; therefore this petition/application cannot be admitted for the CIRP and deserves rejection - petition dismissed.

Summary

Issues:
Admission of winding up petition under section 433(e) of the Companies Act, 1956 prior to enactment of the Insolvency and Bankruptcy Code, 2016; Transfer of petition to National Company Law Tribunal post-enactment of the Code; Invocation of provisions of section 9 of the Insolvency and Bankruptcy Code for insolvency proceedings; Dispute regarding operational debt amounting to &8377; 13,45,603; Claim by operational creditor against debtor for outstanding bills and work orders; Submission of Form 5 under the Insolvency and Bankruptcy Code; Response to statutory notice under section 433(e) of the Companies Act by the debtor; Allegations of poor quality of work by the debtor; Lack of evidence supporting outstanding amount towards sub-contractors; Interpretation of dispute under section 9(5)(ii)(d) of the Insolvency and Bankruptcy Code.

Analysis:
The judgment pertains to the admission of a winding up petition initially filed under section 433(e) of the Companies Act, 1956, which was later transferred to the National Company Law Tribunal post the enactment of the Insolvency and Bankruptcy Code, 2016. The operational creditor invoked the provisions of section 9 of the Code by submitting Form 5 under the Rules. The operational debt in question amounted to &8377; 13,45,603, including outstanding bills and work orders against the debtor, leading to insolvency proceedings.

The operational creditor contended that services were rendered, invoices raised, and payments neglected by the debtor, resulting in a statutory notice being issued. The debtor disputed the liability, citing poor quality of work and losses incurred due to substandard services. The debtor raised concerns about the quality of work in various correspondences, questioning the claimed amount payable to sub-contractors.

The tribunal analyzed the submissions and evidence, noting the debtor's prior disputes regarding work quality and lack of evidence supporting the outstanding amount towards sub-contractors. Referring to the Supreme Court decision in Mobilox Innovations P. Ltd. v. Kirusa Software P. Ltd., the tribunal emphasized the need for a genuine dispute to reject an application under section 9(5)(ii)(d) of the Code. The tribunal concluded that a real dispute existed, rendering the petition unfit for insolvency proceedings, and dismissed the application without costs.

In light of the detailed analysis and the pre-existing dispute between the parties, the tribunal highlighted the limited scope of admission under the Insolvency Code, allowing the operational creditor to seek alternative legal remedies if available. The judgment emphasized the importance of separating genuine disputes from spurious defenses and highlighted the necessity for further investigation into plausible contentions before admitting claims under the Code.