2020 (9) TMI 53 - AT - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - existence of dispute or not - Adjudicating Authority has rejected the Application on the ground that the Corporate Debtor has raised a dispute regarding demurrage payment, much before the issuance of demand notice - HELD THAT - It is clear that the dispute was raised by email dated 09th March 2018 regarding the alleged claim of demurrage and detention charges. The demand notice regarding the alleged claim has been issued on 05th September, 2018. The issue regarding payment against the detention charges requires extensive evidence because the parties are at variance interalia in respect of the period for which such charges are to be levied. The alleged claim is not crystallised and the Adjudicating Authority while exercising summary power cannot investigate into the matter regarding the liabilities of the Corporate Debtor to pay the demurrage and detention charges. The dispute raised by the Corporate Debtor cannot be said to be spurious, hypothetical or illusory. The Adjudicating Authority has rightly rejected the Application filed under Section 9 of the Code based on the ground of the pre-existing dispute - Appeal dismissed.

Summary

Issues:
1. Rejection of Application under Section 9 of the Insolvency & Bankruptcy Code, 2016 by the Adjudicating Authority.
2. Dispute regarding demurrage and detention charges raised by the Corporate Debtor.
3. Application of legal principles from the case of Mobilox Innovations Pvt Ltd Vs. Kirusa Software (P) Limited.

Analysis:
1. The Appellant filed an Appeal against the order passed by the Adjudicating Authority rejecting the Application under Section 9 of the Insolvency & Bankruptcy Code, 2016. The Appellant, engaged in freight forwarding services, claimed outstanding demurrage charges against the Corporate Debtor. The Adjudicating Authority rejected the Application citing a dispute raised by the Corporate Debtor regarding the demurrage payment before the demand notice was issued. The Adjudicating Authority relied on the law laid down by the Supreme Court in Mobilox Innovations Pvt Ltd Vs. Kirusa Software (P) Limited, emphasizing the need for a plausible contention requiring further investigation to reject such applications.

2. The Corporate Debtor contended that the alleged demurrage and detention charges were not crystallized, and extensive evidence was required to determine the liability. The Corporate Debtor raised a dispute about the demurrage payment before the demand notice was issued, as evidenced by an email dated 09th March 2018. The Adjudicating Authority found the dispute genuine and not spurious, hypothetical, or illusory. The Adjudicating Authority held that it could not investigate the liability of the Corporate Debtor under summary jurisdiction, leading to the rejection of the Application under Section 9 of the Code.

3. Referring to the case of Mobilox Innovations Pvt Ltd Vs. Kirusa Software (P) Limited, the Appellate Tribunal upheld the rejection of the Application by the Adjudicating Authority. The legal principles highlighted the need for a plausible contention requiring further investigation in cases of disputes raised by the debtor. The Tribunal emphasized that the existence of a genuine dispute, not a spurious defense, warranted the rejection of the Application. Based on this legal precedent, the Appellate Tribunal found no grounds for interference and dismissed the Appeal, affirming the rejection of the Application under Section 9 of the Code due to the pre-existing dispute regarding demurrage charges.