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2020 (2) TMI 1124 - Tri - Insolvency and BankruptcyMaintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its debt - debt due and payable or not - main contention of the respondent is that there is a pre-existing dispute between the parties and the work remained incomplete by the operational creditor - HELD THAT - It is seen that there is pre-existing dispute and also there is no certainty of the actual amount of default. Though the invoices pertain to the year 2015, there was no effective pursuance for a long period from 2015 till end of 2018. The various correspondences placed on record show that dispute was not raised for the first time to evade liability but certainly pre-existed much prior to the issuance of notice under section 8 of the Code. The e-mail dated 03.09.2015 reveals that the respondent requested for the accounts of the petitioner to confirm the balance which was never issued. There are allegations of non-conciliation of accounts despite request. Existence of an undisputed operational debt is sine qua non for initiating CIRP under section 9 of the Code. The Code is not intended to be substitute to a recovery forum. The moment there is existence of a dispute, the corporate debtor gets out of the clutches of the Code. In the factual background of this case 'existence of real dispute' cannot be totally overruled - The provisions of section 9 (5) (ii) (d) of the Code clearly mandates that Adjudicating Authority shall reject the application when notice of dispute has been received by the applicant operational creditor. In the present case notice under section 8 was duly replied within the period prescribed by bringing to the notice of the operational creditor the existence of dispute. Materials placed before us show that dispute was raised prior to the issuance of notice under section 8 of the Code. The claim of operational debt in question is not free from dispute. There is substance and plausible contention in the pleadings of both sides, which necessitates investigation - Respondent has raised dispute with enough particulars to qualify as a dispute as defined under sub-section (6) of section 5 of the Code. Application dismissed.
Issues Involved:
1. Territorial jurisdiction of the Tribunal. 2. Existence of an operational debt and its default. 3. Pre-existing disputes between the parties. 4. Compliance with procedural requirements under the Insolvency and Bankruptcy Code (IBC), 2016. 5. Admissibility of the application under Section 9 of the IBC. Detailed Analysis: 1. Territorial Jurisdiction of the Tribunal: The Tribunal established its territorial jurisdiction over the case, as the registered office of the respondent corporate debtor, M/s. Kadimi Specials Steels Pvt. Ltd., is located in New Delhi. This aligns with sub-section (1) of section 60 of the Insolvency and Bankruptcy Code, 2016. 2. Existence of an Operational Debt and Its Default: The operational creditor, M/s. NAPC Limited, claimed a total outstanding debt of ?2,26,65,070/- as of March 2015, along with interest due to non-payment by the corporate debtor at 18% per annum till 09.07.2019, amounting to ?1,33,68,046.34. Therefore, the total debt claimed was ?3,60,33,116.34. The operational creditor had issued a demand notice under the IBC on 09.07.2018, which the corporate debtor replied to on 19.07.2018 but failed to pay the dues. 3. Pre-existing Disputes Between the Parties: The corporate debtor raised several objections, asserting that there was a pre-existing dispute regarding the quality and completion of work. They argued that the operational creditor had not completed the work as per the agreement, and several defects were identified and communicated via emails and legal notices. The corporate debtor also highlighted that they had to hire third-party contractors to rectify the defects, incurring additional expenses. The Tribunal noted that these disputes were not raised for the first time to evade liability but pre-existed much prior to the issuance of notice under section 8 of the Code. 4. Compliance with Procedural Requirements Under the IBC, 2016: The corporate debtor contended that the operational creditor failed to comply with Section 9(3)(c) of the IBC, which mandates that an application must be accompanied by a certificate from a financial institution confirming that there has been no payment of the unpaid operational debt. The operational creditor did not furnish such a certificate, leading to the argument that the application should be rejected on this ground alone. 5. Admissibility of the Application Under Section 9 of the IBC: The Tribunal emphasized that the existence of an undisputed operational debt is a sine qua non for initiating the Corporate Insolvency Resolution Process (CIRP) under Section 9 of the Code. The Tribunal referred to the case of K. Kishan v. Vijay Nirman Company (P.) Ltd., where the Hon'ble Supreme Court observed that an insolvency petition cannot proceed if the debt is disputed within the parameters laid down in Mobilox Innovations. The Tribunal concluded that the present case involved a pre-existing dispute and the operational debt in question was not free from dispute. Conclusion: The Tribunal rejected the application for initiation of CIRP under Section 9 of the IBC, 2016, due to the existence of a pre-existing dispute and non-compliance with procedural requirements. It was made clear that any observations made in the order should not be construed as an expression of opinion on the merits of the controversy, and the right of the applicant before any other forum shall not be prejudiced by the dismissal of the application. Communication of Order: The Tribunal directed that a copy of the order be communicated to the parties as per the provisions of section 9 (5) (ii) of the Code.
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