2018 (12) TMI 1622 - Tri - Insolvency and Bankruptcy

Corporate Insolvency Resolution Process - pre-existing dispute - application under Section 9 filed - HELD THAT - It is seen that as early as October 2017 which is much prior to the issue of Section 8 notice being the notice of demand by the OC to the CD dated 22.1.2018 there has been a pre-existing dispute as between the parties. Further it is also alleged by CD that the work awarded in relation to the work order has not been completed which had forced it to award the balance work to another contractor. The quantum of work which had been completed and the amount payable thereon if any cannot be decided in a summary manner by this Tribunal. This Tribunal is hence not required to look beyond as while considering the petition filed under Section 9 of IBC, 2016 where the documents as filed by the petitioner itself discloses that there has been a dispute in pre-existence prior to the issue of Section 8 notice the same will suffice for its rejection. Hon ble Supreme Court in Mobilox Innovations (P.) Ltd. v. Kirusa Software (P.) Ltd. 2017 (9) TMI 1270 - SUPREME COURT OF INDIA in relation to the pre-existence of dispute this Tribunal is required to dismiss the petition taking into consideration Section 9(5)(ii)of IBC 2016. Petition dismissed.

Summary

Issues:
1. Claim of operational debt under Section 9 of Insolvency and Bankruptcy Code, 2016 (IBC, 2016) for unpaid sum from Corporate Debtor (CD).
2. CD's reply asserting completion of prestigious government projects and challenging the operational creditor's claim.
3. Dispute over project execution, abandonment, and subsequent engagement of another contractor by CD.
4. Counterclaims of liquidated damages and allegations of fraudulent demand by the operational creditor.
5. Pre-existing dispute between parties, denial of completion of work, and rejection of the petition under Section 9 of IBC, 2016.

Analysis:
1. The petitioner moved a petition under Section 9 of IBC, 2016 for an operational debt claim against the CD, arising from unpaid sums related to aluminum work supplied at a project site. Despite partial payments received, a significant amount remained outstanding, leading to a notice of demand issued by the operational creditor. The CD contested the claim, highlighting its successful completion of government projects and disputing the alleged debt.

2. The CD detailed its engagement in government contracts, emphasizing its workforce and financial performance. It refuted the operational creditor's claims of non-compliance and abandonment of the project, citing the engagement of another contractor due to the operational creditor's alleged failure to fulfill obligations.

3. The dispute centered on project execution, with the CD alleging incomplete work and non-payment for supplies directly provided by them. The operational creditor rebutted the counterclaims of liquidated damages, asserting that the CD's actions led to project disruption and termination without formal notice.

4. Both parties presented conflicting accounts regarding project completion, payment disputes, and termination procedures. The operational creditor contested the CD's allegations of fraudulent demands and abuse of the insolvency resolution process, while the CD raised objections to the operational creditor's approach and claimed a lack of cause of action.

5. The tribunal, considering the pre-existing dispute between the parties and the complexity of project completion issues, dismissed the petition under Section 9 of IBC, 2016. Citing the necessity of a thorough examination of the dispute beyond the scope of insolvency proceedings, the tribunal emphasized the need for alternative forums for resolution while dismissing the petition without costs.