National Company Law Appellate Tribunal, New Delhi: While upholding the order passed by the Adjudicating Authority admitting an application filed under S. 9 of the Insolvency and Bankruptcy Code, 2016 (IBC), a Division bench comprising of Ashok Bhushan, J., and Barun Mitra* (Technical Member), opined that a Corporate Debtor cannot raise an issue of pre-existing dispute when there is no evidence of any lacuna prior to demand notice.
Factual Matrix
In the instant matter, a dispute between both parties arose when the respondent-Operational Creditor (Tarannom Shargh International Transportation Co.) denied the moving of the Corporate Debtor (Lark Logistics Private Ltd.)’s cargo with a consignment of medical supplies belonging to the Indian Embassy personnel in Kyrgyzstan.
The respondent sent a demand notice under S. 8 of the IBC after the Corporate Debtor asked the respondent to perform an acceptable account reconciliation and the respondent refused the same and decided to donate the consignment of medical supplies to Afghanistan. On 23-02-2021, the respondent preferred an application under S. 9 of the IBC against the Corporate Debtor.
The Adjudicating Authority, vide order dated 20-06-2022, admitted S. 9 application and directed the initiation of Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor. Aggrieved by the impugned order passed by the Adjudicating Authority the appellant, suspended director of the Corporate Debtor preferred an appeal before the NCLAT challenging the same.
Parties’ Contentions
The appellant contended that the Adjudicating Authority had overlooked the fact that the Corporate Debtor had insisted on account reconciliation to determine if any payment was genuinely due, moreover, the respondents were aware that here are no outstanding debts that would trigger CIRP and that the Adjudicating Authority has merely acted like a debt recovery forum.
On the other hand, the Respondents contended that there was an outstanding liability of USD 3,16,217 towards operational dues for which the respondent’s had sent a S. 8 demand notice and default had been committed by the Corporate Debtor qua the invoices raised by the respondent, moreover, the Corporate Debtor had unreservedly approved the bills submitted by the Operational Creditor.
Moot Point
Whether there was any pre-existing dispute which was raised prior to the issue of demand notice by the Operational Creditor on 16.12.2020?
NCLAT’s Observation and Verdict
While applying the test laid down by the Supreme Court in Mobilox Innovative (P) Ltd. v. Kirusa Software (P) Ltd., (2018) 1 SCC 353, for examining an application preferred under S. 9 of the IBC, the NCLAT observed that the adjudicating authority did no mistake in recognising the Corporate Debtor’s admission of failing to pay the operating dues because of bad financial standing and external circumstances, moreover, the stoppage of shipment was a consequence of the debt being unpaid.
The NCLAT further observed that after the Corporate Debtor has frozen their liability, addressed the issue of rate discrepancies and accompanied reconciliation seems redundant and does not appear authentic. The NCLAT stated that “The Adjudicating Authority therefore does not appear to have committed any error in holding the alleged disputes claimed by the Corporate Debtor to be feeble as it is not supported by credible evidence.”
While dismissing the appeal, the NCLAT held that in the light of overall facts and circumstances of the present case there is no illegality in the impugned order passed by the Adjudicating Authority admitting the S. 9 application.
[Sharad Chandra Goel v. Tarannom Shargh International Transportation Co., 2023 SCC OnLine NCLAT 232, order dated 04-05-2023]
*Judgment by Mr. Barun Mitra
Advocates who appeared in this case :
Mr. Brijesh Kumar Tamber, Mr. Prateek Kushwaha and Mr. Vinay Singh Bist, Counsel for the Appellant;
Mr. Rohit Bansal, Counsel for the Respondent No. 1;
Mr. Vishal Ganda, Ms. Akanksha Mathur and Mr. Rahul Natula, Counsel for the Respondent No. 2.
