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TMI Blog2018 (3) TMI 1889X X X X Extracts X X X X X X X X Extracts X X X X ..... efore the date on which demand notice was issued under sub-section (1) of Section 8 of the I B Code and was also pending when the application under Section 9 of the I B Code was admitted, application under section 9 of the I B Code was not maintainable. The order dated 30th August, 2017 passed by Adjudicating Authority, Bengaluru Bench is set aside and the appeal is allowed. X X X X Extracts X X X X X X X X Extracts X X X X ..... or' thereafter filed an application under Section 9 of the 'I & B Code' on 23rd February, 2017, wherein the impugned order was passed. The main ground taken by the Appellant is that the suit was pending as on the date of admission and prior to issuance of notice under sub-section (1) of Section 8 of the 'I & B Code'. 4. According to 'Operational Creditor' after admission of the application under section 9 of the 'I & B Code' suit was withdrawn by the 'Operational Creditor'. 5. Mr. Vaibhav Srivastava, learned counsel appearing on behalf of the workmen, submits that workmen have also not been paid the wages since January, 2014. Hence, it is a fit case for initiation of 'Corporate Insolvency Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filed before the receipt of such notice or invoice in relation to such dispute (Section 8(2)(a)). What is important is that the existence of the dispute and/or the suit or arbitration proceeding must be pre-existing - i.e. it must exist before the receipt of the demand notice or invoice, as the case may be. In case the unpaid operational debt has been repaid, the corporate debtor shall within a period of the self-same 10 days send an attested copy of the record of the electronic transfer of the unpaid amount from the bank account of the corporate debtor or send an attested copy of the record that the operational creditor has encashed a cheque or otherwise received payment from the corporate debtor (Section 8(2)(b)). It is only if, after th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efects within 7 days of the receipt of the notice from the adjudicating authority to make the application complete. Once this is done, and the adjudicating authority finds that either there is no repayment of the unpaid operational debt after the invoice (Section 9(5)(i)(b)) or the invoice or notice of payment to the corporate debtor has been delivered by the operational creditor (Section 9(5)(i)(c)), or that no notice of dispute has been received by the operational creditor from the corporate debtor or that there is no record of such dispute in the information utility (Section 9(5)(i)(d)), or that there is no disciplinary proceeding pending against any resolution professional proposed by the operational creditor (Section 9(5)(i)(e)), it sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d has not yet been paid? And (iii) Whether there is existence of a dispute between the parties or the record of the pendency of a suit or arbitration proceeding filed before the receipt of the demand notice of the unpaid operational debt in relation to such dispute? If any one of the aforesaid conditions is lacking, the application would have to be rejected. Apart from the above, the adjudicating authority must follow the mandate of Section 9, as outlined above, and in particular the mandate of Section 9(5) of the Act, and admit or reject the application, as the case may be, depending upon the factors mentioned in Section 9(5) of the Act." 9. As, admittedly the suit between the parties was pending before the date on which demand n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions and all such orders and actions are declared illegal and are set aside. Learned Adjudicating Authority will close the proceeding. The 'Corporate Debtor' company is released from all the rigour of law and is allowed to function independently through its Board of Directors from immediate effect, if no other proceeding under 'I & B Code' is initiated.
13. The Adjudicating Authority will fix the fee of 'Interim Resolution Professional', if appointed, and the 'Corporate Debtor' will pay the fees for the period he has functioned. The appeal stands disposed of with aforesaid observation and liberty. However, in the facts and circumstances of the case, there shall be no order as to cost. X X X X Extracts X X X X X X X X Extracts X X X X
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