2018 (4) TMI 351 - Tri - Insolvency and Bankruptcy

Initiation of Corporate Insolvency Resolution Process - existence of operational debt - Held that - There has been no admission of operational debt by the respondent. In fact, there has been a dispute regarding bills raised and services provided by the applicant. Respondent had raised counter debit notes in 2016. There was existence of dispute much prior to the issuance of notice under Section 8 of the Code. Respondent has raised dispute with sufficient particulars. The amount of claim raised by the applicant clearly falls within the ambit of disputed claim. The claim of dispute suggests the need of elaborate investigation. In the facts it is reiterated that existence of genuine dispute in the present case cannot be ruled out. Section 9(5)(ii)(d) of the Code provides that adjudicating authority shall reject the application if notice of dispute has been received by the operational creditor or there is a record of dispute in the information utility. This petition fails and the same is rejected.

Summary

Issues:
1. Application under Section 9 of the Insolvency and Bankruptcy Code, 2016 for initiation of Corporate Insolvency Resolution Process.
2. Existence of a dispute regarding the operational debt claimed by the applicant.

Analysis:
1. The applicant, a sole proprietorship concern, filed an application under Section 9 of the Insolvency and Bankruptcy Code, 2016, seeking initiation of Corporate Insolvency Resolution Process against the respondent company, an airline corporation. The applicant claimed that the respondent owed a substantial amount for transport services provided from 2012 to 2015, supported by agreements and bills.

2. The respondent contested the claim, alleging discrepancies and malpractices in the billing and services provided by the applicant. An internal audit by the respondent revealed various issues such as inappropriate charges, excess kilometers, and service level agreement non-compliance. The respondent raised counter debit notes and highlighted discrepancies, leading to a significant amount being disputed.

3. The Tribunal noted that the respondent had replied to the Section 8 notice, indicating the existence of a dispute with specific details regarding the alleged falsification of invoices and deficiencies in services dating back to 2015. Correspondences, meeting minutes, and acknowledgments by the applicant further supported the respondent's contention of a genuine dispute.

4. Referring to the definition of "dispute" under the Code, the Tribunal emphasized that the existence of a dispute, even if not pending in a suit or arbitration, would exempt the operational creditor from the Code. Citing the Supreme Court's stance in Mobilox case, the Tribunal highlighted the need to differentiate between genuine disputes and frivolous claims, emphasizing the requirement for further investigation in case of a plausible contention.

5. Ultimately, the Tribunal rejected the application under Section 9, as the respondent had sufficiently demonstrated the existence of a dispute predating the demand notice. The Tribunal clarified that its decision did not reflect an opinion on the merits of the controversy, preserving the applicant's rights to pursue the matter in other forums.