2019 (12) TMI 1020 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor committed default in making payment - existence of dispute or not - HELD THAT - There are clear disputes relating to breach of agreement as provided u/s. 5(6) of the Code. The dispute regarding the breach of agreement was raised by the Corporate Debtor long back prior to the issue of demand notice. Hence this is a clear case of pre-existing dispute between the Corporate Debtor and the Petitioner. There is a dispute, in relation to the unpaid operational debt, between the parties which is supported by abundant evidence. This dispute existed prior to the serving of demand notice under section 8 and the Operational Creditor had notice of existence of such dispute. Further, this dispute truly exists in fact and is not spurious, hypothetical or illusory. This petition as under section 9(5)(2)(d) is rejected.

Summary

Issues:
1. Petition seeking Corporate Insolvency Resolution Process (CIRP) against Corporate Debtor for default in payment.
2. Dispute regarding breach of agreement and unpaid operational debt.

Analysis:
1. The Company Petition was filed by the Petitioner seeking to initiate the Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor for defaulting on payments, invoking Section 9 of the Insolvency and Bankruptcy Code. The Petitioner claimed that the Corporate Debtor failed to make payments as per the Leave and License Agreement, leading to the demand for a significant amount including interest. The Petitioner provided evidence of regular payments followed by defaults by the Corporate Debtor, leading to the legal action.

2. The Corporate Debtor raised disputes regarding the breach of agreement, alleging that the Petitioner had allowed mortgage of the land without consent, leading to possession issues and eventual eviction. The Corporate Debtor claimed that they were kept in the dark about certain financial arrangements related to the licensed premises, leading to legal notices and demands for compensation. The Corporate Debtor highlighted various communications and actions taken to address the alleged breaches by the Petitioner, including attempts to settle outstanding dues and disputes.

3. The Tribunal analyzed the documents, replies, and rejoinders submitted by both parties. Referring to Section 5(6) of the Code, the Tribunal noted that disputes regarding the breach of agreement fell within the definition of a "dispute" under the law. Citing a Supreme Court case, the Tribunal emphasized the need to differentiate between genuine disputes and spurious claims, stating that the existence of a dispute, even if not guaranteed to succeed, warranted rejection of the petition. The Tribunal found that there was a pre-existing dispute between the parties regarding the breach of agreement, which was raised before the demand notice was issued.

4. After considering the arguments and evidence presented, the Tribunal concluded that there was a genuine dispute related to the unpaid operational debt. The Tribunal noted that the dispute existed prior to the demand notice and was supported by substantial evidence. Following the legal principles laid down by the Supreme Court, the Tribunal rejected the petition under section 9(5)(2)(d) as the notice of dispute had been acknowledged by the Operational Creditor. The decision was made based on the clear existence of a dispute, as required by law, and no costs were awarded in this matter.