2023 (1) TMI 746 - AT - Insolvency & Bankruptcy
Initiation of CIRP - existence of debt and dispute or not - Operational Creditors - NCLT admitted the application - Ex-parte order - Corporate Debtor did not make any appearance before the Adjudicating Authority nor filed any submissions - HELD THAT:- It is a well settled proposition that for a pre-existing dispute to be a ground to nullify an application under Section 9, the dispute raised must be truly existing at the time of filing a reply to notice of demand as contemplated by Section 8(2) of IBC or at the time of filing the Section 9 application.
The Operational Creditor neither having received any reply to the demand notice nor having received any further payments from the Corporate Debtor had proceeded to file Section 9 application and at this stage the Adjudicating Authority is only required to look into the substance of the pleadings to find out whether a real dispute is discernible from the stated facts - The relevant proof for late receipt of notice has been placed at page 322-323 of the Appeal Paper Book (‘APB’ in short). Moreover, the poor health of the Appellant prevented him from following up the matter in the court and in substantiation thereof medical certificate has been placed at page 321 of APB which we find to be sufficient cause to explain their inability to agitate the matter before the Adjudicating Authority. In the interest of justice, we are of the considered view that the present appeal filed before this Tribunal deserves to be considered on merit.
It is well settled that in Section 9 proceeding, there is no need to enter into final adjudication with regard to existence of dispute between the parties regarding operational debt. What has to be looked into is whether the defence raises a dispute which needs further adjudication by a competent court - The present is not a case where there is an undisputed debt for which insolvency can be initiated against the Corporate Debtor. The Adjudicating Authority having heard the matter ex-parte has failed to appreciate the facts of the case in its entirety and therefore committed an error in admitting the Section 9 application and we therefore hold that the impugned order passed is unsustainable.
The Adjudicating Authority has erroneously admitted the application under Section 9 of IBC - Appeal allowed.