2022 (11) TMI 1152 - AT - Insolvency and Bankruptcy

Initiation of CIRP - existence of dispute supported by evidences - Corporate Debtor failed to make repayment of its dues - Operational Creditors - applicability of section 9 of IBC for recovery of dues - entitlement to receive ten percent commission by virtue of contract between the parties - HELD THAT - The Demand Notice dated 12.10.2020 which was issued under Section 8 of the Code claiming amount of 1,26,50,000/- was based on the Memorandum of Understanding dated 1st June, 2018 entitling the Appellant to claim commission of ten percent on sale of goods to the end client M/s. Shapoorji and Pallonji Co. Ltd. The notice given under Section 8 captures the agreement and all the contents thereof. The notice was replied by the Corporate Debtor giving a notice of dispute on 04.11.2020. Under the scheme of Code, when Notice of Dispute has been issued and dispute raised is supported by any evidence and is not a moonshine defence, the Adjudicating Authority is not to entertain Section 9 Application and reject the Section 9 Application. The Notice of Dispute clearly held that no material was sold to M/s. Shapporji and Pallonji Co. Ltd. The dispute which has been raised is a genuine dispute which required further investigation, cannot be subject to a Section 9 Proceeding. It is always open for the Appellant to seek his remedy in law for recovery of dues, if any, in accordance with law but for such disputed issues, Section 9 Proceeding cannot be invoked at the instance of Operational Creditor. Appeal dismissed.

Summary

Issues:
Appeal against dismissal of Section 9 application under the Insolvency and Bankruptcy Code, 2016 based on a commission agreement dispute.

Analysis:
The Appellant filed an appeal against the Order of the Adjudicating Authority dismissing the Section 9 application under the Insolvency and Bankruptcy Code, 2016. The Appellant's claim stemmed from an agreement with the Corporate Debtor to receive a commission on the sale of goods to a specific company. The Appellant issued a notice demanding the unpaid amount, which led to a dispute. The Adjudicating Authority dismissed the application, prompting the appeal.

The Appellant argued that they were entitled to a commission as per the contract and referenced an email acknowledging part payment. They contended that a related company's project entitled them to the commission. However, the Tribunal carefully considered these submissions and reviewed the record to make a decision.

The Demand Notice issued under Section 8 of the Code was based on a Memorandum of Understanding entitling the Appellant to a commission on sales to the specified company. The Corporate Debtor disputed the claim, stating that no goods or services were provided as per the agreement. They clarified that the project in question was not awarded to the specified company, hence no commission was due. The Corporate Debtor argued that the Appellant's claim was misconceived and lacked merit.

The Tribunal emphasized that under the Code, when a genuine dispute is raised, the Adjudicating Authority should not entertain a Section 9 application. In this case, the Notice of Dispute highlighted that no material was sold to the specified company, making it a valid dispute requiring further investigation. Therefore, the Tribunal concluded that the dispute raised was genuine and not suitable for a Section 9 proceeding. The Appellant was advised to seek legal remedies for recovery in accordance with the law, but the Section 9 application was not maintainable in this scenario. As a result, the Appeal was dismissed by the Tribunal.