2018 (9) TMI 681 - Tri - Insolvency and Bankruptcy

Corporate insolvency process - petition under section 9 of the Insolvency & Bankruptcy Code, 2016 - Corporate Debtor pointed out the pendency of the suit - existence of dispute or pendency of the suit - Held that - We are unable to accept the submissions of the Ld. Counsel for the Operational Creditor that the Corporate Debtor ought to have raised such dispute or filed suit at the earlier point of time, i.e. when the first proceeding of winding up was filed by them in the Hon ble High Court. Hold that it cannot be said that it was necessary for the Corporate Debtor to raise the dispute at earlier point of time only and not later on. The provisions of I&B Code, 2016 under section 8(2)(a) allows him to show the existence of dispute or pendency of the suit within 10 days from the receipt of demand notice from the Operational Creditor. It has been done in this case. Moreover, the Corporate Debtor has elaborately stated what is exact dispute in between them. It is not necessary to go into that details but suffice to mention herein is that the dispute cannot be said to be feeble on facts or unsustainable as based only on the legal arguments. Hence, hold that this petition under section 9 of I&B Code, 2016 is not maintainable. The petition under section 9 of the I&B Code, 2016 filed against the Corporate Debtor stands rejected

Summary

Issues:
1. Maintainability of the petition under section 9 of the Insolvency & Bankruptcy Code, 2016.
2. Existence of dispute and pendency of suit between the Operational Creditor and the Corporate Debtor.

Analysis:
1. The Operational Creditor filed a petition under section 9 of the I&B Code against the Corporate Debtor for non-payment of dues. The Corporate Debtor had earlier faced winding-up petitions which were dismissed due to technical grounds. The Operational Creditor contended that the Corporate Debtor's dispute raised after the notice was an afterthought to avoid the current petition. The Corporate Debtor argued that the suit filed by them prior to the notice made the petition not maintainable. The Tribunal observed that the Corporate Debtor had replied to the demand notice within 10 days, pointing out the pending suit, as required by the I&B Code. The Tribunal held that the Corporate Debtor's response was in line with the provisions, making the petition not maintainable.

2. The key issue revolved around the interpretation of the term "existence of dispute" in section 8(2)(a) of the I&B Code. The Operational Creditor argued that the dispute should have been raised before any previous proceedings, while the Corporate Debtor maintained that the suit filed before the notice made the petition invalid. The Tribunal clarified that the Corporate Debtor's timely response to the demand notice, highlighting the pending suit, fulfilled the requirements of the Code. The Tribunal emphasized that the Code allows the Corporate Debtor to show the existence of a dispute within 10 days of receiving the notice, which was done in this case. The Tribunal concluded that the dispute was not feeble and the petition was not maintainable, ultimately rejecting the petition under section 9 of the I&B Code.

In conclusion, the Tribunal dismissed the petition under section 9 of the I&B Code, stating that the Corporate Debtor's response regarding the pending suit within the stipulated time frame fulfilled the requirements of the Code, making the petition not maintainable. The judgment focused on the interpretation of the term "existence of dispute" and the Corporate Debtor's compliance with the statutory provisions, leading to the rejection of the petition.