Insolvency and BankruptcyNCLTRulings

NCLT finds evidence of existing dispute about the amount of debt, holds not maintainable u/s 9 of IBC

Anjani Glasses vs. B.P. Projects Pvt. Ltd.

NCLT rejects application for CIRP of Corporate Debtor on the grounds of existing serious dispute between the parties about the amount of debt.

In the present matter, Anjani Gases (Operational Creditor) filed an application to start Corporate Insolvency Resolution Process (CIRP) against M/s B.P. Projects Pvt. Ltd. (Corporate Debtor) under section 9 of the Insolvency & Bankruptcy Code, 2016 (I & B Code). Operational Creditor alleges that the Corporate Debtor failed to pay operational debt of Rs. 1,45,74,133/-. The Operational Creditor submits that the Operational Creditor supplied Industrial Oxygen Cylinders, Carbon Dioxide Cylinders and LPG Cylinders for a sum of Rs. 1,10,23,431/- which amounts to Rs. 1,45,74,133/- at an interest of 12% p.a. which is liable to be paid by the Corporate Debtor. Operational Creditor sent a demand notice u/s 8 of I&B Code, to which the Corporate Debtor contended false and concocted dispute about the amount claimed.

Corporate Debtor submits that the Operational Debtor has been paid an excess amount to the tune of Rs. 5,56,889/- and there is no amount due and payable by the Corporate Debtor to the Operational Creditor. Corporate Debtor submits that the Operational Creditor submitted bogus invoices and claimed the amount towards holding charges which was not agreed between the parties. Furthermore, Corporate Debtor claims that the Operational Creditor did not send the tax invoices so as to enable the Corporate Debtor to claim the refund and further made wrongful claims for delivery charges although the same was paid by the Corporate Debtor has paid the same at the time of delivery itself. Corporate Debtor submits that the Operational Creditor filed frivolous FIRs against the Corporate Debtor which is an outcome of disputes pending between the parties for the amount claimed. Corporate Debtor challenges the maintainability of the present application stating that the questions of law and facts involved in the present application should be adjudicated via a Civil Suit.

NCLT identifies the point of controversy to be “Whether there exist a dispute about the amount claimed which requires investigation and adjudication.” NCLT observes that the Operational Creditor filed an FIR against the Directors of the Corporate Debtor alleging they cheated the Operational Creditor by not paying due amount of Rs. 1,08,59,347/- and such FIR is challenged by the Corporate Debtor by filing a proceeding before the Hon’ble High Court at Calcutta, which is pending before the High Court for adjudication. NCLT observes that the aforementioned fact was not disclosed by the Operational Creditor in the present application but claimed the same amount pertaining to the same period for which allegations have been made. NCLT concludes that there is a serious dispute pending about the amount claimed by the Operational Creditor against the Corporate Debtor.

NCLT further observes that there exists no contract between the parties and that the invoices did not indicate the Operational Creditor’s entitlement to any holding charges. NCLT observes that there is a dispute between the parties regarding the amount claimed as well as non-submission of the tax invoices by the Operational Creditor to the Corporate Debtor. NCLT relies on the decision of the Apex Court in the matter of Mobilox Innovation Limited. V Kirusa Software Private Limited (Civil Appeal No. 9405 of 2017) in which the term “what means existence of dispute” is explained by the Apex Court in para 51 as – “it is clear that such notice should 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 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 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.”

NCLT observes that the Corporate Debtor has brought to the notice of the Operational Creditor pendency of dispute about the amount of debt claimed by the Operational Creditor. NCLT holds that there exists a serious dispute between the Operational Creditor and the Corporate Debtor about the amount of debt and hence the applicable is not maintainable under section 9 (5)(II) (d) of the Code.

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