2019 (3) TMI 1642 - AT - Insolvency and Bankruptcy

Maintainability of application - initiation of Corporate Insolvency Resolution Process - pre-existing dispute - Section 9 of the I B Code - HELD THAT - The respondent wrongly stated that the defective fabrics were returned by courier which is not the fact. However, such issue cannot be decided by the Adjudicating Authority as the question of return of fabrics is subsequent to that of the pre-existing dispute communicated by WhatsApp message on 4th November, 2017. Such being the position, the Adjudicating Authority having noticed the pre-existing dispute rightly rejected the application under Section 9 of the I B Code. Appeal dismissed.

Summary

Issues:
- Appeal against rejection of application under Section 9 of the Insolvency and Bankruptcy Code, 2016 due to a pre-existing dispute.
- Condonation of delay in preferring the appeal.
- Allegation of fraud by the respondent.

Analysis:
1. The appeal was filed by the Operational Creditors against the order of the Adjudicating Authority rejecting the application under Section 9 of the Insolvency and Bankruptcy Code, 2016. The appeal was filed with a delay of 12 days, which was condoned by the Tribunal after being satisfied with the grounds presented by the Appellants.

2. The Tribunal noted that a demand notice under Section 8(1) was issued on 29th January, 2018, but prior to this, on 4th December, 2017, the respondent had intimated the appellants about defective fabrics via a WhatsApp message. This pre-existing dispute was crucial in the decision-making process of the Adjudicating Authority in rejecting the application under Section 9 of the I&B Code.

3. The Tribunal acknowledged the presence of a pre-existing dispute as the reason for the rejection of the application. The counsel for the appellants alleged fraud on the part of the respondent, claiming that the respondent falsely stated that defective fabrics were returned by courier. However, the Tribunal clarified that the issue of fraud in the return of fabrics was not within its purview, as it was subsequent to the pre-existing dispute communicated via WhatsApp message.

4. The Tribunal emphasized that the Adjudicating Authority rightly rejected the application under Section 9 of the I&B Code due to the pre-existing dispute. The Tribunal did not delve into the question of whether fraud was committed during the return of fabrics, stating that this matter would be decided by the Court of competent jurisdiction. Consequently, the appeal was dismissed, and no costs were awarded in the matter.