The division judge bench of Justice Ashok Bhushan and Barun Mitra, Member (Technical) of the National Company Appellate Tribunal in the case of Amrop India Private Limited Vs The Hi-Tech Gears Limited held that for a pre-existing dispute to be ground to nullify an application under Section 9, the dispute raised must be truly existing at the time of filing a reply to notice of demand as contemplated by Section 8(2) of IBC or at the time of filing the Section 9 application.
Brief Facts:
The factual matrix of the case is that the corporate debtor entered into two contracts with Amrop India Consultant Private Limited (AICPL) to fill up vacancies. The four invoices were raised by the AICPL for the services rendered. Thereafter, the AICPL sold their business to the Amrop India Private Limited (present appellant) and the appellant sent a letter demanding payment of Rs.29,65,732/- from the Corporate Debtor. However, the corporate debtor denied the outstanding amount and in return raised a counterclaim of Rs.137.53 lakh. Furthermore, the appellant served the corporate debtor with the demand notice under Section 8 of IBC. Then, the appellant applied Section 9 before the adjudicating authority. However, the adjudicating authority rejected the application which resulted in the present appeal.
Contentions of the Appellant:
The learned counsel appearing on behalf of the Appellant submitted that the adjudicating authority was wrong in noting that there was a pre-existing dispute between the parties by simply relying on certain emails of the Corporate Debtor in which the deficiency of services had been raised. It was furthermore submitted that the ingredients of Section 9 were fulfilled as there existed operational debt which had become due and payable and the said debt was free of any pre-existing dispute.
Contentions of the Respondent:
The learned counsel appearing on behalf of the Respondent submitted that the adjudicating authority was right in deciding that there were pre-existing disputes. It was furthermore submitted that by creating confusion in the Executive Search Contract, the Operational Creditor attempted to mislead the parties involved in the current issues and give the impression that the contract was not composite. At last, it was submitted that the Corporate Debtor had made payments conditional on resolving performance difficulties rather than unconditionally agreeing to make any and the adjudicating authority was right in dismissing the Section 9 application.
Observations of the Court:
The Hon’ble Court observed that a pre-existing dispute must have been genuine at the time the Section 9 application is filed or the reply to the notice of demand is filed, as specified by Section 8(2) of the IBC, for it to serve as a basis for nullifying an application under that section.
It was furthermore observed from analysing the emails that there exist genuine pre-existing disputes and the adjudicating authority committed no mistake in concluding that there was a pre-existing dispute.
Based on these considerations, the court was of the view that the proceedings under Section 9 of the IBC couldn’t be initiated and the application deserved to be rejected.
The decision of the Court:
With the above direction, the court dismissed the appeal.
Case Name: Amrop India Private Limited Vs The Hi-Tech Gears Limited
Coram: Hon’ble Mr. Justice Ashok Bhushan and Hon’ble Mr. Barun Mitra, Member (Technical)
Case No.: Company Appeal (AT)(Insolvency) No. 1251 of 2023 & I.A. No.4417, 4356 of 2023
Advocate for the Appellant: Mr. Angad Varma and Mr. Prashat Kumar, Advocates.
Advocate for the Respondent: Mr. Nishant Datta, Mr. Pradeep Bharwat, Mr. Chirag Rathi, Mr. Aditya Narain, Advocates.
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