2019 (1) TMI 1628 - AT - Insolvency and Bankruptcy

Maintainability of petition - initiation of CIRP - pre-existing dispute or not - Section 9 of the Insolvency and Bankruptcy Code, 2016 - HELD THAT - There is existence of dispute raised prior to the filing of petition under Section 433(e) and Section 434 (1) of the Companies Act, 1956, the application under Section 9 of the I B Code was not maintainable. Appeal dismissed.

Summary

Issues:
1. Jurisdiction of National Company Law Tribunal over a transferred petition from the High Court.
2. Treatment of a petition under the Insolvency and Bankruptcy Code.
3. Dismissal of application under Section 9 of the I&B Code due to a pre-existing dispute.
4. Dispute regarding project completion and quality raised by the Corporate Debtor.
5. Competence of the Adjudicating Authority to decide disputed issues.

Analysis:
The Appellant filed a petition under Sections 433(e), 434(1), and 439 of the Companies Act, 1956 before the High Court of Karnataka, which was later transferred to the National Company Law Tribunal (NCLT) pursuant to the Companies (Transfer of Pending Proceedings) Rules, 2016. The Appellant treated the petition as an application under Section 9 of the Insolvency and Bankruptcy Code, 2016, and issued a Demand Notice under Section 8(1) followed by filing Form-5 as required by the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016. However, the Adjudicating Authority, Bengaluru Bench, dismissed the application citing a pre-existing dispute.

The Appellant contended that the Corporate Debtor had agreed to pay the dues at different times, but the Corporate Debtor claimed the existence of a dispute before the Adjudicating Authority. It was noted from the records that objections regarding project completion and quality were raised by the Corporate Debtor even before the petition was filed under the Companies Act, 1956. The dissatisfaction with the project work was evident as far back as the year 2015, despite the project closure document being signed in 2014.

The Appellant argued that the Corporate Debtor had issued certificates, but disputed issues regarding project completion and quality should be decided by a Civil Court based on evidence, not by the Adjudicating Authority. The Tribunal, after hearing the arguments and reviewing the records, condoned a 10-day delay in preferring the appeal but ultimately held that the application under Section 9 of the I&B Code was not maintainable due to the existence of a dispute raised prior to the filing of the petition under the Companies Act, 1956. Consequently, the appeal was dismissed, and no relief was granted, with no costs awarded.

In conclusion, the Tribunal emphasized that the Adjudicating Authority was not the appropriate forum to decide disputed issues related to project completion and quality, which should be addressed by a Civil Court with competent jurisdiction. The dismissal of the application under the I&B Code was based on the finding of a pre-existing dispute, highlighting the importance of resolving such disputes through the appropriate legal channels.