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2019 (10) TMI 1476 - Tri - Insolvency and BankruptcyMaintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational creditor - Existence of debt and dispute or not - application rejected on the ground that the dispute has been raised much prior to the Section 8 notice - HELD THAT - In terms of Section 9(5)(ii)(d) of the Code the Adjudicating Authority shall reject the application if notice of dispute has been received by the operational creditor. Section (d) refers to the notice of an existing dispute that has been received, as it has to be read with Section 8(2)(a) of the Code. The moment there is existence of a pre-existing dispute, the operational debtor gets out of the clutches of the rigors of the Code - In the present case admittedly, respondent has relied upon its reply to the demand notice issued under Section 8 (2) of the Code on 18.03.2018 and 20.03.2018 bringing to the notice of the petitioner the existence of dispute in respect of the claimed operational debt. It is no longer Res-lntegra that the definition of dispute is inclusive and not exhaustive. Dispute has been given wide meaning so as to cover all disputes on debt, default etc. and not be limited to only pending suit or a record of a pending arbitration - there is also no dispute that this is not the forum to examine and adjudicate as to what extent the claim of the petitioner is admissible as due and recoverable. Neither the Tribunal in the proceedings under Section 9 will examine the merits of the respective disputes. Moreover, even the adequacy of dispute is not to be seen. It is only to be seen whether the dispute raised by the corporate debtor qualifies as a 'dispute' as defined under sub-section (6) of Section 5 of the Code. Whether there is an existence of a dispute between the parties that would fall within the inclusive definition contained in Section 5(6) of the Code? - HELD THAT - In the facts there appears existence of a genuine dispute between the parties. The respondent has also an offsetting claim. These are matters of trial and enquiry. Tribunal in the present proceeding cannot go into roving enquiry into the disputed claims made by the parties. This is not the forum to examine and adjudicate as to which portion of the claims or counter claims are admissible. At this stage it is immaterial to consider who will succeed. Tribunal will not examine the merits of the dispute other than to see if there is in fact exists a real dispute having some substance - it is seen that not only there is pre-existing dispute but also there is a confusion on the actual amount of default. The various documents/ correspondences placed on record show that dispute was not raised for the first time to evade liability but certainly pre-existed prior to the issuance of notice under Section 8 of the Code. There are allegations of non-conciliation of accounts despite request. It is also pertinent to note that various disputes raised by the respondent in its reply dated 13.08.2019 has not been specifically denied by the applicant. Once there is material to believe that dispute exists, it is right to have the matter tried out before the axe, in the form of corporate insolvency resolution process falls - Existence of an undisputed operational debt is sine qua non for initiating CIRP under Section 9 of the Code. The Code is not intended to be a substitute to a recovery forum. The moment there is existence of a dispute, the corporate debtor gets out of the clutches of the Code. In the factual background of this case 'existence of real dispute' cannot be totally overruled. The respondent has raised dispute with sufficient particulars to qualify as a dispute as defined under sub-section (6) of Section 5 of the Code - application rejected.
Issues Involved:
1. Jurisdiction of the Tribunal. 2. Validity of the application under Section 9 of the Insolvency and Bankruptcy Code, 2016. 3. Existence of operational debt and default. 4. Existence of a pre-existing dispute. 5. Admissibility of the claim and the Tribunal’s authority to adjudicate. Detailed Analysis: 1. Jurisdiction of the Tribunal: The Tribunal's jurisdiction was established based on the registered office of the respondent company, M/S NTPC GE Power Services Private Limited, being situated in New Delhi. Therefore, the National Company Law Tribunal, New Delhi, has territorial jurisdiction over the matter. 2. Validity of the Application under Section 9 of the Insolvency and Bankruptcy Code, 2016: The application was filed by M/S New Engineering Works under Section 9 of the Insolvency and Bankruptcy Code, 2016, seeking initiation of Corporate Insolvency Resolution Process (CIRP) against the respondent company. The application was supported by Rule 6 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016. 3. Existence of Operational Debt and Default: The applicant claimed an operational debt of ?1,33,40,071/- for completed work under the work orders and additional bills amounting to ?1,42,72,787/-. The respondent company acknowledged partial payment but disputed the remaining amount, arguing that the additional work bills were never certified or acknowledged and were raised unilaterally by the applicant. 4. Existence of a Pre-existing Dispute: The respondent company raised a pre-existing dispute regarding the additional work bills and liquidated damages due to delays in project completion. The respondent cited their letters dated 18.03.2019 and 20.03.2019, which were sent in response to the applicant’s demand notice, highlighting the existence of disputes about the additional work and liquidated damages. The Tribunal emphasized that the existence of a pre-existing dispute, as defined under Section 5(6) of the Code, disqualifies the application under Section 9. 5. Admissibility of the Claim and the Tribunal’s Authority to Adjudicate: The Tribunal referred to Section 9(5)(ii)(d) of the Code, which mandates rejection of the application if a notice of dispute has been received by the operational creditor. The Tribunal noted that the respondent’s dispute was genuine and pre-existed the notice under Section 8. The Tribunal cannot adjudicate the merits of the dispute but only determine if a real dispute exists. The Tribunal cited precedents, including the Mobilox Innovations Private Limited case, to support the view that the presence of a plausible dispute necessitates rejection of the application. Conclusion: The Tribunal concluded that there was a genuine pre-existing dispute regarding the operational debt claimed by the applicant. Consequently, the application under Section 9 of the Insolvency and Bankruptcy Code, 2016, was rejected. The Tribunal clarified that its observations should not prejudice the applicant's rights in other forums and directed that a copy of the order be communicated to the parties as per Section 9(5)(ii) of the Code.
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