TMI Blog2017 (6) TMI 1162X X X X Extracts X X X X X X X X Extracts X X X X ..... there exists a dispute between the parties, we hold that the as impugned order dated 3rd April 2017 passed by Adjudicating Authority is not only in violation of rules of natural justice, the application under Section 9 was also not maintainable. For the reasons aforesaid, we set aside impugned order dated 3rd April 2017. In effect the order appointing an Interim Resolution Professional, order declaring moratorium, freezing of account and all other order passed by Adjudicating Authority pursuant to impugned order and action, if any, taken by the Interim Resolution Professional, including the advertisement published in the newspaper calling for applications are declared illegal. The Adjudicating Authority is directed to close the proceeding. The appellant company is released from the rigour of law. The appellant company is allowed to function independently through its Board of Directors from immediate effect. The Adjudicating Authority will fix the fee of Interim Resolution Professional and the Financial Creditor will pay the fees to the Interim Resolution Professional, for the period he has worked. - Company Appeal (AT) (Insolvency) No. 56 of 2017 - - - Dated:- 1-6-2017 - S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s resolution for initiating proceeding against the Corporate Debtor. Therefore, time was allowed for the Operational Creditor. From the aforesaid order sheets it is clear that only Ld. Counsels appearing for the Operational Creditor were present and no notice was given to the Appellant Corporate Debtor. 6. It appears that the matter was subsequently taken up on 3rd April 2017. On the said date taking into consideration the fact that after service of notice by the Operational Creditor under Section 8 of the I B Code, the petition had been filed and the Operational Creditor had alleged that the Corporate Debtor has failed to pay ₹ 9,76,095/- (Rupees Nine Lakh seventy-six thousand ninety-five only) in spite of notice dated 17th January 2017 and the petition was otherwise complete, the application was admitted. From the said order it is clear only Ld. Counsels for the Respondent/Operational Creditor were present and no notice was given to the Appellate Corporate Debtor. 7. It appears that on 10th April 2017 when the matter was taken up the Ld. Counsel for the Respondent submitted that the Operational Creditor will propose the name of Insolvency Resolution Professional al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idle in the work shop of Operational Creditor. It was also alleged that the Operational Creditor failed to supply the spare parts as per agreement due to negligence of the Operational Creditor for that the Appellant - Corporate Debtor had to incur loss to the tune of ₹ 2 crores. The relevant portion of the letter dated 16th November, 2016 reads as follows: - This has reference to your letter dated November 4 2016 and the content has been noted by us. In this regard, we feel it necessary to bring to your notice the following facts for taking necessary action at your end to avoid legal complications. That one of the Caterpillar Engine (CAT 6.6) which was repaired and installed is not functioning property from the date of installation. This was brought to your notice several times and the same was verified by your Engineers on this spot and assured for its rectification without any fruitful results. You were also informed for taking necessary measures to overcome our huge revenue loss. In this regard, we informed you since last 8 months several times that without rectifying the existing Engine it is not possible on our part to lift the captioned Engine, which is lying ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reminder for forthwith payment of our dues to the tune of ₹ 9,76,095/- In case we don t hear from you within 2 weeks from the date of receipt of this letter, we initiate legal proceedings, both civil and criminal and will also dispose off the said machine in parts or as a whole as scrap lying in unclaimed and abandoned state at your cost and consequence. 14. In Kirusa Software Private Ltd. Vs Mobilox Innovations Private Ltd Company Appeal (AT) (Insolvency) No. 6 of 2017, the Appellate Tribunal by judgment dated 24th May 2017 decided the question as to what does a dispute and existence of dispute means for the purpose of determination of petition under Section 9 of the I B Code. In the said case, the Appellate Tribunal held: - 25. The true meaning of sub-section (2)(a) of Section 8 read with sub-section (6) of Section 5 of the 'I B Code' clearly brings out the intent of the Code, namely the Corporate Debtor must raise a dispute with sufficient particulars. And in case a dispute is being raised by simply showing a record of dispute in a pending arbitration or suit, the dispute must also be relatable to the three conditions provided under su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d of pendency of a suit or arbitral proceedings on a dispute is enough and to intent of the Legislature is clear, i.e. once the dispute (on matters relating to 3 classes in sub-section (6) of Section 5 of the 'I B Code') is pending adjudication, that in itself would bring it within the ambit of sub-section (6) of Section 5 of the 'I B Code'. 31. The dispute under I B Code, 2016 must relate to specified nature in clause (a), (b) or (c) i.e. existence of amount of debt or quality of goods or service or breach of representation or warranty. However, it is capable of being discerned not only from in a suit or arbitration from any document related to it. For example, the 'operational creditor' has issued notice under Code of Civil Procedure Code, 1908 prior to initiation of the suit against the operational creditor which is disputed by 'corporate debtor. Similarly notice under Section 59 of the Sales and Goods Act if issued by one of the party, a labourer/employee who may claim to be operation creditor for the purpose of Section 9 of I B Code, 2016 may have raised the dispute with the State Government concerning the subject matter i.e. existence of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the Appellant, in violation of rules of natural justice and there exists a dispute between the parties, we hold that the as impugned order dated 3rd April 2017 passed by Adjudicating Authority is not only in violation of rules of natural justice, the application under Section 9 was also not maintainable. For the reasons aforesaid, we set aside impugned order dated 3rd April 2017. 17. In effect the order appointing an Interim Resolution Professional, order declaring moratorium, freezing of account and all other order passed by Adjudicating Authority pursuant to impugned order and action, if any, taken by the Interim Resolution Professional, including the advertisement published in the newspaper calling for applications are declared illegal. The Adjudicating Authority is directed to close the proceeding. The appellant company is released from the rigour of law. The appellant company is allowed to function independently through its Board of Directors from immediate effect. 18. The Adjudicating Authority will fix the fee of Interim Resolution Professional and the Financial Creditor will pay the fees to the Interim Resolution Professional, for the period he has worked. 19. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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