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IBC - Case Laws
Showing 341 to 360 of 9149 Records
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2024 (5) TMI 1000
Admissibility of the second petition under Section 7 of the Insolvency and Bankruptcy Code, 2016 - unpaid instalments - existence of debt and default or not - Amount paid out of the court during the pendency of this appeal to be adjusted in the amount which is stated to be due - HELD THAT:- There is no dispute that the Corporate Debtor availed the loan on interest from the Financial Creditor. Since, the instalments were not paid, the Financial Creditors filed the first petition which was admitted, moratorium was declared and IRP was appointed. In order to save itself to slip into CIRP, the CD approached the FC for a settlement which was ultimately arrived at in writing on 26.07.2018.
The Financial Creditors believed the Corporate Debtor and entered into the agreement and further on the asking of the CD filed a joint application in the first petition not only to bring on record the settlement but also to withdraw the first petition being sanguine of the fact that CD would keep its words and shall honour all the post-dated cheques in time but they were not aware of the intention of the CD as it had not made payment beyond Rs. 1,10,00,000 and were still in the arrears of more than Rs. 3 Cr. The Financial Creditor then filed the second petition of the reduced debt about which the default is not in question, therefore, the Adjudicating Authority has rightly admitted the application.
It is observed that if this kind of tricks, played by the CD with the FC are allowed and the plea raised by the Appellant is accepted that the second petition on the ground of settlement agreement is not maintainable then it would give a premium to the unscrupulous CD to get the petition filed under Section 7 withdrawn on the basis of the settlement which was not to be ultimately followed. Definitely, this kind of attitude and act on the part of the CD is not appreciated.
Amount paid out of the court during the pendency of this appeal to be adjusted in the amount which is stated to be due - HELD THAT:- Suffice it to say that the Appellant has not brought on record any writing/ agreement in this regard that the said amount has been paid towards the adjustment of the principal amount otherwise the Financial Creditor is entitled to adjust the amount towards the payment of interest component at the first instance.
There are no merit in the present appeal - the amount deposited by the Appellant in this court by way of FDR is ordered to be returned to the Appellant within a period of one month from the date of passing of this order by the Registrar after due verification.
Appeal dismissed.
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2024 (5) TMI 999
Maintainability of proceedings under Section 66 of IBC, 2016 - Resolution Professional has not given clear opinion or determination or finding as required under Regulation 35 A - Fraudulent transaction or not - HELD THAT:- The Resolution Professional had informed the CoC that there are no matching assets/inventory with the Corporate Debtor. Only thereafter, Application under Section 66 IBC was filed thereby showing that the Resolution Profession had complied with the Regulation 35A of IBBI (Resolution Process for Corporate Persons), Regulation 2016.
As per provisions of sub-section (1), the Adjudicating Authority can pass an order directing “any person”, who was party to carrying on the business of Corporate Debtor in such manner as to defraud creditors of the Corporate Debtor, or for any fraudulent purpose, to make him liable to make such contribution to the assets of the Corporate Debtor as it may deem fit. A plain reading clearly shows that action can be taken against ‘any person’ for recovery of amount involved in the fraudulent transaction.
In the present case, there is a finding that Manoj Punamia was running several companies in its business of gold refinery. The finding of the Customs Department was that both the Appellant Company (RICL) and Corporate Debtor (RRPL) were being managed by Mr. Manoj Punamia. Mr. Manoj Punamia and his wife were said to be shareholders of the Appellant Company. In these circumstances, the appellant cannot be said to be a third party, as both RICL and RRPL are under the control of same person - This is a case where the outstanding of Appx. Rs. 158 Cr. was brought down to Rs. 31 Cr. by alleged entries so as to reduce the amount due to the Corporate Debtor thereby reducing likelihood of recovery, causing loss to the creditors of the Corporate Debtor.
