2021 (10) TMI 339 - AT - Insolvency and Bankruptcy

Seeking reconciliation of the invoices that were presented by the Operational Creditor - absence of non-production of work completion reports relating to the invoices under question - Pre-existing dispute or not - HELD THAT - No prima facie case is made out in favour of the Appellant, moreso in the light of the fact that the Corporate Debtor was making regular payments on invoices raised Corporate Debtor on the invoices raised before February 2018. This coupled with the fact that in the Reply on affidavit submitted by the Corporate Debtor in the Application filed by the Operational Creditor u/s. 9 of IBC before the Adjudicating Authority the Corporate Debtor has stated 'payable when able' being his payment condition. The argument of the Ld. Counsel of Respondent No. 1 is convincing that this alleged dispute has been raised at this late stage only after the Operational Creditor started asking for his pending payments to show that a pre-existing dispute was present even though it is a spurious dispute, to avoid action under IBC. Thus we find that a prima facie case doesn't exist in favour of the Appellant. Both the parties are agreeable for early hearing and finalization of the appeal case on merits. Hence, no irreparable harm will be caused to the Corporate Debtor if he is not granted stay at this stage. Therefore, there are no sufficient and cogent reason to grant an order for staying the CIRP in the case. The matter be fixed for final hearing on 9th Nov. 2021.

Summary

Issues:
1. Consideration of stay application in insolvency proceedings under the Insolvency and Bankruptcy Code, 2016.

Analysis:
The judgment pertains to an appeal regarding the grant of a stay in insolvency proceedings under the Insolvency and Bankruptcy Code, 2016. The Appellant, a Corporate Debtor, argued that reconciliation of invoices was repeatedly sought from the Operational Creditor, and a dispute existed as defined in the IBC. The Appellant claimed a prima facie case in their favor, emphasizing the necessity of reconciliation before payment. The Respondent No. 1 contended that invoices were regularly paid, and pending payments were due to liquidity issues of the Corporate Debtor. The Respondent argued that the dispute raised by the Corporate Debtor was spurious and aimed at avoiding action under the IBC. The Tribunal reviewed documents and oral submissions, noting the lack of cooperation by the Appellant with the Interim Resolution Professional (IRP) and the history of payments and demands between the parties.

The Tribunal found that no prima facie case existed in favor of the Appellant, considering the regular payments made by the Corporate Debtor and the timing of dispute raised after demands for pending payments. The judgment referenced the Supreme Court's decision in Mobilox Innovations, emphasizing that a pre-existing dispute, if not false or spurious, could lead to the rejection of an application under Section 9 of the IBC without delving into the dispute's merits. The Tribunal scheduled the final hearing for November 9, 2021, as both parties agreed for an early hearing and finalization of the appeal on merits. The Tribunal declined to grant a stay, stating that no irreparable harm would be caused to the Corporate Debtor at that stage. It clarified that the decision on the stay application would not impact the final outcome of the appeal after hearing it on merits.