2018 (11) TMI 1671 - AT - Insolvency and Bankruptcy

Initiation of CIRP - existence of dispute or not - pendency of the case under Section 138/441 of Negotiable Instruments Act 1881 - HELD THAT - In the present case it is not in dispute that there is a debt payable to the Operational Creditor and default on the part of the Corporate Debtor - The pendency of the case under Section 138/441 of the Negotiable Instruments Act 1881 even if accepted as recovery proceeding it cannot be held to be a dispute pending before a court of law. The pendency of the case under Section 138/441 of Negotiable Instruments Act 1881 actually amounts to admission of debt and not an existence of dispute - appeal dismissed.

Summary

Issues:
1. Appeal against the order admitting application under Section 9 of I&B Code.
2. Existence of a dispute due to pending cases under Section 138/441 of Negotiable Instruments Act, 1881.
3. Interpretation of the decision in 'R. Vijayan Vs. Baby and Anr.' regarding civil cases of recovery.
4. Analysis of the scheme of Section 7 and Section 8 of the I&B Code.
5. Determination of whether the pendency of cases under Section 138/441 of Negotiable Instruments Act, 1881 constitutes a dispute or admission of debt.

Analysis:
The appeal was filed by the Promoter of 'M/s Auto Décor Pvt. Ltd.' against the order passed by the Adjudicating Authority admitting the application under Section 9 of the I&B Code by 'APPL Industries Ltd.' The Appellant argued that there was a dispute due to pending cases under Section 138/441 of the Negotiable Instruments Act, 1881, where a partial payment had been made by the Corporate Debtor. The Appellant relied on the decision in 'R. Vijayan Vs. Baby and Anr.' to assert that the cases under Section 138 were civil cases of recovery, making the application under Section 9 of the I&B Code not maintainable. However, the Tribunal did not accept this argument after considering the submissions and records presented.

Regarding the interpretation of the scheme under Sections 7 and 8 of the I&B Code, the Tribunal referred to the decision in 'Innoventive Industries Ltd. Vs. ICICI Bank and Ors.' where it was highlighted that the existence of a dispute can exempt the operational creditor from the provisions of the Code. In the current case, despite the pendency of cases under Section 138/441 of the Negotiable Instruments Act, 1881, it was determined that such cases did not constitute a dispute pending before a court of law. The Tribunal concluded that the pendency of these cases amounted to an admission of debt rather than an existence of a dispute, leading to the dismissal of the appeal. No costs were awarded in this matter.