{"id":289975,"date":"2023-04-18T17:00:27","date_gmt":"2023-04-18T11:30:27","guid":{"rendered":"https:\/\/www.scconline.com\/blog\/?p=289975"},"modified":"2023-05-08T09:40:03","modified_gmt":"2023-05-08T04:10:03","slug":"nclt-admitted-section-9-ibc-application-nclat-objection-pre-existing-dispute-appeal-dismissed-scc-blog-legal-research-news","status":"publish","type":"post","link":"https:\/\/www.scconline.com\/blog\/post\/2023\/04\/18\/nclt-admitted-section-9-ibc-application-nclat-objection-pre-existing-dispute-appeal-dismissed-scc-blog-legal-research-news\/","title":{"rendered":"To reject application under Sec. 9 IBC, a genuine pre-existing dispute must exist: NCLAT"},"content":{"rendered":"<p><script type=\"text\/javascript\">\n\u00a0\u00a0\u00a0 document.title = 'Genuine pre-existing dispute must to reject application under IBC Section 9: NCLAT | SCC Blog'\n\u00a0\u00a0\u00a0 document.querySelector('meta[name=\"description\"]').setAttribute(\"content\", \"National Company Law Appellate Tribunal held that a genuine pre-existing dispute must exist to reject an application under IBC Section 9.\");\n<\/script><\/p>\n<div style=\"text-align: justify; line-height: 150%;\">\n<p style=\"margin-bottom: 3%;\"><b>National Company Law Appellate Tribunal, New Delhi:<\/b> While affirming the order passed by the Adjudicating Authority, a Division Bench comprising of <b>Rakesh Kumar<\/b>*, J. and Dr. Alok Srivastava (Technical Member), held that the defence of existence of pre-existing dispute by the appellant was a <b>&#8216;moonshine defence&#8217;<\/b>, as the same was not raised at the time of inspection but was only raised after the goods were consumed by the Corporate Debtor.<\/p>\n<p style=\"margin-bottom: 3%;\">In the instant matter, the Operational Creditor (respondent 2) filed an application under S. <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0001549828\" target=\"_blank\" rel=\"noopener\">9<\/a> of the <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0002802178\" target=\"_blank\" rel=\"noopener\">Insolvency &amp; Bankruptcy Code, 2016<\/a> (IBC) read with R. 6 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 before the Adjudicating Authority. The appellant, who is a suspended director and shareholder of Corporate Debtor objected regarding the pre-existing dispute which was asserted by the Corporate Debtor i.e. dispute regarding the quality of the materials supplied by the Operational Creditor. The Adjudicating Authority vide order dated 16-08-2022, rejected the plea of appellant and admitted S. 9 application and directed the initiation of Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor(respondent 1). Aggrieved by the impugned order passed by the Adjudicating Authority, the appellant preferred an appeal under S. <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0001549797\" target=\"_blank\" rel=\"noopener\">61<\/a> <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0002802178\" target=\"_blank\" rel=\"noopener\">IBC<\/a> before the NCLAT challenging the same.<\/p>\n<p style=\"margin-bottom: 3%;\">The appellant admitted that there exists pre-existing dispute which was required to be noticed by the Adjudicating Authority and contended that the Adjudicating Authority incorrectly appreciated and rejected the plea of the Corporate Debtor regarding pre-existing dispute. The appellant relied on <i>Rajratan Babulal Agarwal<\/i> v. <i>Solartex India (P) Ltd.<\/i>, <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-9001360853\" target=\"_blank\" rel=\"noopener\">(2023) 1 SCC 115<\/a> and submitted that if a pre-existing dispute is established before issuance of notice under S. <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0001549817\" target=\"_blank\" rel=\"noopener\">8<\/a> <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0002802178\" target=\"_blank\" rel=\"noopener\">IBC<\/a> or before the Adjudicating Authority then the Adjudicating Authority could have rejected S. 9 application filed by the Operational Creditor(respondent 2).<\/p>\n<p style=\"margin-bottom: 3%;\">The Operational Creditor(respondent 2) contended that no dispute with regards to quality of goods was raised by the Corporate Debtor as the materials which were supplied by Operational Creditor were accepted by the Corporate Debtor and later utilised entire granite slabs without any dispute. The respondents further contended that objection in respect of pre-existing dispute which was asserted by the Corporate Debtor was thoroughly examined and satisfied by the Adjudicating Authority.<\/p>\n<p style=\"\">NCLAT observed that it is not disputed that on the date of filing of S. 9 application there was outstanding debt against the Corporate Debtor, and the only objection which is to be asserted is regarding pre-existing dispute. NCLAT observed that if an application filed under S. <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0001549828\" target=\"_blank\" rel=\"noopener\">9<\/a> <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0002802178\" target=\"_blank\" rel=\"noopener\">IBC<\/a> is rejected then a genuine pre-existing dispute must exist between the parties.