2019 (9) TMI 1721 - AT - Insolvency and Bankruptcy

Rejection of Application under Section 9 of IBC - rejection on the ground that there is a dispute about quantum of debt - HELD THAT - There is no dispute with regard to the aforesaid amount and it remaining outstanding and being more than Rs. 1 Lakh, the Application under Section 9 was fit to be admitted. The impugned order is set aside - case remitted to the Adjudicating Authority to admit the Application under Section 9 after Notice to the Respondent, so that the Respondent may get an opportunity to settle the matter prior to the admission of the Application - appeal allowed.

Summary

Issues involved:
- Application under Section 9 of the Insolvency and Bankruptcy Code, 2016 rejected due to a dispute about quantum of debt.
- Dispute about the quantum of payment and the amount shown in the Demand Notice.
- Existence of a dispute between the parties in respect of breach of warranty and defects clause.
- Lack of evidence showing the existence of a dispute before the issuance of the Demand Notice.
- Interpretation of an email dated 24th February, 2016 regarding the payable amount.
- Admittance of the Application under Section 9 based on the outstanding amount being more than Rs. 1 Lakh.

Analysis:
The Appellant, an Operational Creditor, filed an Application under Section 9 of the Insolvency and Bankruptcy Code, 2016 against the Corporate Debtor for initiation of Corporate Insolvency Resolution Process. However, the Adjudicating Authority rejected the Application citing a dispute about the quantum of debt. The Appellant argued that despite the debt being disputed, since the amount exceeded Rs. 1 Lakh and there was no pre-existing dispute, the Application should have been admitted. On the other hand, the Corporate Debtor claimed a dispute regarding the quantum of payment, stating that the balance amount payable was lower than what was claimed in the Demand Notice under Section 8(1).

The Adjudicating Authority acknowledged the debt payable by the Corporate Debtor and that it was not barred by limitation. However, it noted a dispute between the parties concerning breach of warranty and defects clause, indicating the existence of a dispute. The Authority highlighted the lack of evidence showing a pre-existing dispute before the Demand Notice was issued. The Respondent referred to an email from 24th February, 2016, where the Corporate Debtor acknowledged an amount of Rs. 75,97,141 as payable.

Upon review, the Tribunal found no dispute regarding the outstanding amount, which exceeded Rs. 1 Lakh. Consequently, the Tribunal set aside the Impugned Order and remitted the case to the Adjudicating Authority to admit the Application under Section 9, allowing the Respondent an opportunity to settle the matter before admission. Ultimately, the Appeal was allowed with the mentioned observations, and no costs were awarded.