2020 (4) TMI 350 - AT - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its debt - pre-existing dispute or not - HELD THAT - The Notice does disclose pre-existing dispute between the parties with regard to the services rendered by the Appellant. Notice shows loss of confidence thus holding on to outstanding payments. It is not possible in a summary proceeding like the present one for the Adjudicating Authority or this Tribunal to analyze the e-mails exchanged earlier in depth to ignore Notice like the present one, which was not simply rushed through. In proceedings of Section 9 of IBC, such Notice which is prior in time to the Notice sent under Section 8 of IBC, does show that there was pre-existing dispute regarding services rendered. It cannot be stated to be a dispute raised merely for the purpose of dispute - Application rightly rejected - appeal dismissed.

Summary

Issues:
1. Rejection of application under Section 9 of the Insolvency and Bankruptcy Code, 2016 on the ground of pre-existing dispute.

Analysis:
The Appellant, an 'Operational Creditor,' filed an appeal against the rejection of their application by the Adjudicating Authority. The Appellant claimed to have provided digital marketing services to the 'Corporate Debtor' as per a contract, raising invoices for outstanding dues. The Respondent disputed the charges, alleging unauthorized use of brand keywords and overcharging. The Respondent also accused the Appellant of colluding with employees and manipulating geo-location data. The Adjudicating Authority referred to the definition of 'dispute' from a previous judgment and found that the Respondent had raised disputes before the demand notice, indicating a pre-existing dispute, leading to the rejection of the application.

The Appellant argued that the Respondent's defense was baseless and that the brand keywords were part of the job assignment. They referenced emails showing satisfaction with the services provided. The Respondent, however, pointed to emails instructing to pause campaigns and an investigation report suggesting misuse of brand keywords. The Appellant refuted these claims, stating that the Respondent's allegations were unsubstantiated and that the Respondent's reliance on the investigation report was flawed.

The Notice dated 23rd March, 2019, sent by the 'Corporate Debtor' to the Appellant, highlighted concerns regarding improper business practices and suspended services pending an investigation. The Appellant argued that the Notice should have been ignored as they had explained the allegations. However, the Tribunal found that the Notice demonstrated a pre-existing dispute, as it was sent before the demand notice under Section 8 of IBC. The Tribunal agreed with the Adjudicating Authority's decision to reject the application, emphasizing that the Notice indicated a loss of confidence and a genuine dispute regarding the services rendered. The appeal was dismissed, with no costs awarded.