2020 (2) TMI 55 - AT - Insolvency and Bankruptcy

Maintainability of petition - initiation of CIRP - Corporate Debtor failed to make repayment - existence of dispute or not - HELD THAT - In the present case, applying the test of existence of a dispute , without going into the merit of the dispute, it is apparent that the Corporate Debtor had raised a plausible contention to require further investigation, which was not a patently, feeble, legal arguments or an assertion of facts, unsupported by evidence. The defence was not spurious, mere bluster, plainly, frivolous or vexatious. In this Operational Creditor has not filed any documents to show that the final bill was submitted regarding the alleged contract and the outstanding amount was also acknowledged by the Corporate Debtor. These email/communication submitted by the Corporate Debtor also shows that there was a pre-existing dispute, before issuance of the demand notice. Therefore, we are of the considered opinion that the Adjudicating Authority has rightly rejected the application filed under Section 9 of the I B Code for initiation of the Corporate Insolvency Process. Appeal rejected.

Summary

Issues:
1. Rejection of petition under Section 9 of the Insolvency and Bankruptcy Code, 2016 based on pre-existing dispute.

Analysis:
The appeal was filed against the order rejecting a petition under Section 9 of the Insolvency and Bankruptcy Code, 2016. The Operational Creditor claimed an outstanding amount against the Corporate Debtor for construction work done. The Corporate Debtor disputed the claim, stating that the Operational Creditor did not adhere to the work order specifications. The Adjudicating Authority rejected the petition citing a pre-existing dispute. The Corporate Debtor had raised contentions regarding the bills and demanded certain documents to settle the claim before the demand notice was issued.

The Adjudicating Authority considered the test for determining the existence of a dispute as laid down by the Hon'ble Supreme Court in a previous judgment. It was emphasized that the Authority must assess whether there is a plausible contention requiring further investigation and that the dispute is not frivolous or unsupported by evidence. In this case, the Corporate Debtor's contentions were found to be plausible and not spurious. The Operational Creditor's claim was only in relation to running bills, with the final bill not being raised or accepted by the Corporate Debtor, which is crucial for contract conclusion.

The communication between the parties indicated a pre-existing dispute before the demand notice was issued. The Corporate Debtor had objected to the alleged bills as an exaggerated claim. The Adjudicating Authority concluded that there was indeed a genuine dispute existing before the demand notice, justifying the rejection of the petition under Section 9 of the Insolvency and Bankruptcy Code. Consequently, the appeal was dismissed, upholding the decision of the Adjudicating Authority without any cost implications.