2018 (4) TMI 275 - Tri - Insolvency and Bankruptcy

Corporate Insolvency Resolution Process under Insolvency & Bankruptcy Code - Corporate Debtor having defaulted payment - whether pendency of appeal falls within the ambit of definition of existence of dispute, which has already been held that pendency of the appeal amounts to existence of dispute? - Held that - On reading and rereading of section 9, it is understood that if any of the compliance not done as envisaged under section 9(5)(ii), it shall invariably be rejected without going any further, but as to admission of the case, the petitioner has filed an affidavit stating that it has not received notice of dispute within 10 days from the date of receipt of section 8 notice. It is also not held so far if reply has not been given intimating preexistence of dispute, the corporate debtor is deprived of placing the material reflecting preexistence of dispute. The only difference is, if reply to section 8 notice is not given, burden lies upon the corporate debtor to prove existence of dispute. Here the corporate debtor as well as the petitioner are in ad idem in respect to pendency of appeal u/s 37 of the Arbitration and Conciliation Act, 1996 This Company Petition is dismissed by holding that the dispute has already been in pre-existence in between the Petitioner and Corporate Debtor even before section 8 notice was issued by the Petitioner

Summary

Issues Involved:
1. Whether the pendency of an appeal under Section 37 of the Arbitration and Conciliation Act, 1996 amounts to the "existence of a dispute" under Sections 5(6) and 8 of the Insolvency & Bankruptcy Code (IBC).
2. Whether the claim is barred by limitation.
3. The effect of the Corporate Debtor not replying to the Section 8 notice.

Detailed Analysis:

1. Existence of Dispute:
The primary issue was whether the pendency of an appeal under Section 37 of the Arbitration and Conciliation Act, 1996, amounts to the "existence of a dispute" under Sections 5(6) and 8 of the IBC.

The Tribunal examined the hierarchy of adjudicating authorities under the Arbitration and Conciliation Act, 1996. It noted that an arbitral award is deemed final under Section 35 unless stayed by the court. The Tribunal referred to the NCLAT decision in Annapurna Infrastructure (P.) Ltd. v. SORIL Infra Resources Ltd., which held that the pendency of an arbitration proceeding is considered an "existence of dispute," but not the pendency of an application under Section 34 or Section 37 of the Arbitration Act.

The Tribunal also referenced the Supreme Court decision in Mobilox Innovations Pvt. Ltd. v. Kirusa Software Pvt. Ltd., which clarified that a plausible dispute existing before the issuance of a Section 8 notice must be considered as an "existence of dispute." Thus, the Tribunal held that the pendency of an appeal under Section 37 constitutes an "existence of dispute" under the IBC.

2. Limitation:
The Corporate Debtor argued that the claim was barred by limitation. The Tribunal noted that the existence of a dispute was already established and therefore did not delve deeply into the limitation aspect. However, it acknowledged that the Limitation Act is applicable to proceedings under the IBC, as established in previous judgments.

3. Effect of Non-reply to Section 8 Notice:
The Petitioner contended that the Corporate Debtor did not reply to the Section 8 notice, which should favor the initiation of the Corporate Insolvency Resolution Process (CIRP). The Tribunal clarified that non-reply to a Section 8 notice does not automatically lead to the admission of a petition under Section 9. Instead, it shifts the burden to the Corporate Debtor to prove the existence of a dispute.

The Tribunal emphasized that if a dispute is in existence before the issuance of the Section 8 notice, the petition under Section 9 should be dismissed. It was noted that both parties agreed on the pendency of an appeal under Section 37, establishing the existence of a dispute.

Conclusion:
The Tribunal dismissed the Company Petition, holding that the pendency of an appeal under Section 37 of the Arbitration and Conciliation Act, 1996, constitutes an "existence of dispute" under Sections 5(6) and 8 of the IBC. Consequently, the petition was dismissed without costs.