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TMI Blog2017 (7) TMI 1X X X X Extracts X X X X X X X X Extracts X X X X ..... fused to entertain the application under Section 9 of 'I B code, no ground is made out to interfere with such orders. - Company Appeal (AT) (Insolvency) No. 14 of 2017, 15 of 2017 - - - Dated:- 31-5-2017 - Mr. Balvinder Singh, And S.J. Mukhopadhaya, JJ. For The Appellant : Mr. N.Mahabir and Mr. P.C.Arya, Advocates For The Respondent : Mr. S.N.Jha, Sr. Counsel, Mr. Atul T.N. and Mr. Harsh Raghuvanshi, Advocates JUDGEMENT SUDHANSU JYOTI MUKHOPADHAYA,J. As both the appeals have been preferred against common order dated 2nd March 2017 passed by 'Adjudicating Authority' (National Company Law Tribunal), Principal Bench, New Delhi, the appellant is common and common question of law is involved, they were heard together and disposed of by this common judgement. 2. Appellant, Philips India Limited (hereinafter referred to as 'Operational Creditor) had preferred two separate applications for initiation of Corporate Insolvency Resolution Process invoking provisions of Section 9 of Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as 'I B Code) against one Respondent - Corporate Debtor Goodwill Hospital and Research Centre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat, claimed and has classified itself as 'operational creditor' and has prayed for triggering of the Insolvency Process. A bare perusal of Section 9 of IBC would inter alia, reveal that this Tribunal is vested with the powers to reject the application of the operational creditor under Section 9(5) (d) of IBC in case it is found that notice of dispute has been received by such an operational creditor, or there is a record of dispute with the information utility. We have been informed that no 'Information Utility' has so far been set up and we are perforce to rely on the notice of dispute as sent by the respondent operational debtor to the applicant in the notice of dispute, the liability to pay has been completely denied. 7. The 'Corporate Debtors' have taken plea that there was an existence of dispute which they brought to the notice of the 'Operational Creditor' in reply to notice under Section 8 of the 'I B Code' read with Section 9 of 'I B Code'. 8. At this stage it is desirable to state that the Appellant - Operational Creditor issues a notice under Section 433(e) read with Section 434(1)(a) of the Companies Act on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o which the functioning of the equipment was majorly effected. It is further important to mention herein that the Allura Xper FD 20C installed at the hospital of my client was left unattended at the hospital of mtj client for several days due to minor problems which were to be repaired by your client but were never repaired in time causing severe financial loss due to non activity of the machine of my client. The unprofessional approach by the officials of your client has caused major loss of reputation for my client and caused severe inconvenience to the patient awaiting their treatment at the Hospital of my client due to which the payment was deducted by my client and the same was informed to the officials of your client. 10. The Adjudicating Authority then proceeded to discuss the provisions of law including the expression 'dispute' as defined and inclusive definition as could be seen from sub-section (6) of Section 5 of the 'I B Code' and observed: - dispute includes a suit or arbitration proceedings relating to- ( a) The existence of the amount of debt; ( b) The quality of goods or service; or ( c) The breach of a repre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The word 'includes' ought to be read as 'means and includes'. 12.3 The word 'include' is used because the proceedings could be of various other nomenclature and cannot be listed by an exhaustive definition. Proceedings could include a Writ petition, Consumer Court, Rent tribunal, Labour court, mediation, conciliation etc. 12.4 'Dispute; connotes a claim made and denied by the other party. A suit or arbitration would ordinarily be covered by 'Dispute'. Therefore, construing 'Dispute' to situations other than a proceedings/us would render the words 'suit or arbitration' in S. 5(6) otiose. Section 8(2): 12.5 Use of the word AND envisages a us/proceeding regarding the dispute. 12.6 It would not be an appropriate construction that there are two parts in Section 8(2) with the first party bring 'existence of a dispute' and the second part being 'record of the pendency of suit or arbitration...' by reading the conjunctive 'and' as disjunctive 'or'. Such a reading would render the second part otiose for the following reasons: (i) There is no limitation of time for the first part i.e. to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt meaning of the definition with the section 8(2) (a) of the Code enlarges the scope of the definition as provided in the section 5(6) of the Code and gives illustration of a pending suit or arbitration. It was submitted that after the rendering of defective services by operational creditor, to avoid the rigors of section 9 of the Code, the Corporate Debtor would, if the term dispute has to give a narrow meaning of a Suit or Arbitration proceeding be constraint to approach the Court seeking a negative declaration of non-payment which is prohibited under the Specific Relief Act. Hence, as per the submission of the respondent herein, a dispute would mean communication of a denial or repudiation of the claim of the operation creditor at first instance either when the invoice has been raised and duly communicated to the Corporate Debtor, a Recovery Notice has been received by a Corporate Debtor or a statutory notice under section 8(2) (a) has been received by a Corporate Debtor. Further as per submission of the Respondent, no negative burden of filing a suit or arbitration could be casted upon operational creditor in view of the above submission. The word 'includes' is a very ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ending arbitration or a civil suit. It must include disputes pending before every judicial authority including mediation, conciliation etc. as long there are disputes as to existence of debt or default etc., it would satisfy sub-section (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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e one of the party has moved before the High Court under Section 433 of the Companies Act, 1956 for initiation of liquidation proceedings against the corporate debtor and dispute is pending. Similarly, with regard to quality of foods, if 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 Sub-section (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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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