<\/p>\n<p style=\"margin-left: 36pt; margin-bottom: 3%;\"><b>&#8220;It is true that under the provisions of Code if Adjudicating Authority is satisfied with pre-existing dispute at the time of entertaining an application filed under Section 9 of the Code there is no reason to initiate the same or admit the application. However, law is settled on the point that there must be pure pre-existing dispute. Meaning thereby that genuine pre-existing dispute must exist in rejecting an application Section 9 of the code.&#8221;<\/b><\/p>\n<p style=\"margin-bottom: 3%;\">NCLAT observed in the light of facts and circumstances of the present case, it is clear that the Corporate Debtor had accepted the delivery of granite slabs made by the Operational Creditor without raising any dispute or objection otherwise the Corporate Debtor had accepted the delivery of granite slabs made by the Operational Creditor without raising any dispute or objection. NCLAT stated that the <b>&#8220;plea of Corporate Debtor regarding dispute Corporate Debtor can be termed as moon shine defence&#8221;<\/b>, therefore there is no reason to accept such a plea.<\/p>\n<p style=\"margin-bottom: 3%;\">While upholding the Adjudicating Authority&#8217;s order of accepting S. 9 application, the NCLAT rejected the appeal on not finding any ground to interfere with the impugned order or any defect in the said impugned order.<\/p>\n<p style=\"margin-bottom: 3%;\">[<span style=\"font-weight: bold; color: #632423;\">Deepak Modi v. Shalfeyo Industries (P) Ltd., <a href=\"http:\/\/www.scconline.com\/DocumentLink\/OO911Ly2\" target=\"_blank\" rel=\"noopener\">2023 SCC OnLine NCLAT 169<\/a>, decided on 31-03-2023<\/span>]<\/p>\n<p style=\"text-indent: 18pt;\"><strong><span style=\"color: #000080;\">*Judgment by Justice Rakesh Kumar<\/span><\/strong><\/p>\n<hr\/>\n<p>Advocates who appeared in this case:<\/p>\n<p style=\"margin-left: 18pt;\">Mr. Abhijeet Sinha and Mr. Naresh Kr Sejvani, Counsel for the Appellant;<\/p>\n<p style=\"margin-left: 18pt;\">Mr. Garvit Thukral and Mr. Pushpendra Singh Bhadoriya, Counsel for the Respondent No. 1;<\/p>\n<p style=\"margin-left: 18pt;\">Mr. Amol Vyas, Mr. Vivek Sinha and Mr. Vivek Malik, Counsel for the Respondent No. 2.<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p><i>The National Company Law Appellate Tribunal held that no pre-existing dispute regarding quality of supplied goods exist as the same was not raised before consumption of the goods.<\/i><\/p>\n","protected":false},"author":67514,"featured_media":284626,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[3,11],"tags":[43781,30596,22814,31387,30182,22014,12521],"class_list":["post-289975","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-casebriefs","category-tribunals_commissions_regulatorybodies","tag-cirp","tag-corporate-debtor","tag-corporate-insolvency-resolution-process","tag-insolvency-and-bankruptcy-code-2016","tag-national-company-law-appellate-tribunal","tag-nclat","tag-nclt"],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v26.4 (Yoast SEO v26.4) - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>To reject application under Sec. 9 IBC, a genuine pre-existing dispute must exist: NCLAT | SCC Times<\/title>\n<meta name=\"description\" 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2x"},"classes":[]},{"id":296173,"url":"https:\/\/www.scconline.com\/blog\/post\/2023\/07\/06\/nclat-application-section-9-ibc-not-maintainable-absence-strict-proof-debt-default\/","url_meta":{"origin":289975,"position":2},"title":"Application under Section 9 of the IBC is not maintainable in absence of strict proof of Debt and Default: NCLAT","author":"Ritu","date":"July 6, 2023","format":false,"excerpt":"\u201cThe Proceedings under the IBC, 2016, are summary in character and a trial is not conducted, like that of \u2018Civil\u2019 matter, before the \u2018Competent Civil Court\u2019.\u201d","rel":"","context":"In &quot;Case Briefs&quot;","block_context":{"text":"Case Briefs","link":"https:\/\/www.scconline.com\/blog\/post\/category\/casebriefs\/"},"img":{"alt_text":"national company law appellate tribunal","src":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2023\/05\/national-company-law-appellate-tribunal-1.webp?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2023\/05\/national-company-law-appellate-tribunal-1.webp?