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2022 (8) TMI 1004 - AT - Insolvency and BankruptcyMaintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - debt in the Appeal is in nature of operational debt within the ambit of Section 5(21) of IBC or not - existence of any pre-existing dispute or not. Whether the debt in the Appeal is in nature of operational debt within the definition of Section 5(21) of IBC? - HELD THAT:- The ‘financial debt’ is an inclusive and non-exhaustive definition given under Section 5(8) of the IBC to mean “a debt alongwith interest, if any, which is disbursed against the consideration for time value of money. Financial creditors have relationship with the entity as financial contract, like loan or security etc. Whereas, an operational debt as defined under section 5(21) of IBC signifies a claim in respect of the provisions of goods or services. The argument of Learned Counsel for the Appellant that insurance company has rejected the claims of Respondents treating this as Financial Arrangements and not procurement of goods and services - It is also noted from Learned Counsel for the Respondent that the said order of insurance company has already been challenged in the State Consumer Forum as such this has not reached the stage of finality. In any case, the outcome of insurance will not impact IBC Proceedings and at the best can only be one of the factors to be considered in final decision as claimed by Appellant. The Adjudicating Authority has correctly treated debt due as operational debt and therefore allowed to petition under Section 9 of IBC. Existence of any pre-existing dispute or not - HELD THAT:- As per section 9(5)(ii)(d) of the IBC, application under Section 8 must be rejected with notice of dispute has been received by the Operational Creditor, however, the existence of dispute and/or a suit of arbitration proceeding must be pre-existing i.e. before receipt of demand notice. It is therefore, important to understand as to whether there were pre-existing dispute prior to issue of demand notice or otherwise. The demand notice was issued on 24.06.2019 in Form 3. Whereas, the arbitration petition was filed by OC on 03.11.2020. CD also initiated arbitration proceeding on 07.12.2020. Thus, it is clear that both the arbitration petition filed by OC (R-1) and CD (Appellant) were later then the demand notice issued. From the series of events, it is clear that the arbitration petition as well as settlement memo were subsequent to issue of demand notice. In terms of legal provision of the IBC, pre-existing dispute can be considered only if it is pre dated then the date of demand notice which is not the case here. As such the Learned Adjudicating Authority was right, there are no pre-existing dispute and therefore, Section 9 application was maintainable. Appeal dismissed.
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