2018 (6) TMI 858 - AT - Insolvency and Bankruptcy

Corporate insolvency process - existence of dispute - Held that - We find that in reply to demand notice under section 8(2) of the I&B Code , the Corporate Debtor by letter dated 22nd August, 2017 intimated that in terms of the agreement the amount has been paid. The Corporate Debtor also mentioned the defects and the counter claim. In view of the aforesaid existence of dispute , we are not inclined to interfere with the impugned order passed by the Adjudicating Authority. The appeal is accordingly dismissed.

Summary

Issues:
- Claim of being an 'Operational Creditor' under Section 9 of the Insolvency and Bankruptcy Code, 2016
- Dismissal of the application by the Adjudicating Authority due to the 'existence of dispute'
- Arguments regarding the 'existence of dispute' based on the reply to the demand notice under section 8(2) of the I&B Code
- Decision of the Appellate Tribunal to dismiss the appeal based on the 'existence of dispute'

Analysis:
The Appellant in this case claimed to be an 'Operational Creditor' and filed an application under Section 9 of the Insolvency and Bankruptcy Code, 2016 against the 'Corporate Debtor'. The Adjudicating Authority dismissed the application citing the 'existence of dispute'. The Appellant's counsel argued before the Appellate Tribunal that there was no 'existence of dispute'. However, the Corporate Debtor, in response to the demand notice under section 8(2) of the I&B Code, provided details of the alleged breach of trust and counterclaims. The Corporate Debtor mentioned delays in training, financial losses, and reputation damage due to the Appellant's actions. The Corporate Debtor also claimed to have overpaid the Appellant and demanded a refund.

The Appellate Tribunal noted the detailed response from the Corporate Debtor, highlighting the 'existence of dispute'. The Tribunal found that the issues raised by the Corporate Debtor indicated a clear disagreement and dispute between the parties regarding the payments and services rendered. Due to the 'existence of dispute', the Appellate Tribunal declined to interfere with the decision of the Adjudicating Authority and dismissed the appeal. The Tribunal also ruled that no costs were to be awarded in this matter. The judgment underscores the importance of considering the 'existence of dispute' in insolvency proceedings under the I&B Code and the significance of providing detailed responses to demand notices to establish such disputes.