2024 (4) TMI 175 - AT - Insolvency and Bankruptcy

Dismissal of Section 9 application - Appellant and Respondent are having relationship of Corporate Debtor and Operational Creditor or not - pre-existing dispute between the parties which will disallow initiation of CIRP proceedings or not. Whether in the instant case, the Appellant and Respondent are having any relationship of Corporate Debtor and Operational Creditor? - HELD THAT - The facts of the case clearly bring out that the Appellant was acting on the referral instructions of the Respondent and was issuing the air tickets on the basis of the credit card the customers details provided by the Respondent. The Respondent had also given the undertaking that if any debit note comes against those tickets, then they will be responsible. The plea of the Respondent that they are not having any debt and the Appellant is not an Operational Creditor as they were not supplying any goods or services to the Respondent is not tenable. It is concluded that there is a relationship of operational creditor and corporate debtor between the Appellant and Respondent. Whether there is any pre-existing dispute between the parties which will disallow initiation of CIRP proceedings? - HELD THAT - Respondent was undertaking the responsibility for issuance of the debit notes and when ADMs were issued by the airlines, a debt arises and the unconditional undertakings will act as an acknowledgment of debt towards the Appellant - When the demand notice was issued under Section 8 of the IBC, 2016 on 22.08.2018, it was disputed in its reply by the Respondent vide letter dated 08.09.2018. There are police complaints also on record. It had become a criminal case. Thus it had become a dispute and is not a spurious, hypothetical or illusory dispute. From the correspondence on record, it can be clearly made out that there is a pre-existing dispute. The Adjudicating Authority has gone into the circumstances of their business dealings and have come to the conclusion that the dispute raised by the respondent is plausible and not a patently feeble legal argument. Thus, when the Appellant received the reply to Section 8 demand notice raising a dispute, the Section 9 petition could not have been proceeded under I B Code against the respondent. For CIRP under Section 9 of IBC, 2016 to be initiated, the Appellant is required to prove that the debt is due, it has not been paid and the debt is an undisputed debt. In this particular case, there is no record to suggest that there is any contract entered into between the parties but there is a evidence of pre-existing dispute. The ingredients laid down under Section 9 read with the requirements laid down by the judicial pronouncement are not fulfilled. Therefore, in the present case owing to the pre-existing dispute between the parties, the Adjudicating Authority has rightly rejected the Section 9 Application. There are no error in the orders of the Adjudicating Authority - appeal dismissed.

Summary

Issues Involved:

1. Relationship of Corporate Debtor and Operational Creditor.
2. Pre-existing dispute between the parties.

Summary:

Issue 1: Relationship of Corporate Debtor and Operational Creditor

The primary issue was whether the Appellant (M/s Akbar Travels of India Private Limited) and the Respondent (M/s Ritco Travels & Tours Private Limited) had a relationship of Corporate Debtor and Operational Creditor. The Appellant issued "Sold Outside Ticketed Outside" (SOTO) tickets on the request of the Respondent, who provided credit card details for payment. The Respondent undertook full responsibility for any debit notes issued by airlines against these transactions. The Tribunal concluded that the Appellant and Respondent had the relationship of an Operational Creditor and Corporate Debtor, as the Respondent had given unconditional undertakings to pay for any debit notes.

Issue 2: Pre-existing dispute between the parties

The second issue was whether there was a pre-existing dispute that would disallow the initiation of Corporate Insolvency Resolution Process (CIRP) u/s 9 of the Insolvency and Bankruptcy Code, 2016. The Appellant issued a demand notice u/s 8 of the Code, which the Respondent disputed, claiming the transactions were fraudulent and that the Appellant had sent goons to intimidate them. The Tribunal referred to the judgment in Mobilox Innovations Private Limited Vs. Kirussa Software Private Limited, (2018) 1 SCC 353, which outlines the conditions for triggering CIRP. It was established that there was a plausible pre-existing dispute, supported by emails and police complaints. Consequently, the Tribunal concluded that the Section 9 petition could not proceed due to the pre-existing dispute.

Conclusion:

For CIRP u/s 9 of IBC, 2016 to be initiated, the debt must be due, unpaid, and undisputed. The Tribunal found that there was no contract between the parties and a pre-existing dispute existed. Therefore, the Adjudicating Authority rightly rejected the Section 9 Application, and the appeal was dismissed with no order as to costs.