2023 (6) TMI 329 - AT - Insolvency and Bankruptcy

Initiation of CIRP - Proof of debts - raising an Invoice is a precondition in all cases for admission of a Section 9 Petition under the I B Code 2016 or not - strict proof of debt and default present or not - According to the Appellant / Petitioner / Operational Creditor the Respondent / Corporate Debtor is required to pay an advance Sum of Rs, 2, 28, 62, 374.63 but the Respondent / Corporate Debtor is denying / disputing its Liability to pay an Advance Sum. HELD THAT - The Proceedings under the I B Code 2016 are summary in character and a trial is not conducted like that of Civil matter before the Competent Civil Court. It cannot be forgotten that an Application under Section 9 of the Code requires a strict proof of Debt and Default. An existence of a Pre-existing Dispute is a bar to the initiation of the Corporate Insolvency Resolution Process at the instance of an Operational Creditor. If there is a Pre-existing Dispute between the Parties the main CP (IB) No.49 / BB /2021 under Section 9 of the Code against the Respondent / Corporate Debtor (filed by the Appellant / Petitioner / Operational Creditor) per se is not maintainable. On a careful consideration of the contentions advanced on either side and when the Appellant / Petitioner / Operational Creditor in the instant case has not proved to the satisfaction of this Tribunal as to the Aspect of Debt and Default committed by the Respondent / Corporate Debtor (ofcourse based on the facts and circumstances of the instant case which float on the surface) the conclusion arrived at by the Adjudicating Authority (NCLT Bengaluru Bench) in dismissing CP (IB) No. 49 / BB / 2021 (preferred by the Appellant / Petitioner / Operational Creditor) is free from any legal infirmities. Consequently the instant Appeal fails. Appeal dismissed.

Summary

Issues Involved:
1. Delay in rectifying defects in the appeal.
2. Validity of the Adjudicating Authority's dismissal of the petition under Section 9 of the I&B Code, 2016.
3. Existence of debt and default by the Corporate Debtor.
4. Pre-existing dispute between the parties.

Summary:

1. Delay in Rectifying Defects in the Appeal:
The Petitioner/Appellant faced a delay of 28 days in rectifying the defects in the appeal as per the Defect Notice dated 07.10.2022. The Tribunal, being satisfied with the reason provided by the Petitioner/Appellant, condoned the delay in the interest of justice and allowed IA No. 1106/2022.

2. Validity of the Adjudicating Authority's Dismissal:
The Appellant, dissatisfied with the impugned order dated 25.05.2022 by the National Company Law Tribunal (NCLT), Bengaluru Bench, filed the appeal. The NCLT had dismissed the petition filed under Section 9 of the I&B Code, 2016, on the grounds that the Petitioner failed to prove the debt and default by the Respondent/Corporate Debtor.

3. Existence of Debt and Default:
The Appellant contended that the NCLT misdirected itself by holding that any dispute raised could be a valid defense, thereby rejecting the application. The Appellant argued that the Corporate Debtor committed default on the amount payable under the Quotation dated 12.09.2018 and the Purchase Order dated 25.09.2018. The Appellant also highlighted that the Corporate Debtor admitted liability in an email dated 04.02.2020.

4. Pre-existing Dispute:
The Respondent argued that no invoice was issued by the Appellant, and hence no payment term of 60 days from the date of invoice was relevant. The Respondent also contended that the NRE Cost of INR 6,21,055/- was less than the threshold limit of INR 1 Crore, making the petition not maintainable. The Tribunal noted that proceedings under the I&B Code, 2016, are summary in nature and require strict proof of debt and default. The existence of a pre-existing dispute is a bar to the initiation of the Corporate Insolvency Resolution Process.

Conclusion:
The Tribunal concluded that the Appellant failed to prove the debt and default to its satisfaction. The NCLT's dismissal of the petition was found to be free from any legal infirmities. Consequently, the appeal was dismissed with no costs.