On similar facts, in the case of MR. NANDKISHORE VISHNUPANT DESHPANDE (RESOLUTION PROFESSIONAL FOR ROYAL REFINERY PVT. LTD. VERSUS SHRI BAIJU TRADING AND INVESTMENT PRIVATE LIMITED; MR. VISHAL CHOUDHARY; MR. GAURAV D PANWAR; MR. MANISH PANWAR; MR. MUKESH MEHTA AND RAKSHA BULLION VERSUS ROYAL REFINERY PRIVATE LIMITED [2021 (1) TMI 1322 - NATIONAL COMPANY LAW TRIBUNAL MUMBAI] the order of NCLT under Section 66 of IBC, 2016 was upheld by this Tribunal [2023 (7) TMI 958 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL PRINCIPAL BENCH], vide order dated 29.03.2023 - Similarly, in the case of Tridhaatu Kirti Developers LLP [2023 (1) TMI 455 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI] against the same respondents, who are also Respondents in the present appeal, the order of NCLT under Section 66 IBC was upheld by this Tribunal.
Section 66 of IBC, 2016 empowers the Adjudicating Authority to pass an order for recovery from such fraudulent transactions as contribution to the assets of the Corporate Debtor. Such action has also been upheld by Hon’ble Supreme Court in the case of Phoenix Arc (P) Ltd. vs. Spade Financial Services Ltd. [2021 (2) TMI 91 - SUPREME COURT].
Thus, it is apparent that entries were made in its accounts by the Appellant to reduce its liability towards the Corporate Debtor - there are no reason to interfere with the order of the Adjudicating Authority. The Appeal is accordingly dismissed.
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2024 (5) TMI 998
Dismissal of application filed for resolution - application dismissed on the ground that since the name of the Corporate Debtor has already been struck off by the RoC, therefore, the application under Section 9 cannot be further prosecuted - whether the application under Section 9 is filed for winding up or for initiation of CIRP? - HELD THAT:- Winding up is the process by which a company is dissolved and its assets are liquidated to pay off its creditors and any remaining assets are distributed to its shareholders. The winding up of a company can be initiated voluntarily by the company’s shareholders by passing a resolution and appointing liquidator to oversee the process and winding up can also be by an order of the Court wherein the Court appoints the liquidator and the process is governed by the Rules set up in the Act and other applicable laws. This process is initiated when the company is unable to pay its debts or when it is just and equitable to do so.
The mechanism of winding up is applied for the recovery of debt. On the other hand, it has been repeatedly held by the Hon’ble Supreme Court that the Code is not a debt recovery mechanism but a mechanism for revival of a company fallen in debt. It has been held that the Code is a beneficial legislation intended to put the corporate debtor back on its feet and is not a mere money recovery legislation.
The CIRP is not intended to be adversarial to the CD but is aimed at protecting the interests of the CD. The primary focus of the legislation is thus to ensure the revival and continuation of the CD by protecting the CD from its own management and from a corporate death by liquidation. The preamble of the Code speaks of maximisation of value of assets of the CD and balancing the interests of all the stakeholders with an object to keep the CD as a going concern.
Section 252(3) travels into an altogether different direction rather than the way it has been observed in the case of Hemang (Supra) because Section 252(3) gives a right of appeal to a company, member, director or workmen to challenge the order of the Registrar passed under Section 248 (5) on the three grounds, namely, while its name was struck off it was carrying on business, or was in operation or otherwise it is just which has to be established by pleadings and evidence before the Tribunal and only then the order can be passed which shall again be a subject of an appeal in terms of Section 61 of the Code but in our humble opinion, there is nothing like automatic restoration on the filing of the application under Section 7 or 9 of the Code.
There are no error in the order of the Adjudicating Authority which requires any interference by this Court - appeal dismissed.
