2020 (6) TMI 558 - AT - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - existence of debt and dispute or not - failure to comply the statutory provision of Section 9(3)(b) of the Code - time limitation - HELD THAT - On perusal of e-mail correspondence dated 19th January 2018 and 09th April 2018 it is clear that the Operational Creditor has issued the statement of account of pending invoices as on January 19, 2018. This statement pertains to the financial year 2015-16, 2016-17 and 2017-18. In reply to the said mail, the Corporate Debtor has submitted that the account had already been settled with Mr Anumod Sharma and further no services were required. It also transpired that the Corporate Debtor raised a question on raising the bill for the year 2017-18, partially for the year 2016-17. It is also apparent that the Corporate Debtor advised to the Operational Creditor not to raise, such kind of bills and take clarity from Mr Anumod Sharma, as the Company is not liable for the same - Thus, it is clear that before issuance of demand notice there was a pre-existing dispute regarding raising of invoices for the financial year 201718, and partially for 2016-17, on the pretext that the Corporate Debtor had already informed that no services were required. In the instant case, after receiving the demand notice Corporate Debtor within ten days of receipt of the demand notice raised the dispute of the unpaid operational debt. Therefore, affidavit in compliance of Section 9(3)(b) could not be submitted. Thus, it is apparent that there is no default in not providing the affidavit in compliance of Section 9(3)(b) of the Code. Time Limitation - HELD THAT - On perusal of the record, it is crystal clear that about one year before the issuance of demand notice, the Corporate Debtor complained about the quality of service to the Operational Creditor and communicated that he has not provided services after 2015 and also informed that their services are no longer required. Thus, the Adjudicating Authority/National Company Law Tribunal, New Delhi Bench has rightly rejected the Application filed under Section 9 of the Insolvency and Bankruptcy Code 2016 - appeal dismissed.

Summary

Issues:
- Rejection of Application under Section 9 of the Insolvency and Bankruptcy Code 2016 by the Adjudicating Authority
- Grounds of rejection: pre-existing dispute and non-compliance with Section 9(3)(b) of the Code

Analysis:

1. The appeal arose from the Adjudicating Authority's order rejecting the Operational Creditor's application under Section 9 of the Insolvency and Bankruptcy Code 2016. The dispute involved an outstanding amount of ?63,29,169 owed by the Corporate Debtor for services rendered by the Applicant from September 2013 to January 2017.

2. The Applicant contended that despite raising invoices, the Respondent failed to clear the debt. The Respondent acknowledged the debt in an email dated March 10, 2017, admitting an outstanding amount of ?53,83,299. However, no payment was made despite this acknowledgment.

3. The Adjudicating Authority rejected the application citing a pre-existing dispute and non-compliance with Section 9(3)(b) of the Code. The Applicant argued that the compliance under Section 9(3)(b) was not mandatory and challenged the rejection on the grounds of a pre-existing dispute before receiving the demand notice.

4. The Adjudicating Authority emphasized the importance of the demand notice in Form-4, issued on March 20, 2019, and delivered on March 23, 2019. The Respondent's responses to the demand notice highlighted a pre-existing dispute, as evidenced by email correspondence from January 2018 and April 2018.

5. Citing the judgment in Mobilox Innovations (P) Ltd. v. Kirusa Software (P) Ltd., the Operational Creditor argued that a genuine dispute existed, requiring further investigation. The Corporate Debtor had disputed the claims before the application under Section 9 was filed, and the Adjudicating Authority rejected the application mainly on the ground of a pre-existing dispute.

6. The Operational Creditor failed to file an affidavit as per Section 9(3)(b) of the Code, which requires a statement confirming no notice of dispute from the Corporate Debtor. However, the Supreme Court clarified that such an affidavit is not mandatory if the Corporate Debtor responds to the demand notice within 10 days, as seen in Macquarie Bank v. Shilpi Cable Technologies Ltd.

7. The Corporate Debtor had raised concerns about the quality of service and informed the Operational Creditor that services were no longer required, a year before the demand notice was issued. Considering these factors, the Tribunal upheld the Adjudicating Authority's decision to reject the application under Section 9 of the Code.

8. The Tribunal found no grounds for interference with the impugned order and dismissed the appeal, emphasizing the lack of justification for overturning the rejection. No costs were awarded in the matter.