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2023\/05\/national-company-law-appellate-tribunal-1.webp?resize=525%2C300&ssl=1 1.5x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2023\/05\/national-company-law-appellate-tribunal-1.webp?resize=700%2C400&ssl=1 2x"},"classes":[]},{"id":219161,"url":"https:\/\/www.scconline.com\/blog\/post\/2019\/09\/05\/nclat-pre-existing-dispute-regarding-salary-payable-renders-s-9-ibc-application-not-maintainable\/","url_meta":{"origin":289975,"position":3},"title":"NCLAT | Pre-existing dispute regarding salary payable renders S. 9 IBC application not maintainable","author":"Bhumika Indulia","date":"September 5, 2019","format":false,"excerpt":"National Company Law Appellate Tribunal (NCLAT), New Delhi: The Bench comprising of S.J. Mukhopadhaya (Chairperson) and A.I.S Cheema, Member (Technical) and Kanthi Narahari, Member (Technical) declared an appeal filed under Section 9 of the Insolvency and Bankruptcy Code, 2016 not maintainable in view of the pre-existing dispute. In the present\u2026","rel":"","context":"In &quot;Case Briefs&quot;","block_context":{"text":"Case Briefs","link":"https:\/\/www.scconline.com\/blog\/post\/category\/casebriefs\/"},"img":{"alt_text":"","src":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2017\/08\/NCLAT.jpg?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2017\/08\/NCLAT.jpg?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2017\/08\/NCLAT.jpg?resize=525%2C300&ssl=1 1.5x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2017\/08\/NCLAT.jpg?resize=700%2C400&ssl=1 2x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2017\/08\/NCLAT.jpg?resize=1050%2C600&ssl=1 3x"},"classes":[]},{"id":284573,"url":"https:\/\/www.scconline.com\/blog\/post\/2023\/02\/20\/operational-creditor-corporate-debtor-agreement-services-live-tv-production-default-section-8-notice-no-reply-application-nclt-pre-existing-dispute-dismissed-appeal-nclat\/","url_meta":{"origin":289975,"position":4},"title":"Whether Corporate Debtor can raise pre-existing dispute in reply to the petition filed under Section 9 IBC in case demand notice issued under Section 8 of IBC is not replied? NCLAT answers","author":"Editor","date":"February 20, 2023","format":false,"excerpt":"In the instant matter, the petitioner preferred an appeal challenging the order of Adjudicating Authority dismissing application in view of the \u201cpre-existing dispute\u201d. NCLAT held that when the reply to Demand Notice was not filed within 10 days, the Corporate Debtor is not precluded from raising the question of dispute\u2026","rel":"","context":"In &quot;Case Briefs&quot;","block_context":{"text":"Case Briefs","link":"https:\/\/www.scconline.com\/blog\/post\/category\/casebriefs\/"},"img":{"alt_text":"National Company Law Appellate Tribunal","src":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2023\/02\/MicrosoftTeams-image-458.png?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2023\/02\/MicrosoftTeams-image-458.png?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2023\/02\/MicrosoftTeams-image-458.png?resize=525%2C300&ssl=1 1.5x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2023\/02\/MicrosoftTeams-image-458.png?resize=700%2C400&ssl=1 2x"},"classes":[]},{"id":237819,"url":"https:\/\/www.scconline.com\/blog\/post\/2020\/10\/21\/nclat-reiterates-ibc-is-beneficial-legislation-intended-to-put-corporate-debtor-on-its-feet-not-a-mere-money-recovery-legislation\/","url_meta":{"origin":289975,"position":5},"title":"NCLAT reiterates IBC is beneficial legislation intended to put Corporate Debtor on its feet, not a mere money recovery legislation","author":"Bhumika Indulia","date":"October 21, 2020","format":false,"excerpt":"National Company Law Appellate Tribunal (NCLAT):\u00a0The Bench of Justice Bansi Lal Bhat (Acting Chairperson) and Justice Anant Bijay Sing (Judicial Member) and Kanthi Narahari (Technical Member) set aside the Adjudicating Authorities decision while establishing whether a pre-existing dispute existed between the parties. The instant appeal was filed against the order\u2026","rel":"","context":"In &quot;Case Briefs&quot;","block_context":{"text":"Case Briefs","link":"https:\/\/www.scconline.com\/blog\/post\/category\/casebriefs\/"},"img":{"alt_text":"","src":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2017\/08\/NCLAT.jpg?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2017\/08\/NCLAT.jpg?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2017\/08\/NCLAT.jpg?resize=525%2C300&ssl=1 1.5x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2017\/08\/NCLAT.jpg?resize=700%2C400&ssl=1 2x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2017\/08\/NCLAT.jpg?resize=1050%2C600&ssl=1 3x"},"classes":[]}],"amp_enabled":true,"_links":{"self":[{"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/posts\/289975","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/users\/67514"}],"replies":[{"embeddable":true,"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/comments?post=289975"}],"version-history":[{"count":0,"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/posts\/289975\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/media\/284626"}],"wp:attachment":[{"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/media?parent=289975"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/categories?post=289975"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/tags?post=289975"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}