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2024 (5) TMI 978
Calculation of fees eligible to the liquidator - time period consumed by the Liquidator in the liquidation process, after considering the eligible exclusions granted by the Adjudicating Authority - exclusion of period of stay granted - HELD THAT:- The dispute, during the oral arguments narrowed down to the period of 37 days, being the period from 03.10.2021 to 08.11.2021. The facts relating to this period are that IAs bearing Nos. 471 of 2021 and IA 550 of 2021 were filed by the Ex-Management of the Corporate Debtor before the Adjudicating Authority wherein a stay on e-auction of properties was granted by the Adjudicating Authority on 09.11.2021.
The Adjudicating Authority erred in granting exclusion the period consumed in adjudication of subject IAs, instead of period consumed while auction was under stay. If this period of 37 days from 03.10.2021 to 08.11.2021 is not excluded and is added to the liquidation period of 174 days determined by the Adjudicating Authority, it can be said that the liquidation process period was 211 days. The period consumed in the liquidation process in this case is accordingly determined as 211 days. The Stakeholder’s Consultation Committee is directed to compute and pay the Liquidator’s fees accordingly.
Appeal disposed off.
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2024 (5) TMI 899
Maintainability of appeal - time limitation - impugned order was passed on 10.06.2022 and the period of 30 days prescribed for filing the appeal had expired on 10.07.2022 and a further period of 15 days had also expired on 25.07.2022 but these appeals have been filed without annexing the certified copy of the impugned order and the certified copies of the impugned order were applied much after the expiry of period of 45 days - it was held by NCLAT that 'the application for condonation of delay is allowed then the appeals shall be deemed to have been filed within the period of limitation and if the application is dismissed then the matter would be over.'
HELD THAT:- Notice issued to the Insolvency and Bankruptcy Board of India (IBBI), as there appears to be considerable ambiguity concerning service of the orders passed by the National Company Law Tribunal, uploading of orders on the website and also the requirement to obtain a certified copy of the order and enclose the same with the appeal. The IBBI will examine whether the process requires any clarification, modification or simplification.
Issue notice and tag with Civil Appeal no. 4404/2024.
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2024 (5) TMI 898
Admission of section 7 application - Rejection of transfer application - proceedings were initiated by the Financial Creditor under Section 7 which proceedings were initially admitted and the application to recall the said order was rejected - HELD THAT:- A substantive appeal would lie against the order of admission under the Insolvency and Bankruptcy Code 2016.
It would be open to the appellant to raise all the grounds which have been raised in the present appeal before the National Company Law Appellate Tribunal in an appeal against the order of admission dated 3 May 2024 - Appeal disposed off.
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2024 (5) TMI 897
Seeking permission to withdraw the present appeal - seeking review of impugned judgement - petition under Section 7 of the Insolvency and Bankruptcy Code of India, 2016 was barred by limitation - it was held by NCLAT that 'The Adjudicating Authority has rightly come to the conclusion that the Respondent No.1 has successfully proved the financial debt and default on part of the Corporate Debtor in admitting the Section 7 application and initiating the CIRP process' - HELD THAT:- The appeal is dismissed as withdrawn.
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2024 (5) TMI 896
Application under Section 12A of the Insolvency and Bankruptcy Code, 2016 - HELD THAT:- An application under Section 12A of the Insolvency and Bankruptcy Code, 2016 (the IBC) can be made only by the applicant in the applications under Section 7 or Section 9 or Section 10 of the IBC. Hence, there is no reason to interfere with the impugned judgment.
The Civil Appeal is, accordingly, dismissed.
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2024 (5) TMI 895
Admission of section 7 application - financial debt owed by the Corporate Debtor or not - default was committed by the Corporate Debtor in not carrying out the construction due to interim order or not - it was held by NCLAT that 'There is no error in the order of the Adjudicating Authority admitting Section 7 Application.' - HELD THAT:- There are no reason to interfere with the order of the National Company Law Appellate Tribunal - appeal dismissed.
