2022 (1) TMI 1384 - AT - Insolvency and Bankruptcy

Application filed u/s 9 of IBC, rejected on the ground of pre-existing dispute - police complaint evidences the dispute between the parties or not - HELD THAT - The Adjudicating Authority has observed the fact that the police complaints were registered by the Appellant and cross-complaints were also registered by the Corporate Debtor is evidence of facts, that dispute has arisen between the parties which was pending investigation by the police. When the allegations against each other are serious allegations including allegations of offence against each other, we are not convinced by the Appellant that police complaint do not evidence any dispute between the parties. It is to be noted that all the aforesaid complaints are much before initiation of proceedings u/s 9 by the Appellant. The Adjudicating Authority has not committed any error in relying of the facts and materials on record to come to the conclusion that there was pre-existing dispute between the parties. The IBC proceedings are not for the purposes of adjudicating such dispute between the parties and are not the recovery proceedings to recover the unpaid amount by the official creditor whose claim is disputed by the Corporate Debtor - appeal dismissed.

Summary

Issues Involved:
- Appeal against rejection of application under section 9 of the Code due to pre-existing dispute.

Analysis:
The Appellant filed an appeal against the rejection of their application under section 9 of the Code by the Adjudicating Authority. The Appellant claimed that they were awarded a fabrication work by the Corporate Debtor, and invoices were issued for the same. The Appellant also filed a criminal complaint against the Corporate Debtor for breach of trust, cheating, and intimidation. The Respondent filed a police complaint as well. The Adjudicating Authority rejected the application for non-payment of operational debt amounting to Rs. 17,83,642, citing a pre-existing dispute between the parties. The Appellant argued that the police complaints cannot be considered as evidence of a pre-existing dispute. The Adjudicating Authority noted that serious allegations were made by both parties against each other, indicating a dispute. The Tribunal agreed with the Adjudicating Authority that there was a pre-existing dispute between the parties, based on the facts and materials on record. The Tribunal emphasized that IBC proceedings are not meant to adjudicate disputes between parties but for recovery purposes. Consequently, the appeal was dismissed, upholding the Adjudicating Authority's decision.

This judgment primarily revolves around the issue of whether a pre-existing dispute existed between the parties, justifying the rejection of the application under section 9 of the Code. The Appellant's contention that the police complaints did not indicate a dispute was rejected by both the Adjudicating Authority and the Tribunal. The seriousness of the allegations made by both parties in the complaints was considered as evidence of the existence of a dispute. The Tribunal clarified that IBC proceedings are not intended to resolve such disputes but for recovery purposes. Therefore, the decision to dismiss the appeal was based on the finding that a pre-existing dispute indeed existed between the parties, justifying the rejection of the application.