2020 (8) TMI 421 - AT - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its debt - pre-existing dispute or not - Whether pre-existing dispute exists before issuance of the demand notice? - HELD THAT - The Ld. Adjudicating Authority has given a finding that there is a running composite account between the same parties, and there is no differentiation between the different work orders issued between the parties. It is also on record that the Operational Creditor had filed Section 9 application in respect of outstanding dues under the following Purchase Orders and two Work Orders amounting to ₹ 48,06,944/- with the interest of ₹ 14,69,242/- aggregating to ₹ 62,76,186/- for the projects at Hyderabad Centrum Project, Hyderabad and Greena Panvel Project, Maharashtra. The service was deficient in respect of Sky Forest Project, but there was no dispute concerning P.O. No. 3228108125. The Corporate Debtor himself alleged that the Operational Creditor is pressurizing the payment under P.O. No. 3228108125 under the fear that the same will not function similar to STP at Sky Forest Project. On perusal of the Reply dated 23.04.2018 (Annexure A-7), it is clear that no dispute was existing about the P.O. No. 3228108125. There is nothing on record to substantiate that there is running composite account between the same parties, and there is no differentiation between different work orders issued between the parties. The above observation of the Adjudicating Authority is without any basis. It is also necessary to mention that each P.O./W.O. Constitutes separate contract having separate terms and conditions and independent dispute resolution clause, therefore for the alleged deficiency of service relating to the Sky Forest Project, the outstanding payment relating to other invoices could not be stopped and the finding of the Adjudicating Authority that there was pre-existing dispute is also erroneous - thus, it is clear that the Adjudicating Authority erred in rejecting the application filed under Section 9 of the IBC based on the pre-existing dispute. Appeal allowed.

Summary

Issues Involved:
1. Whether a pre-existing dispute exists before the issuance of the demand notice?

Detailed Analysis:

Issue 1: Whether a pre-existing dispute exists before the issuance of the demand notice?

The Appellate Tribunal heard an appeal arising from an order passed by the Adjudicating Authority in a company petition. The petitioner had placed purchase and work orders for maintenance and operation services, invoiced the respondent, and filed a petition seeking payment of outstanding dues. The Adjudicating Authority rejected the petition citing a pre-existing dispute and a running composite account between the parties. The respondent contended that demand notices were issued despite a pending dispute. The Tribunal noted that the petition only concerned specific orders and not others in dispute. The respondent argued that payment was contingent on compliance with terms, specifically related to a project in Mumbai. The Tribunal referenced a Supreme Court case emphasizing the need for a genuine dispute to reject an application under the Insolvency and Bankruptcy Code. It highlighted that the respondent's objections were specific to one project, not the subject of the petition, and each order had separate terms. The Tribunal found the rejection based on a pre-existing dispute erroneous and allowed the appeal, directing the Adjudicating Authority to admit the petition promptly.

This detailed analysis provides a comprehensive overview of the issues involved in the legal judgment, focusing on the key arguments, findings, and legal principles applied by the Appellate Tribunal in its decision.