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TMI Blog2017 (6) TMI 984X X X X Extracts X X X X X X X X Extracts X X X X ..... djudicating authority would have noticed the provisions as discussed above and what constitute and as to what constitute 'dispute' in relation to services provided by operational creditor then would have come to a conclusion that condition of demand notice under subsection (2) of Section 8 has not been fulfilled by the corporate debtor and the defence claiming dispute was not only vague, got up and motivated to evade the liability. For the reasons aforesaid we set aside the impugned order passed by adjudicating authority and remit the case to adjudicating authority for consideration of the application of the appellant for admission if the application is otherwise complete. - Company Appeal (AT) (Insolvency) 6 of 2017 - - - Dated:- 24-5-2017 - Mr. Balvinder Singh, And Mr. S.J. Mukhopadhaya, JJ. For The Appellant : Mr Amar Gupta, Mr. Sanjeev Jam, Ms Apoorva Agrawal, Mr Alok Dhir, Ms Varsha Banerjee, Mr. Milan Negi and Mr. Kunal odhwani, For The Respondent : Mr. Devansh Mohta, Mr. Shyam Pandya, Mr. Puneet Singh Bindra and Mr. Rohan Kaushal, Advocates JUDGEMENT SUDHANSU JYOTI MUKHOPADHAYA, J. The appellant - operational creditor filed petition under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under Section 9 of the Code, the requirements under Section 8 of the Code are required to be complied with, which reads as under: - 8. Insolvency Resolution by operational creditor (1) An operational creditor may, on the occurrence of a default, deliver a demand notice of unpaid operational debtor copy of an invoice demanding payment of the amount involved in the default to the corporate debtor in such form and manner as may be prescribed. (2) The corporate debtor shall, within a period of ten days of the receipt of the demand notice or copy of the invoice mentioned in sub-section (1) bring to the notice of the operational creditor- (a) existence of a dispute, if any, and record of the pendency of the suit or arbitration proceedings filed before the receipt of such notice or invoice in relation to such dispute; (b) the repayment of unpaid operational debt- (i) by sending an attested copy of the record of electronic transfer of the unpaid amount from the bank account of the corporate debtor; or (ii) by sending an attested copy of record that the operational creditor has encashed a cheque issued by the corporate debtor. Explanation. -For ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... delivered by the operational creditor to the corporate debtor; (b) an affidavit to the effect that there is no notice given by the corporate debtor relating to a dispute of the unpaid operational debt; (c) a copy of the certflcate from the financial institutions maintaining accounts of the operational creditor confirming that there is no payment of an unpaid operational debt by the corporate debtor; and (d) such other information as may be specified (4) An operational creditor initiating a corporate insolvency resolution process under this section, may propose a resolution professional to act as an interim resolution professional. (5) The Adjudicating Authority shall, within fourteen days of the receipt of the application under sub-section (2), by an order- (i) admit the application and communicate such decision to the operational creditor and the corporate debtor (a) the application made under sub-section (2) is complete; (b) there is no repayment of the unpaid operational debt; (c) the invoice or notice for payment to the corporate debtor has been delivered by the operational creditor; (d) no notice of dispute has been r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... debtor shall, within a period of ten days of the receipt of the demand notice or copy of the invoice mentioned in sub-section (1), 'bring to the notice of the operational creditor.., the existence of a dispute.... . 13. Under Section 7 neither notice of demand nor a notice of dispute is relevant whereas under Sections 8 and 9 notice of demand and notice of dispute become relevant both for the purposes of admission as well as for and rejection. 14. It may be helpful to interpret Sections 8 and 9 and the jurisdiction of the Adjudicating Authority being akin to that of a judicial authority under Section 8 of the Arbitration Conciliation Act, 1996 amended up to date, which mandates that the judicial authority must refer the parties to arbitration if the matter before it is subject to an arbitration agreement Section 8 as amended in 2015 contemplates the judicial authority to form a prima facie view in relation to existence of a valid arbitration agreement, thereby conferring limited jurisdiction. 15. Though the words 'prima facie' are missing in Sections 8 and 9 of the Code, yet the Adjudicating Authority would examine whether notice of dispute in fact raises ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spute should cover all disputes on debt, default etc. and not be limited to only two ways of disputing a demand made by the operational creditor, i.e. either by showing a record of pending suit or by showing a record of a pending arbitration. The intent of the Legislature, as evident from the definition of the term dispute , is that it wanted the same to be illustrative (and not exhaustive). If the intent of the Legislature was that a demand by an operational creditor can be disputed only by showing a record of a suit or arbitration proceeding, the definition of dispute would have simply said dispute means a dispute pending in Arbitration or a suit. 20. The Hon'ble Supreme Court in P. Kasilingam Vs PSB College of Technology 1995 Supp. (2) SCC 348 was dealing with the question what expression 'College' includes as used in the relevant Rule. The Hon'ble Supreme Court observed what is the intent of the of the Legislature when the expression used in the definition is 'means' and when the expression used is 'includes'. At page 356 para 19 it observed as under: a particular expression is often defined by the Legislature by using