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2019 (9) TMI 25 - AT - IBCAdmissibility of application - Initiation of CIRP - existence of debt or not - Section 9 of the Insolvency and Bankruptcy Code, 2016 - HELD THAT - The Adjudicating Authority has not applied its mind nor gone through the application under Section 9 (Form 6) to find out whether there is debt payable or not. It has simply rejected the application on the ground that there is no contract between the parties which cannot be a ground. It is not the case of the Respondent that there is a pre-existing dispute. The Respondent has not pleaded and nor the Adjudicating Authority held that there is no record of debt or default. In this background, merely on the ground that there is no agreement reached between the parties, it was not open to the Adjudicating Authority to reject application under Section 9 preferred by the Appellant. From the decision of the Hon ble Supreme Court in the case of M/S. INNOVENTIVE INDUSTRIES LTD. VERSUS ICICI BANK ANR. 2017 (9) TMI 58 - SUPREME COURT , it is clear that the Adjudicating Authority is only required to notice as to whether there is a debt and default or not. It was open to the Respondent (Corporate Debtor) to take plea that there was no debt payable in law or in fact but no such plea was taken. Therefore, as per decision of the Hon ble Supreme Court, if the record is complete and debt is payable, it was duty of the Adjudicating Authority to admit the application. The case remitted to the Adjudicating Authority for passing appropriate order - appeal allowed by way of remand.
Issues:
- Application under Section 9 of the Insolvency and Bankruptcy Code, 2016 rejected by Adjudicating Authority - Claim of Appellant for unpaid invoices against Corporate Debtor - Opposition by Respondent on grounds of claim being frivolous and lack of bonafide - Dispute over the amount owed by the Corporate Debtor to the Appellant - Interpretation of Section 7 and Section 8 of the Insolvency and Bankruptcy Code Analysis: The case involved an appeal filed by an Operational Creditor against the rejection of their application under Section 9 of the Insolvency and Bankruptcy Code by the Adjudicating Authority. The Appellant had provided SMS services to the Corporate Debtor based on purchase orders, invoicing a total amount which the Debtor partially paid, leaving a significant balance outstanding. The Respondent disputed the claim, alleging it to be frivolous and lacking bonafide, citing the absence of a written contract between the parties. The Respondent acknowledged receiving services from the Appellant but disputed the total amount owed, claiming to have made payments for the services rendered. The Adjudicating Authority noted the lack of a written contract but emphasized that the Tribunal cannot consider email correspondence as evidence of debt and default. The Authority rejected the application based on the absence of a contract, which was deemed insufficient grounds for dismissal. The Appellate Tribunal, citing the Supreme Court's decision in "Innoventive Industries Ltd. Vs. ICICI Bank and Ors.", clarified the requirements under Sections 7 and 8 of the Code. It highlighted that the Adjudicating Authority's role is to ascertain the existence of a debt and default, without delving into the merits of the dispute. Since the Respondent did not raise a valid defense regarding the debt's existence, the Adjudicating Authority erred in rejecting the application solely based on the absence of a formal agreement. Consequently, the Appellate Tribunal set aside the previous order and remitted the case to the Adjudicating Authority for reevaluation in line with the Supreme Court's decision. The Respondent was given the opportunity to settle the claim, emphasizing the importance of following the legal framework outlined in the Insolvency and Bankruptcy Code. The appeal was allowed, with no costs imposed on either party.
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