2023 (1) TMI 194 - AT - Insolvency & Bankruptcy

Initiation of CIRP - existence of debt and dispute or not - Settlement of dispute between the parties or not - NCLT rejected the application - HELD THAT:- The alleged settlement deed which is a bone of contention between the two parties is in the nature of pre-existing dispute which needs thorough investigation and therefore beyond the scope of the Adjudicating Authority in terms of the judgement of the Hon’ble Supreme Court in MOBILOX INNOVATIONS PRIVATE LIMITED VERSUS KIRUSA SOFTWARE PRIVATE LIMITED [2017 (9) TMI 1270 - SUPREME COURT].

It is well settled that in a Section 9 proceeding, the Adjudicating Authority is not to enter into final adjudication with regard to existence of dispute between the parties regarding the operational debt. What has to be looked into is whether the defence raises a dispute which needs further adjudication by a competent court. From the available material on record in the APB and after hearing the rival contentions of both the parties as noted in the preceding paragraphs, we are of the view that the Adjudicating Authority has correctly recorded the finding that there exist disputes between the two parties even prior to the date of demand notice both in respect of the terms and conditions of their business transactions and outstanding dues payable to the operational creditor.

It is clear that the defence was raised by the Corporate Debtor both in their reply to demand notice as well as in their detailed reply filed in Section 9 application and the nature of dispute raised was such that it required adjudication by competent court. The Adjudicating Authority has therefore correctly applied the ratio of the Mobilox judgement and rejected the Section 9 application on the ground of pre-existing disputes between the parties and that the matter requires thorough investigation.

The Adjudicating Authority has rightly rejected the application of the Appellant filed under Section 9 of IBC - appeal dismissed.