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2024 (5) TMI 894
Initiation of proceedings under the Insolvency and Bankruptcy Code, 2016 - it was held by NCLAT that 'The Adjudicating Authority erred in passing the Impugned Order dated 13.10.2021 admitting application under Section 7 of the Code and therefore Impugned Order deserves to be set aside accordingly' - HELD THAT:- The observations recorded in the impugned judgment(s) agreed upon that initiation of proceedings under the Insolvency and Bankruptcy Code, 2016, was not the appropriate remedy given the factual background and the disputes arising in the present cases.
Appeal dismissed.
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2024 (5) TMI 893
CIRP - Jurisdiction of the Adjudicating Authority to direct consideration of a settlement proposal after approval of a Resolution Plan. - Appellant (Successful Resolution Applicant - SRA) submits that after approval of Resolution Plan of the Appellant by the CoC, there was no occasion for directing consideration of fresh settlement proposal submitted by Ex. Directors to be placed before the CoC - It was held by NCLAT that 'The Adjudicating Authority, ought to have allowed opportunity to SRA to respond to the Application (IA No.188 of 2024 filed by Respondent Nos.1 and 2), whose Resolution Plan has been approved by the CoC and which is pending consideration before the Adjudicating Authority. Without giving an opportunity to the Appellant, direction to the CoC to consider the Plan, cannot be sustained.'
HELD THAT:- There are no reason to interfere with the impugned order - appeal dismissed.
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2024 (5) TMI 892
CIRP - Liquidation proceedings - Rejection of claim of Yes Bank for transfer of VAT refund to the account of FEMC Pratibha JV - non relinquishing of security interest as part of liquidation estate, having not complied with Regulation 21A of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016.
Transfer of VAT refund to the account of FEMC Pratibha JV - HELD THAT:- The claim filed by the Yes Bank, thus, clearly mentioned that FEMC was only technical partner and pecuniary liability was that of Corporate Debtor only. Both projects were completed prior to initiation of insolvency proceeding against the Corporate Debtor. As per the JV Agreement and the Supplementary Agreements entered between the parties, it is clear that it was the Corporate Debtor who was to carry out all obligations under the contract including pecuniary liabilities and FEMC was only technical partner. Under the JV Agreement all liabilities including VAT liabilities were discharged by the Corporate Debtor, hence, the refund made by the VAT Department transferred to the account of Corporate Debtor is in accordance with the rights and obligations of the parties as per the JV Agreement.
There are two main reasons due to which there are no fault in the impugned order passed by the Adjudicating Authority rejecting application filed by the Appellant. Firstly, as per the terms of the JV Agreement between the parties, all contractual liabilities including pecuniary liabilities were to be discharged by the Corporate Debtor. Both the projects were completed prior to initiation of insolvency resolution process and all the liabilities including the VAT liabilities were discharged by the Corporate Debtor, hence, the VAT refund which was made by the VAT Authorities in the account as communicated by the Liquidator cannot be held to be erroneous.
Non relinquishing of security interest as part of liquidation estate, having not complied with Regulation 21A of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016 - HELD THAT:- As held by the Adjudicating Authority, the Yes Bank who has not relinquished its security interest having not complied with Regulation 21A, the said asset became part of the liquidation assets - The Liquidator having sent the email and asked the Bank to provide its share and the Yes Bank having failed to provide its share, which was required to be discharged by it, no error was committed in treating the assets as part of the liquidation assets.
There are no error in the impugned order passed by the Adjudicating Authority rejecting I.A filed by the Yes Bank. There is no merit in the Appeal - appeal dismissed.
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2024 (5) TMI 871
CIRP - parties have compromised and settled the matter in terms of the Deed of Settlement - HELD THAT:- The Corporate Insolvency Resolution Process against respondent no. 2 – M/s. Anjani Realtors Pvt. Ltd. will be treated as closed.
The appeal is disposed of.
