National Company Law Appellate Tribunal
Value Kine Interiors Pvt. Ltd vs Rattan India Power Ltd on 8 December, 2017
NATIONAL COMPANY LAW APPELLATE TRIBUNAL
NEW DELHI
Company Appeal (AT) (Insolvency) No. 305 of 2017
IN THE MATTER OF:
Value Kine Interiors Pvt. Ltd. ...Appellant
Versus
Rattan India Power Ltd. ...Respondent
Present:
For Appellant : Shri Manohar Malik, Advocate
ORDER
08.12.2017 The appellant (Operational Creditor) preferred an application under Section 9 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as the 'I & B Code') for initiation of 'Corporate Insolvency Resolution Process' of the respondent - M/s. Rattan India Power Ltd. Having noticed that there is an 'existence of dispute' between the parties, the Adjudicating Authority (National Company Law Tribunal) New Delhi Bench by the impugned order dated 23rd October, 2017 rejected the application No. (IB) -367(ND)/2017.
2. Learned counsel appearing on behalf of the appellant submitted that the defects as were pointed out has already been rectified. After rectification of the defects, there was no dispute since 30th June, 2016.
3. From the record, we find that the Adjudicating Authority has referred to the correspondence between the parties on different dates such as 1st October, 2015, 10th February, 2016, 16th May, 2016 etc. By those letters, the Corporate Company Appeal (AT) (Insolvency) No. 305 of 2017 1 Debtor had specifically alleged that the Operational Creditor did not finish several items and abandoned the work. In their letter dated 11th March, 2016, the Corporate Debtor has also taken a plea that due to non-completion of work it caused loss to the Corporate Debtor. This apart, we also find that pursuant to demand notice issued by the appellant under sub-section (1) of Section 8, the respondent disputed the claim by reply dated 11th September, 2017.
4. Similar issue fell for consideration before the Hon'ble Supreme Court in Mobilox Innovations Private Ltd. vs. Kirusa Software Pvt. Ltd. - 2017 SCC ONLINE SC 1154 wherein the Hon'ble Supreme Court observed as follows:
"40. It is, thus, clear that so far as an operational creditor is concerned, a demand notice of an unpaid operational debt or copy of an invoice demanding payment of the amount involved must be delivered in the prescribed form. The corporate debtor is then given a period of 10 days from the receipt of the demand notice or copy of the invoice to bring to the notice of the operational creditor the existence of a dispute, if any. We have also seen the notes on clauses annexed to the Insolvency and Bankruptcy Bill of 2015, in which "the existence of a dispute" alone is mentioned. Even otherwise, the word "and" occurring in Section 8(2)(a) must be read as "or"
keeping in mind the legislative intent and the fact that an anomalous situation would arise if it is not read as "or". If read as "and", disputes would only stave off the Company Appeal (AT) (Insolvency) No. 305 of 2017 2 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 possibly 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."
While observing so, the Hon'ble Supreme Court further held that :
Company Appeal (AT) (Insolvency) No. 305 of 2017 3 "44. This being the case, is it not open to the adjudicating authority to then go into whether a dispute does or does not exist?"
The Hon'ble Supreme Court further observed that once the operational creditor has filed an application, which is otherwise complete, the Adjudicating Authority must reject the application under Section 9(5)(2)(d) if notice of dispute has been received by the 'Operational Creditor' or there is a record of dispute in the information utility, as quoted below:
"54. It is clear, therefore, that once the operational creditor has filed an application, which is otherwise complete, the adjudicating authority must reject the application under Section 9(5)(2)(d) if notice of dispute has been received by the operational creditor or there is a record of dispute in the information utility. It is clear that such notice must bring to the notice of the operational creditor the "existence" of a dispute or the fact that a suit or arbitration proceeding relating to a dispute is pending between the parties. Therefore, all that the adjudicating authority is to see at this stage is whether there is a plausible contention which requires further investigation and that the "dispute" is not a patently feeble legal argument or an assertion of fact unsupported by evidence. It is important to separate the grain from the chaff and to reject a spurious defence which is mere bluster. However, in doing so, the Court does not need to be satisfied that the defence is Company Appeal (AT) (Insolvency) No. 305 of 2017 4 likely to succeed. The Court does not at this stage examine the merits of the dispute except to the extent indicated above. So long as a dispute truly exists in fact and is not spurious, hypothetical or illusory, the adjudicating authority has to reject the application."
5. In the present case, we find that there is an 'existence of dispute' and a notice of dispute has been received by the 'Operational Creditor'. In the aforesaid background the Adjudicating Authority rightly rejected the application filed by the appellant under Section 9 of the I & B Code. In absence of any merit in the appeal, the appeal is dismissed. However, in the facts and circumstances of the case, there shall be no order as to costs.
[Justice S.J. Mukhopadhaya]
Chairperson
[ Justice Bansi Lal Bhat ] [ Justice A.I.S. Cheema ]
Member (Judicial) Member (Judicial)
/ns/uk
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