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2023 (8) TMI 663 - AT - Insolvency and BankruptcyMaintainability of application - initiation of CIRP - Operational Creditors - dispute relating to the operational debt as claimed by the operational creditor is a pre-existing dispute or not - HELD THAT:- The four new invoices which relate to the work done as covered in the four old invoices issued in December, 2016 and January, 2017 were fully paid by the corporate debtor and these were in accordance with the GST regime. Therefore, it stands to reason that the operational debt with regard to the work done, which was the subject matter of four old invoices, namely NV No. 3189000123 dated 26.12.2016 for Rs. 5,752,713.00, NV No. 3189000140 dated 28.12.2016 for Rs. 5,572,713.00, NV No. 3189000143 dated 28.12.2016 for Rs. 5,572,713.00 and NV No. 3189010008 dated 25.01.2017 for Rs. 5,572,713.00, were paid by the corporate debtor, and the operational creditor has not raised any issue about the non-payment of related operational debt. It is thus, clear that there is no operational debt due to be paid by the corporate debtor to the operational creditor, but the disputed amount is only regarding the service tax amounting to Rs. 40,37,816/-, which was paid by the operational creditor to the Government. It is thus clear that there is a dispute in relation to the service tax paid by the operational creditor. Clearly, this was a dispute between the operational creditor and the corporate debtor regarding how credit or refund service tax amount could be claimed and by whom - this dispute existed before the issue of statutory demand notice under section 8 and the corporate debtor had clearly mentioned this dispute in its reply dated 1.4.2019 to the section 8 demand notice. Regarding the necessary condition for examining the presence of a pre-existing dispute in relation to an operational debt, we refer to the judgment of Hon’ble Supreme Court in the matter of MOBILOX INNOVATIONS PRIVATE LIMITED VERSUS KIRUSA SOFTWARE PRIVATE LIMITED [2017 (9) TMI 1270 - SUPREME COURT], wherein it is held all that the adjudicating authority is to see at this stage is whether there is a plausible contention which requires further investigation and that the “dispute” is not a patently feeble legal argument or an assertion of fact unsupported by evidence. It is important to separate the grain from the chaff and to reject a spurious defence which is mere bluster. However, in doing so, the Court does not need to be satisfied that the defence is likely to succeed. From the judgement, it is clear that it would be sufficient that a dispute that is not hypothetical, illusory or moonshine dispute exists and such a dispute should have arisen on a date prior to the date of issue of section 8 demand notice - In the present situation, it is found that the Adjudicating Authority has erred by not considering the various e-mails communication exchanged between the corporate debtor and operational creditor as evidence of a pre-existing dispute, but vide paragraph 11 of the Impugned Order has gone ahead to adjudicate the said dispute on merits even though the Adjudicating Authority was only required to see whether a dispute existing prior to the issue of section 8 Demand Notice. Thus, a dispute regarding credit/refund of the service tax amount which is claimed to have been paid by the operational creditor to the government existed prior to the issue of demand notice under section 8 and further that such a dispute was a “real” dispute and not merely an assertion or ploy of the corporate debtor to avoid taking care of his liability. The Corporate Insolvency Resolution Process which was initiated against the corporate debtor as a result of the Impugned Order will abate forthwith and the corporate debtor shall be released from the rigours of CIRP and other effects of moratorium under section 14 of IBC with immediate effect - appeal allowed.
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