2022 (5) TMI 923 - AT - Insolvency and Bankruptcy

Initiation of CIRP - NCLT rejected the application on the ground of pre-existing dispute - the six ADMs received by the Operational Creditor, which had made flight bookings on behalf of the Respondent, but the requisite payments were not made by the Corporate Debtor - HELD THAT - On perusal of the Respondent s reply to Section 9 notice, it is found that the Respondent had communicated to the Operational Creditor vide email dated 10.01.2018 (reproduced at pg. 297 of the appeal paper book) stating very clearly that they would be in a position to make any payment against ADM only with respect of the same . The details of the ADMs, as sought by the Corporate Debtor vide email dated 10.01.2018, were supplied to the Corporate Debtor vide email dated 19.01.2018 sent by Sunita Nair of Tek Travels Pvt. Ltd. to Meera Kashyap with copy to Travel Markers alongwith copies of the ADMs (attached at pg. 359 of appeal paper book), and again vide email dated 24.03.2018 (attached at pp. 369-377 of the appeal paper book) details of ADMs receipt for Married Segments Policy violation were sent by the Operational Creditor. The ADMs were issued by Air France/KLM and Turkish Airlines, in the present case the Travel Boutique Online which are the brand name of the Operational Creditor. Thus, the primary responsibility for responding to the ADMs is of the ticketing agency Travel Boutique Online . Since, the Adjudicating Authority has primarily looked at the non-supply of ADMs to the Corporate Debtor in support of the contention regarding pre-existing dispute, we are of the view that it has committed an error by not considering the fact that the Operational Creditor had supplied the copies of the ADMs which is evidenced by emails dated 19.01.2018 and 24.03.2018 - the purported dispute considered by the Adjudicating Authority as a result of non-supply of copies of ADMs is more like a sham dispute, and it should not come in the way of admission of Section 9 application. Section 9 application of the Operational Creditor should be admitted. The case is remanded to the Adjudicating Authority for passing necessary order which should include order regarding all consequential actions which should follow upon admission of Section 9 application within 15 days of this judgment.

Summary

Issues:
- Appeal against order passed by Adjudicating Authority under Section 9 of IBC based on pre-existing dispute between parties.

Analysis:
1. The appeal was filed by the Appellant challenging the order passed by the Adjudicating Authority under Section 9 of the Insolvency and Bankruptcy Code, 2016, citing a pre-existing dispute between the Appellant and the Respondent. The Appellant, a B2B travel services provider, claimed that the Respondent, a travel agency, owed a total of Rs. 6,76,897 as operational debt, arising from unpaid invoices and Agency Debit Memos (ADMs) issued by the Appellant.

2. The Appellant contended that the Respondent had made partial payments against the invoices, indicating no dispute regarding the quality of services provided. The Respondent, on the other hand, argued that the Appellant, as the booking agent, was responsible for any violations and had failed to provide copies of the ADMs, leading to payment disputes.

3. The Respondent raised a dispute prior to the demand notice under Section 8, claiming no tie-up with airlines and relying on the Appellant for ticket bookings. The Adjudicating Authority considered the dispute genuine based on an email from the Respondent dated 10.01.2018, stating that payments against ADMs could only be made upon receipt of the same.

4. However, it was revealed that the Appellant had indeed supplied copies of the ADMs to the Respondent before the issuance of the demand notice, as evidenced by emails dated 19.01.2018 and 24.03.2018. The Adjudicating Authority's reliance on the non-supply of ADMs as a basis for a pre-existing dispute was deemed erroneous.

5. The Appellate Tribunal concluded that the dispute raised by the Respondent was more of a sham to avoid payment, as the ADM copies were provided in a timely manner. The impugned order was set aside, and the Section 9 application of the Operational Creditor was directed to be admitted, with the case remanded to the Adjudicating Authority for necessary actions within 15 days of the judgment.

6. No costs were awarded in the case. The detailed analysis highlighted the importance of timely communication and documentation in disputes related to operational debts under the Insolvency and Bankruptcy Code, emphasizing the need for genuine disputes to be distinguished from attempts to evade payment obligations.