The Principal Bench, New Delhi, National Company Law Appellate Tribunal (hereinafter referred to as “NCLAT”) expounded that when the issues are contractual in nature, Section 9 application of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as “IBC”) cannot be accepted. It further held that the application cannot be entertained when there is a pre-existing dispute between the parties.
Brief Facts:
The Appellant used to provide consultancy services to the Corporate Debtor and about one such service, a letter was issued by the Corporate Debtor concerning the quality of service. The Appellant asked for payments but there was no response from the Corporate Debtor.
The present Appeal has been filed against the order of the Adjudicating Authority vide which Section 9 application of the IBC was rejected.
The Adjudicating Authority held that there was an existence of a pre-existing dispute between the parties due to the letter issued regarding the quality of service offered.
Contentions of the Appellant:
It was argued that despite the issuance of the letter, the services were continued as the contract between the parties was not terminated. Therefore, the Appellant followed for the payment, but there was no response.
Observations of the Bench:
It was noted that vide the letter by the Corporate Debtor, the Appellant was informed about the poor performance of the consultancy service and how the process of consultancy resulted in a poor end.
It was observed that even the submission of the Appellant that the contract was never terminated does not negate the dispute between the parties due to the poor quality of services offered and the same was communicated in a detailed manner.
The Bench opined that the disputes pertaining to contractual issues cannot be resolved in Section 9 proceedings and further, there was a pre-existing dispute and hence, Section 9 application cannot be accepted in such a case.
Decision of the Bench:
Therefore, based on the reasons, the appeal was accordingly dismissed.
Case Title: A’XYKno Capital Services Pvt. Ltd. V. Rattan India Power Ltd.
Coram: Chairperson, Justice Ashok Bhushan, Technical Member, Barun Mitra
Case No.: Company Appeal (AT) (Insolvency) No. 913 of 2022
Advocates for Appellant: Adv. Mr. Nikhil Nayyar, Mr. Vikram Hedge, Mr. Naveen Hegde, Mr. Chitwan Sharma
Advocates for Respondent: Adv. Mr. Karan Batura, Mr. Jayant Chawla
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