the word & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to 'existence of a dispute, if any'. In the said case, the Hon'ble Supreme Court at page 316 para 8 observed as under: It is not a sound principle of construction to brush aside word (s) in a statute as being inapposite surplusage: if they can have appropriate application in circumstances conceivably within the contemplation of the statute. In the interpretation of statutes the Courts always presume that the Legislature inserted every part of the statute for a purpose and the legislative intention is that every part of the statute should have effect. The Legislature is deemed not to waste its words or to say anything in vain 24. The statutory requirement in sub-section (2) of Section 8 of the 'I B Code' is that the dispute has to be brought to the notice of the Operational Creditor. The two comes post the word 'dispute' (if any) have been added as a matter of convenience and/or to give meaningfulness to sub-section (2) of Section 8 of the 'I B Code'. Without going into the grammar and punctuation being hapless victim of pace of life, if one discovers the true meaning of sub-section (2)(a) of Section 8 of the 'I B Code' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on (2) of Section 8 of the 'I B Code'. 28. Therefore, as per sub-section (2) of the 'I B Code', there are two ways in which a demand of an Operational Creditor can be disputed: i. By bringing to the notice of an operational creditor, 'existence of a dispute'. In this case, the notice of dispute will bring to the notice of the creditor, an 'existence of a dispute' under the Code. This would mean disputes as to existence of debt or default etc,; or ii. By simply bringing to the notice of an operational creditor, record of the pendency of a suit or arbitral proceedings in relation to a dispute. In this case, the dispute in the suit/arbitral proceeding should relate to matters (a)-(c) in sub-section (6) of Section 5 and in this case, showing a record of pendency of a suit or arbitral proceedings on a dispute is enough and to intent of the Legislature is clear, i.e. once the dispute (on matters relating to 3 classes in sub-section (6) of Section 5 of the 'I B Code') is pending adjudication, that in itself would bring it within the ambit of sub-section (6) of Section 5 of the 'I B Code'. 29. The definition of 'dispute& ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the 'corporate debtor' has raised a dispute, and brought to the notice of the 'operational creditor' to take appropriate step, prior to receipt of notice under sub-section (1) of Section 8 of the 'I B Code', one can say that a dispute is pending about the debt. Mere raising a dispute for the sake of dispute, unrelated or related to clause (a) or (b) or (c) of Subsection (6) of Section 5, if not raised prior to application and not pending before any competent court of law or authority cannot be relied upon to hold that there is a 'dispute' raised by the corporate debtor. The scope of existence of 'dispute', if any, which includes pending suits and arbitration proceedings cannot be limited and confined to suit and arbitration proceedings only. It includes any other dispute raised prior to Section 8 in this in relation to clause (a) or (b) or (c) of sub-section (6) of Section 5. It must be raised in a court of law or authority and proposed to be moved before the court of law or authority and not any got up or malafide dispute just to stall the insolvency resolution process. 32. There may be other cases such as a suit relating to existen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by corporate debtor under any act or law including while replying to a notice under section 80 of CPC, 1908 or to a notice issued under Section 433 of the Companies Act or Section 59 of the Sales and Goods Act or regarding quality of goods or services provided by 'operational creditor' will come within the ambit of dispute, raised and pending within the meaning of sub-section (6) of Section 5 read with sub-section (2) of Section 8 of I B code, 2016. 36. In the present case we find that the notice in Form 'D' under the I B Code,2016, Application to Adjudicating Authority Rules, 2016, was given by appellant-'operational creditor' on 23rd December, 2016 under the said rules was also forwarded. One MIs Desai Diwanji, Advocates, Solicitors and Notaries vide letter dated 27th December, 2016 replied to the same on behalf of respondentcorporate debtor- MIs Mobilox Innovations Private Limited, relevant of which reads as follows: 1. At the outset, we say that you on behalf of your Client have engaged yourselves into a protracted correspondence with our Client on the issues raised in the Notices. Our Client disputes and denies each of the statements and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t http://kirusal.pairserver.com/ ?page_id=34 and https :t/in. linkedin. corn,' pub/vikram-agarwal/7/3al/83b. Your client should note that any client information of any party carries intrinsic confidentiality obligations (including under the NDA) and your client's breach of the NDA violated the basic keystone of a business relationship. Xxx g) With respect to paragraph no.8 of the 12 December, 2016 Notice, it is denied that an amount of ₹ 20,08,202.55 is an admitted debt on the part of our client based on the contracts in the form of POs placed by our Client and the corresponding Invoices raised by your client for effecting the required services for the campaign under the POs. Our client deny that it had failed to discharge its admitted liability; therefore, it is evident that it is not unable to pay its debt. It is pertinent to highlight that our client has, at no point of time, confirmed or admitted its liability towards your client to pay an amount of ₹ 20,08,202.55. In this regard, our client repeats and reiterates the contents of paragraph number 6 of this reply. 37. Apart from the quoted portion, if reply dated 27 December, 2016 is read in tot ..... X X X X Extracts X X X X X X X X Extracts X X X X
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