2019 (5) TMI 602 - AT - Insolvency and Bankruptcy

Arbitral Award - interest on delayed payments - Section 9 of Insolvency and Bankruptcy Code, 2016 - pre-existing dispute with regard to quantum of liability - HELD THAT - As per Section 9 of the IBC, the only requirement for Adjudicating Authority is to see in such application under Section 9, if there is record of dispute. In the present matter, when the Notice under Section 8 was sent by the Appellant, the Respondent sent Reply (Copy at Annexure - A-6) referring to the litigation between the parties. It is a simple matter where there is an Award and Sections 34 and 37 proceedings under the Arbitration Act have been disposed of. The litigation clearly shows serious disputes pending between the parties with regard to the calculations of dues. Admittedly, the amount of Award has been paid but the dispute appears to be continuing with regard to the interest - In the facts of the present matter, considering the developments of the litigation as pointed out by the learned Counsel for the Respondent, we find that there is pre-existing dispute with regard to calculation of dues and we do not find any fault with the Orders passed by the Adjudicating Authority rejecting the application. Appeal dismissed - decided against appellant.

Issues Involved:
1. Pre-existing dispute regarding the quantum of liability.
2. Claims related to interest on delayed payments.
3. Execution of the Arbitral Award.
4. Litigation history and its impact on the current proceedings.
5. Applicability of Section 9 of the Insolvency and Bankruptcy Code, 2016 (IBC).

Detailed Analysis:

1. Pre-existing Dispute Regarding the Quantum of Liability:
The Appellant, an Operational Creditor, filed a petition under Section 9 of the IBC against the Respondent, a Corporate Debtor. The petition was rejected by the Adjudicating Authority (National Company Law Tribunal, Hyderabad Bench) on 16.07.2018, concluding that there was a pre-existing dispute regarding the quantum of liability. The Respondent contended that there were ongoing disputes about the amount of interest payable and its calculation, which were acknowledged by various judicial orders.

2. Claims Related to Interest on Delayed Payments:
The Appellant supplied goods to the Respondent and claimed interest on delayed payments under the "Interest on Delayed Payments to Small Scale and Ancillary Industrial Undertakings Act, 1993". The Appellant initially filed a claim with the Arbitral Tribunal for ?40,25,648/- up to 30.06.2001, later updated to ?1,36,00,184/- up to 31.01.2008. The Arbitral Tribunal allowed the claim for invoices 26 to 45 with monthly compounding interest as per the Interest Act. The Respondent filed objections under Section 34 of the Arbitration and Conciliation Act, 1996, which were dismissed, and subsequent appeals were also dismissed, including by the Hon'ble Supreme Court.

3. Execution of the Arbitral Award:
The Respondent argued that the Appellant's claims for invoices 1 to 25 were time-barred, and only claims for invoices 26 to 45 were allowed, amounting to ?22,42,619/-. The Respondent deposited 75% of the Award amount as per Section 19 of the "Micro, Small and Medium Enterprises Development Act, 2006". Various execution petitions were filed by the Appellant, and the Respondent challenged these, leading to multiple judicial proceedings. The Execution Petition CEP 41/2017 was dismissed, and subsequent petitions were also closed by the courts.

4. Litigation History and Its Impact on the Current Proceedings:
The Respondent highlighted extensive litigation history, including objections, appeals, and execution petitions, which indicated ongoing disputes. The Hon'ble Supreme Court's order on 06.06.2018 allowed the Respondent to raise objections under Section 47 of the Civil Procedure Code regarding the adjustment and calculation of dues. The Respondent claimed that all awarded amounts had been paid, and no further dues were pending.

5. Applicability of Section 9 of the Insolvency and Bankruptcy Code, 2016 (IBC):
The Appellate Tribunal emphasized that under Section 9 of the IBC, the Adjudicating Authority must verify if there is a record of dispute. The Tribunal noted that the Respondent's reply to the Section 8 notice referred to ongoing litigation, indicating serious disputes about the calculation of dues. The Tribunal concluded that the existence of pre-existing disputes regarding the calculation of interest justified the rejection of the Section 9 application.

Conclusion:
The Tribunal upheld the Adjudicating Authority's decision, finding no fault in rejecting the application under Section 9 of the IBC due to pre-existing disputes regarding the calculation of dues. The appeal was dismissed with no orders as to costs.

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