Application under Section 9 of I&B Code not maintainable where ‘dispute’ existed prior to filing petition under Sections 433(e) and 434(1) of Companies Act

National Company Law Appellate Tribunal (NCLAT): A Bench comprising of Justice S.J. Mukhopadhaya, Chairperson and Justice Bansi Lal Bhat, Member (Judicial) dismissed an appeal filed against the order of National Company Law Tribunal, Bengaluru dismissing appellant’s application under Section 9 of the Insolvency and Bankruptcy Code, 2016.

The appellant had filed a petition under Section 433(e), 434(1) and 439 of Companies Act, 1956 before the Karnataka High Court. The petition was transferred pursuant to rule 5of the Companies (Transfer of Pending Proceedings) Rules, 2016 to NCLT. The petition was treated as an application under Section 9 of the I&B Code by the appellant. Demand Notice under Section 8(1) was issued. After hearing the parties, NCLT dismissed the application on the ground of pre-existing dispute. Aggrieved thereby, the present appeal was filed.

Raghavendra M. Bajaj, Advocate for the appellant submitted that the Corporate Debtor had agreed to pay dues by 5 different times. But the Corporate Debtor claimed the existence of ‘dispute’. It raised objections regarding non-completion of project within time and completion of the same in haste with defects.

The Appellate Tribunal noted that the objections were raised by the Corporate Debtor much prior to the filing of petition under Companies Act. It was held that such disputes cannot be decided by NCLT but only by a civil court of competent jurisdiction on basis evidence. Therefore, as there existed a dispute raised prior to filing of petition under Sections 433(e) and 434(1) of Companies Act, it was held that the application under Section 9 of I&B Code was not maintainable. [Yash Technologies (P) Ltd. v. Base Corpn. Ltd., 2019 SCC OnLine NCLAT 1, dated 03-01-2019]

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