2019 (10) TMI 1522 - AT - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - Breach of agreement - HELD THAT - If documents have been placed showing that there is a pre-existence of dispute with regard to the alleged claim the Adjudicating Authority without going into the merit of the case had rightly rejected the application under Section 9 on the ground that there is pre-existence of dispute . Appeal dismissed.

Summary

Issues:
- Application under Section 9 of the Insolvency and Bankruptcy Code, 2016 for initiation of Corporate Insolvency Resolution Process against a Corporate Debtor.
- Rejection of the application by the Adjudicating Authority based on the pre-existence of a dispute regarding the alleged claim.

Analysis:
The judgment pertains to an appeal filed against the rejection of an application under Section 9 of the Insolvency and Bankruptcy Code, 2016 for initiating Corporate Insolvency Resolution Process against a specific Corporate Debtor. The Appellant had issued a Demand Notice under Section 8(1) of the I&B Code, to which the Corporate Debtor responded by pointing out the pre-existence of a dispute regarding the alleged claim. The Adjudicating Authority observed email exchanges between the parties, wherein the Corporate Debtor disputed the claim based on the terms and conditions of the Agreement with the Appellant, mentioning that the refund sought had already been paid.

The Appellant contended that there was a breach of agreement and raised concerns about frivolous disputes being raised. It was argued that any breach of agreement between the Corporate Debtor and a third party, not involving the Appellant, should not be a matter for the Adjudicating Authority under Section 9 of the I&B Code. The Adjudicating Authority rejected the application under Section 9 on the grounds of the pre-existence of a dispute, as evidenced by documents showing the same.

In the judgment, it was concluded that if documents establish a pre-existence of a dispute concerning the alleged claim, the Adjudicating Authority was correct in rejecting the application under Section 9 without delving into the merits of the case. The appeal was found to lack merit and was consequently dismissed, with no costs awarded. The decision underscores the significance of resolving disputes, particularly those pre-existing, before invoking insolvency proceedings under the I&B Code, highlighting the need for clarity and specificity in such applications to avoid unnecessary litigation.