2020 (8) TMI 422 - AT - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - existence of dispute - application rejected on the ground that the claim of the Appellant falls within the ambit of Existence of Dispute - HELD THAT - The Adjudicating Authority have noticed that 75 MTs cargo is lost due to the moisture and remaining 30GMT cargo in rejected condition is still under the possession of appellant, which appears to be a disputed matter, came to the conclusion and hold that the claim amount raised by the appellant is a disputed claim - In an application under Section 9, it is always open to the Corporate Debtor to point out pre-existence of dispute. It is to be shown that the dispute was raised prior to the issuance of demand notice under Section 8(1). The existence of dispute must be pre-existing i.e. it must exist before the receipt of the demand notice or invoice. If it comes to the notice of the Adjudicating Authority that the operational debt is exceeding ₹ 1 lakh and the application shows that the aforesaid debt is due and payable and has not been paid, in such case, in absence of any existence of a dispute between the parties or the record of the pendency of a suit or arbitration proceeding filed before the receipt of the demand notice of the unpaid operational debt the application under Section 9 cannot be rejected and is required to be admitted. From the record, it is found that the Respondent has defaulted to pay more than ₹ 1 lakh and in absence of any pre-existing dispute, and the record being complete, the application under section 9 preferred by the Appellant was fit to be admitted - application admitted - moratorium declared.

Summary

Issues Involved:
Application under Section 9 of the Insolvency and Bankruptcy Code, 2016 for operational debt dispute.

Detailed Analysis:

1. Existence of Dispute:
The Appellant, an operational creditor, filed an application under Section 9 against the Corporate Debtor for unpaid invoices. The Adjudicating Authority rejected the application citing the existence of a dispute. The Appellant claimed a total amount of ?37,51,623 along with interest, which the Respondent denied. The Respondent alleged discrepancies in stock reports and raised issues regarding missing cargo trucks from 2013.

2. Pre-existing Dispute Requirement:
The Respondent argued that there was a dispute regarding the amount claimed by the Appellant. However, the Adjudicating Authority emphasized the need for a pre-existing dispute before the issuance of a demand notice under Section 8(1) of the I&B Code. Citing the case of "Mobilox Innovations Pvt Ltd Vs Kirusa Software (P) Limited," the Supreme Court highlighted the conditions for admitting an application under Section 9, including the necessity of a pre-existing dispute.

3. Analysis of Evidence:
The Court examined the communication between the parties, including stock reports and emails exchanged. The Appellant had informed the Respondent about stock losses and pending payments, while the Respondent raised issues of missing cargo and disputed invoices. The Respondent's failure to promptly address the discrepancies and raise a pre-existing dispute was noted.

4. Decision and Remittance:
After thorough analysis, the Tribunal set aside the previous judgment and remitted the case to the Adjudicating Authority for admission of the application under Section 9. The Court emphasized the lack of a pre-existing dispute, default in payment exceeding ?1 lakh, and the completeness of the record as reasons for allowing the appeal. The Corporate Debtor was given an opportunity to settle the matter before admission.

In conclusion, the judgment focused on the necessity of a pre-existing dispute, proper documentation of debts, and prompt resolution of discrepancies to avoid insolvency proceedings. The detailed analysis of evidence and legal principles guided the decision to remit the case for further consideration, highlighting the importance of adherence to procedural requirements in insolvency cases.