2018 (7) TMI 2152 - AT - Insolvency and Bankruptcy

Maintainability of application - appeal rejected on the ground that the appellant has claimed the legal expenses under Section 8(1) of the I B Code - HELD THAT - In so far as the claim of the respondent is that there is an agreement where arbitration clause is there, we hold that mere mentioning of arbitration clause cannot be taken into consideration to hold that there was an existence of dispute. Any dispute subsequent to issuance of Demand Notice cannot be taken into consideration to reject an application under Section 9 and therefore, we are of the view that the Adjudicating Authority wrongly rejected the application on the ground that the appellant included legal claim. Case remitted to the Adjudicating Authority to admit the case and pass order of moratorium and appointment of Interim Resolution Professional - appeal allowed by way of remand.

Summary

Issues involved:
- Rejection of application under Section 9 of Insolvency and Bankruptcy Code 2016 due to inclusion of legal expenses.
- Existence of dispute regarding consultancy services rendered by the appellant.
- Consideration of arbitration clause in the agreement.
- Rejection of application based on the existence of dispute post Demand Notice.

Analysis:
The appeal before the National Company Law Appellate Tribunal was filed by M/s Mitcon Consultancy & Engineering Services Limited (Operational Creditor) against the order passed by the Adjudicating Authority rejecting their application under Section 9 of the Insolvency and Bankruptcy Code 2016. The rejection was based on the inclusion of legal expenses claimed by the appellant under Section 8(1) of the I&B Code. The appellant contended that they provided consultancy services to the Corporate Debtor and detailed the amount due in Form 5 without any dispute to the Demand Notice under Section 8(1) of the I&B Code.

The respondent disputed the claim in their reply to the Demand Notice, asserting the existence of a dispute regarding the consultancy services provided by the appellant. However, upon examination, it was revealed that there was no record suggesting that the Respondent had disputed the claim prior to the specified date. The respondent's argument regarding the existence of an arbitration clause in the agreement was deemed insufficient to establish the existence of a dispute. The Tribunal held that any dispute arising after the issuance of the Demand Notice cannot be considered to reject an application under Section 9.

Consequently, the National Company Law Appellate Tribunal set aside the impugned order of the Adjudicating Authority and remitted the case for admission, directing the Adjudicating Authority to pass orders for moratorium and the appointment of an Interim Resolution Professional. The appeal was allowed with the mentioned observations and directions, with no order as to costs.