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2024 (5) TMI 852
Dismissal of application filed under Section 7 of the Insolvency and Bankruptcy Code, 2016 - CIRP - no relationship of financial creditor and the corporate debtor - no transaction in the nature of financial debt between the parties - no privity of contract between the parties - HELD THAT:- It is not in dispute that the Appellants had advanced the loan to PHPL and not to Respondent. There is no privity of contract between the parties. PHPL failed to return the money taken as loan from the Appellants - It was provided in clause 35 of the sale deed that the vendee shall pay to the confirming party and it is mentioned in so many words in the sale deed that the money has already been paid by the vendee to the confirming party but the allegation of the Appellants is that the said money has not been paid to them by the vendor.
In such circumstances, it is not a case which would fall within the provisions of the Code to trigger CIRP, invoking Section 7 of the Code and therefore, the Tribunal has rightly dismissed the application, however, liberty has been granted to the Appellants to pursue his other remedy for the purpose of recovery. It would also be not out of place to mention that the regime of the Code is not for recovery but for the resolution of debt by maximisation of the asset and to bring the CD on its own feet. Therefore, not only Respondent was dragged in the litigation at the instance of the Appellants before the Tribunal but also in this appeal in which no case is made out at all.
The present appeal is hereby dismissed.
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2024 (5) TMI 808
Violation of principles of natural justice - non-speaking order - impugned order has not dealt with the various prayers made by the Appellant in the application and has confined its order with the claim which has been admitted by the RP - HELD THAT:- This matter requires a relook by the Adjudicating Authority for the purpose of recording a finding on each prayers sought in the application after taking into consideration the pleadings as well as the evidence brought on record. As according to us, the impugned order is totally nonspeaking.
Application is hereby restored and the matter is remanded back to the Adjudicating Authority to decide the application again by recording reasons while dealing with the prayers made in the application - appeal allowed by way of remand.
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2024 (5) TMI 789
Scope of CIRP costs - Allowability of the claims during the CIRP to be treated as CIRP costs - waterfall mechanism - contract was completed during the CIRP period - cost attributable to the Respondent can be considered as CIRP cost or not - whether the costs incurred for the work done during the CIRP by Respondent No 1/subcontractor, can be considered as CIRP Cost or not by the Liquidator? - HELD THAT:- From the extracts of the minutes of the CoC, it is clear that a conscious decision was taken that payments to vendors engaged in specific projects would be sourced from the cash flow generated by those projects' customers. The Darlipali Plant of the Corporate Debtor ceased operations during the CIRP Period. Consequently, the activities undertaken by Respondent No. 1, acting as a subcontractor, did not contribute to the Corporate Debtor's viability as a "going concern." This pivotal factor led Respondent No. 2, in its capacity as the Resolution Professional, to exclude the costs incurred by Respondent No. 1 from the ambit of CIRP Costs.
It is agreed that mere fact that the dues have arisen during the CIRP period would not be determinative of it to be classified as CIRP cost. Interpreting Section 5(13)(c) of the Code in this manner would render the words “in running the business of the corporate debtor as a going concern” otiose. Further, it is clear from Regulation 31 and the guidance provided by IBBI vide the above-mentioned circular that unless the CoC has approved the dues and they directly relate to the CIRP, the dues cannot be classified as CIRP cost. And the CoC decided to exclude the cost incurred from the terminated projects, which is not maintaining the Corporate Debtor as “a going concern”.
In conclusion, the following criteria determine whether a cost incurred by the Resolution Professional during CIRP qualifies as CIRP cost: (a) maintaining the Corporate Debtor as a going concern, (b) payment to suppliers of essential goods and services, and (c) direct relation to CIRP with approval from the Committee of Creditors (CoC). Applying these criteria to this case, the claim fails to meet the definition of CIRP cost.
This has also been held so in various decisions of this Tribunal also. In Bharat Hotels Ltd. v Tapan Chakraborty [2022 (9) TMI 224 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI] it was held that These issued may be decided in the meeting of the CoC and are not to be examined by the Adjudicating Authority even before the CoC takes a decision. It shall be always open for the appellant to raise issue regarding the cost in the meeting of the Committee of Creditors. With reference to the grievance of the Appellant with regard to obtaining valuation report, it is always open to the Appellant to request the Liquidator to obtain a valuation report, if not already obtained.
