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National Company Law Appellate Tribunal (NCLAT): A two-member bench comprising of Justice S.J. Mukhopadhaya, Chairperson and Justice A.I.S. Cheema, Member (Judicial), allowed an appeal filed against the order of National Company Law Tribunal, Mumbai whereby an application preferred by the respondent (Operational Creditor) under Section 9 of the Insolvency and Bankruptcy Code, 2016 was admitted; order of moratorium was passed; and Insolvency Resolution Professional was appointed.

The appellant (Corporate Debtor), referring to the emails exchanged between the parties, submitted that there was an existence of dispute prior to issuing of demand notice under Section 8(1). The dispute as alleged was regarding the quantum of payment, which was subsequently settled and the agreed amount plus GST had already been paid to the respondent. It is pertinent to note that originally, as submitted by the respondent, the appellant agreed to pay a fee of Rs 1 crore as brokerage towards the TATA-Neptune deal. However, the respondent accepted that the same was settled at Rs 75 lakhs plus GST, part payment of which was already done. The appellant submitted that though there was an existence of dispute, inspite of the same the NCLT admitted respondent’s application under Section 9 and passed the order impugned.

For settling the issue at hand, the Appellate Tribunal made a reference to the Supreme Court decision in Innoventive Industries Ltd. v. ICICI Bank(2018) 1 SCC 407 and perused Section 7 (when it comes to financial creditor triggering the process, this section becomes relevant) and Section 9 of the Code. It was observed that the Supreme Court, in the case mentioned herein, held that in a petition under Section 9, the Corporate Debtor has a right to show that there is an existence of dispute  about the quality of goods and services provided, as well as a right to dispute the debt including the quantum of payment. In view of the Appellate Tribunal, the emails exchanged between the parties clearly show that negotiations were going on relating to the quantum of payment. Originally, the payment to be made was Rs 1 crore which was finally settled at Rs 75 lakh. In such circumstances, it could be accepted that there was an existence of dispute about the payment of the debt. The Appellate Tribunal held, if the debt has been disputed, the question of default does not arise. Accordingly, the appeal filed by the Corporate Debtor was allowed; the order impugned passed by the National Company Law Tribunal, Mumbai was set aside, and the application preferred by Operational Creditor was dismissed. [Nayan Shah v. Viral Rajarashi Mehta, 2018 SCC OnLine NCLAT 411, dated 29-06-2018]

Case BriefsTribunals/Commissions/Regulatory Bodies

National Company Law Appellate Tribunal: A two-member bench comprising of S.J. Mukhopadhaya, J. (Chairperson) and Bansi Lal Bhat, J. (Member, Judicial), allowed an appeal filed against the order passed by the National Company Law Tribunal (Adjudicating Authority) whereunder application under Section 9 of Insolvency and Bankruptcy Code 2016, preferred by the respondent was admitted and Insolvency Resolution Professional was appointed.

The appeal was filed by the Director of Lepton Projects (P) Ltd. which was the ‘Corporate Debtor’. The respondent Sanghvi Movers Ltd. was the ‘Operational Creditor’. An application was filed by the Operational Creditor under Section 9 of the I&B Code, after the admission of which ‘Moratorium’ was passed and ‘Insolvency Resolution Professional’ was appointed by NCLT in terms of the Code. However, the appellant challenged the said order of NCLT contending that no notice in terms of Section 8(1) of the Code was given to the appellant before such order was passed.

The Appellate Tribunal perused the record and considered the submissions made on behalf of the parties. It was brought to the notice of the Appellate Tribunal that when the respondents reached to the office of the appellant, no one was found occupying the premises. The Appellate Tribunal also found favour with the contention of the appellant that had a demand notice in terms of Section 8(1) or notice of petition been served on the appellant, they could have settled the claim with the respondent- Operational Creditor. Further, the appellant submitted that the amount had already been paid, which was not contended by the respondent. In such circumstances, the Appellate Tribunal though it fit to set aside the impugned order. Accordingly, the order was set aside as illegal, application preferred by the respondent under Section 9 was dismissed, and the appellant was released from all rigours of law in the matter concerned. [Lepton Projects (P) Ltd. v. Sanghvi Movers Ltd., Company Appeal (AT) (Insolvency) No. 273 of 2048, dated 31-5-2018]