2019 (9) TMI 1329 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its debt - existence of debt and dispute or not - HELD THAT - There is a dispute in relation to the unpaid operational debt between the parties which is supported by abundant evidence. This dispute existed prior to the serving of demand notice under section 8 and the Operational Creditor had notice of existence of such dispute. This dispute truly exists in fact and is not spurious hypothetical or illusory - this petition as under section 9(5)(2)(d) is rejected the notice of dispute has been received by the Operational Creditor - petition dismissed.

Summary

Issues:
- Corporate Insolvency Resolution Process sought against Corporate Debtor for default in repayment.
- Maintainability of the petition under Section 9 of the Insolvency and Bankruptcy Code.
- Existence of a pre-existing dispute between the parties.

Analysis:

Corporate Insolvency Resolution Process:
The Petitioner, a company undergoing liquidation, sought Corporate Insolvency Resolution Process against the Corporate Debtor for defaulting on repayment amount due for services provided under a Service Order. The Petitioner claimed an outstanding sum of Rs. 61,49,771, supported by various documents. The Corporate Debtor had partially paid the invoice but ceased payments, leading to a Demand Notice and subsequent petition under Section 9 of the Code.

Maintainability of the Petition:
The Corporate Debtor contended that the Petitioner, being under CIRP itself, was ineligible to file under Section 9. Additionally, they argued a pre-existing dispute, citing various correspondences and a Supreme Court judgment. The Tribunal referred to the Mobilox Innovations case, emphasizing the need for operational debt exceeding Rs. 1,00,000, due and payable debt, and the existence of a dispute before the demand notice.

Existence of a Pre-existing Dispute:
Upon review, the Tribunal found that the Corporate Debtor had raised disputes regarding the Petitioner's conduct and the amount claimed, supported by evidence predating the demand notice. The correspondence and documents indicated a genuine dispute, meeting the standards set by the Supreme Court. Consequently, the Tribunal rejected the petition under Section 9(5)(2)(d) due to the notice of dispute received by the Operational Creditor.

In conclusion, the Tribunal dismissed the petition based on the existence of a genuine dispute between the parties, supported by evidence predating the demand notice. The decision aligned with the principles outlined in the Mobilox Innovations case, emphasizing the need for a plausible contention requiring further investigation to reject an application under Section 9.