The Respondent's claim should be classified as non-CIRP cost, falling under Section 53 of the Code for distribution during liquidation - The Respondent's claim doesn't meet the CIRP cost definition. It lacks CoC approval, doesn't support the "going concern" objective, and is subject to unrealized payments from NTPC. The AA's decision contradicts CoC's authority, previous rulings, and commercial realities and is therefore set aside. Accordingly, the Respondent's claim should not be treated as CIRP cost.
Appeal allowed.
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2024 (5) TMI 784
Initiation of CIRP - maintainability of application filed under Section 7 of IBC - application beyond the period of limitation - HELD THAT:- Three home buyers initiated the legal proceedings under the Code by filing the application under Section 7 which was admitted on 20.08.2019. Since, the CIRP was initiated against the Company as a whole (Corporate Debtor), therefore, the homebuyers of Dreamz Sneh Project also filed their claims to the IRP which were admitted. However, by a subsequent order dated 04.09.2020, the CIRP initiated was ordered to be confined to only one project, namely, Dreamz Sumadhur Porject. As a result thereof, a separate cause of action arose to the Appellant for the purpose of redressal of their grievance with the passing of the order dated 04.09.2020 and therefore, they filed the application under Section 7 on 19.08.2021 within a period of three years from the date of cause of action 04.09.2020 had arisen.
The arguments raised by the Appellant is that the limitation can be extended only under Section 18 and 19 of the limitation Act, cannot be accepted because of the decision of the Hon’ble Supreme Court in the case of Dena Bank [2021 (8) TMI 315 - SUPREME COURT]. It has been held that the limitation can be counted from the date of the judgment or decree.
There are no error in the impugned order in so far as the issue of limitation has been decided which has only been challenged in this appeal, therefore, the present appeal is found devoid of merit and the same is hereby dismissed.
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2024 (5) TMI 728
CIRP - waterfall mechanism - extinguishment of demand for reason of the State Tax Authorities not moving the National Company Law Tribunal (NCLT) for inclusion of their demand in the resolution plan, as a debt payable by the Company-a Corporate Debtor under the IBC - HELD THAT:- The petitioner was incorporated as a Special Purpose Vehicle to carry out the work of upgradation of Hazipur-Muzaffarpur section of the existing NH-77 within the State of Bihar on Build Operate and Transfer (BOT) (annuity-basis) under the National Highway Development Project Phase-III. The agreement executed by the petitioner with the NHAI is produced as Annnexure-P/1 dated 24.02.2010. It was by Annexure-P2 dated 03.01.2020 that the NCLT, New Delhi, admitted the petitioner into the CIRP in terms of the IBC - Annexure-P/2 is dated 03.01.2020 and till the approval of the resolution plan on 10.05.2022 there was a moratorium under Section 14 of the IBC. It has to be noticed that this does not preclude the State Tax Authorities from proceeding with the assessment, which can be proceeded with, but no recovery can be effected.
The State or the Central Government or any local authority definitely is reserved with the right to approach the Resolution Professional with their claims which the Resolution Professional is obliged to include in the resolution plan. There is also an appeal provided from the order of the NCLT to the National Company Law Appellate Tribunal which can be availed by any creditor whose claims have not been included by the resolution professional.
In the present case there is no challenge against the resolution plan as approved by the COC followed up with the approval of the adjudicating authority; the NCLT. The State does not have a case that they have approached the R.P. within the period provided and before the resolution plan was approved by the COC and then by the NCLT. There is no recovery initiated or assessment order passed before the resolution plan is approved - The order of the NCLT was approved finding that, even the dues to the Central or the State Government payable into the respective consolidated funds stand on a different footing; covered only under Section 53(1)(e) of the IBC, in a liquidation proceeding. The debts owed to secured creditors who have relinquished their security interest have a better claim under Section 53(1)(b); at par and along with the dues of the workmen for the just prior 24 months period; both of which have pre-eminence from that of a secured creditor who does not give up the security interest. Even the financial debts owed to unsecured creditors by virtue of Section 53(1)(d) of the IBC has a better claim than the dues to the Central Government and the State Government falling under Clause-(e) of Section 53(1) of the IBC.
