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TMI Blog2017 (11) TMI 890X X X X Extracts X X X X X X X X Extracts X X X X ..... chit Tripathi, Advocates for Bank of India ORDER The Respondent- Operational Creditor filed an application under section 9 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as I B Code ) for initiation of Corporate Insolvency Resolution Process against the Appellants- Corporate Debtor . By impugned order dated 7th September, 2017, the Adjudicating Authority (National Company Law Tribunal), Kolkata Bench, Kolkata, having admitted the application and appointed Interim Resolution Professional with direction to take steps as per sections 15, 17 and 18 of the 1 B Code , the present appeal has been preferred against the said order. 2. The main plea taken by the Appellants- Corporate Debtor is that there is a dispute in existence and therefore the application under Section 9 was not maintainable at the instance of the Respondent- Operational Creditor . 3. From the record we find that the Respondent- Operational Creditor through Advocate issued notice dated 15th June, 2016 under section 138 of the Negotiable Instrument Act, 1881 and made certain claims. In reply to the same, learned counsel for the Appellants- Corporate Debtor by reply dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Sections 9(1) and 9(2). This application is to be filed under Rule 6 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 in Form 5, accompanied with documents and records that are required under the said form. Under Rule 6(2), the applicant is to dispatch by registered post or speed post, a copy of the application to the registered office of the corporate debtor. Under Section 9(3), along with the application, the statutory requirement is to furnish a copy of the invoice or demand notice, an affidavit to the effect that there is no notice given by the corporate debtor relating to a dispute of the unpaid operational debt and a copy of the certificate from the financial institution maintaining accounts of the operational creditor confirming that there is no payment of an unpaid operational debt by the corporate debtor. Apart from this information, the other information required under Form 5 is also to be given. Once this is done, the adjudicating authority may either admit the application or reject it. If the application made under subsection (2) is incomplete, the adjudicating authority, under the proviso to sub-section 5, may give a notice to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndency of a suit or arbitration proceeding filed before the receipt of the demand notice of the unpaid operational debt in relation to such dispute? 39. It is now important to construe Section 8 of the Code. The operational creditors are those creditors to whom an operational debt is owed, and an operational debt, in turn, means a claim in respect of the provision of goods or services, including employment, or a debt in respect of repayment of dues arising under any law for the time being in force and payable to the Government or to a local authority. This has to be contrasted with financial debts that may be owed to financial creditors, which was the subject matter of the judgment delivered by this Court on 31.8.2017 in Innoventive Industries Ltd. v. ICICI Bank (Civil Appeal Nos. 8337-8338 of2Ol 7). In this judgment, we had held that the adjudicating authority under Section 7 of the Code has to ascertain the existence of a default from the records of the information utility or on the basis of evidence furnished by the financial creditor within 14 days. The corporate debtor is entitled to point out to the adjudicating authority that a default has not occurred; in the sense t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isputes would only stave off the bankruptcy process if they are already pending in a suit or arbitration proceedings and not otherwise. This would lead to great hardship; in that a dispute may arise a few days before triggering of the insolvency process, in which case, though a dispute may exist, there is no time to approach either an arbitral tribunal or a court. Further, given the fact that long limitation periods are allowed, where disputes may arise and do not reach an arbitral tribunal or a court for upto three years, such persons would be outside the purview of Section 8(2) leading to bankruptcy proceedings commencing against them. Such an anomaly cannot ppoossssibiblyly have been intended by the legislature nor has it so been intended. We have also seen that one of the objects of the Code qua operational debts is to ensure that the amount of such debts, which is usually smaller than that of financial debts, does not enable operational creditors to put the corporate debtor into the insolvency resolution process prematurely or initiate the process for extraneous considerations. It is for this reason that it is enough that a dispute exists between the parties. 5. In the p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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