Both the writ petitions are allowed restraining the State from proceeding for recovery under the impugned assessment orders.
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2024 (5) TMI 727
Imitation of CIRP - Admissibility of Intervention Petition - Homebuyers - Appellant claiming that they are holding 102 units in Festival City Project and they sought intervention in the Company Petition. - NCLT admitted the Section 7 application which was affirmed by the Supreme Court - HELD THAT:- The Company Petition which has been filed in the year 2024 by Respondent No.6- M/s. Mist Direct Sales Pvt. Ltd., Counsel for the Respondent No.2 has produced the order dated 05.04.2024 of the Adjudicating Authority where petitioners have been asked to clarify various aspects. The petition under Section 230 for scheme by the corporate debtor is independent proceeding but filing of the said petition cannot be a ground to not permit the proceeding under Section 7 which are being halted and obstructed by one or other attempts by corporate debtor and other applicants as noted above. It is further noticed that the case of the corporate debtor as noticed from the record, it is clear that the RERA registration of the project has already cancelled and there is a dispute of title as claimed by the corporate debtor regarding the land.
There are no substance in the submission of the counsel appearing for Respondent No.6 to accepts the submission that Section 7 application be further not proceeded with till application under Section 230 of the Companies Act filed by Respondent No.6 be finalised.
Section 7 application has to be proceeded and decided in accordance with law and in the facts of the present case, Adjudicating Authority did not commit any error in rejecting the Intervention Petition - there are no error in the impugned order. The appeal is dismissed.
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2024 (5) TMI 726
Rejection of section 9 application - Initiation of CIRP - prior dispute in relation to existence of debt or not - whether there was a pre-existing dispute between the two parties with regard to the operational debt? - HELD THAT:- In the present case, from material on record, it is clear that the demand notice was issued by the Operational Creditor on 12.07.2022 and no notice of dispute was raised by the Corporate Debtor. The argument of the Corporate Debtor is not persuasive that the notice was not effectively served upon him for reasons spelt out by the Adjudicating Authority in para 5.3.1 of the impugned order - The statutory scheme of IBC in such circumstances pretty much entitled the Operational Creditor to file an application under Section 9 and this is exactly the course of action followed by the Operational Creditor and we therefore find nothing wrong in this course of action. It is only at this stage when the Operational Creditor moved an application before the Adjudicating Authority under Section 9 that the Corporate Debtor has endeavoured to protect its interests and raised the issue of pre-existing disputes.
In the present case, it is contended by the Corporate Debtor that there is no valid and legal claim to receive payment. The issue of proforma invoice in place of debit note has been voiced by the Corporate Debtor as tantamount to breach of contractual obligations and therefore held by the Adjudicating Authority to be yet another ground of dispute.
Where operational creditor seeks to initiate insolvency process against a Corporate Debtor, it can only be done in clear cases where no real dispute exists between the two which however is not so borne out by the facts of the present case. That pre-existing dispute was very much there is amply supported by material on the record. Such contractual disputes require further investigation and cannot be considered by the Adjudicating Authority in the exercise of their summary jurisdiction. And for such disputed amounts, Section 9 proceeding under IBC cannot be initiated at the instance of the Operational Creditor. Keeping in view that the present facts of the case indicates that the operational debt is disputed, the Adjudicating Authority has therefore correctly rejected the Section 9 application.
The Adjudicating Authority did not commit any error in rejecting the Section 9 application filed by the Appellant. There is no merit in the Appeal. Appeal is dismissed.
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