TMI Blog2017 (9) TMI 1270X X X X Extracts X X X X X X X X Extracts X X X X ..... her, the appellant has withheld amounts that were due to the respondent under the NDA till the matter is resolved. Admittedly, the matter has never been resolved. Also, the respondent itself has not commenced any legal proceedings after the e-mail dated 30th January, 2015 except for the present insolvency application, which was filed almost 2 years after the said e-mail. All these circumstances go to show that it is right to have the matter tried out in the present case before the axe falls. We, therefore, allow the present appeal and set aside the judgment of the Appellate Tribunal. - Civil Appeal No. 9405 of 2017 - - - Dated:- 21-9-2017 - Mr. R.F. Nariman And Mr. Sanjay Kishan Kaul JJ. JUDGMENT R.F. Nariman, J. 1. The present appeal raises questions as to the triggering of the Insolvency and Bankruptcy Code, 2016 when it comes to operational debts owed to operational creditors. The appellant was engaged by Star TV for conducting tele-voting for the Nach Baliye program on Star TV. The appellant in turn subcontracted the work to the respondent and issued purchase orders between October and December, 2013 in favour of the respondent. In the Nach Baliye program, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce it had breached the NDA. 3. An application was then filed on 30 th December, 2016 before the National Company Law Tribunal under Sections 8 and 9 of the new Code stating that an operational debt of ₹ 20,08,202.55 was owed to the respondent. 4. On 19 th January, 2017, the respondent was orally intimated to remove a defect in the application, in that it did not contain the appellant s notice of dispute. This was rectified by an affidavit in compliance dated 24 th January, 2017, by which various other documents were also supplied by the respondent to the Tribunal. On 27 th January, 2017, the Tribunal dismissed the aforesaid application in the following terms: On perusal of this notice dated 27.12.2016 disputing the debt allegedly owed to the petitioner, this Bench, looking at the Corporate Debtor disputing the claim raised by the Petitioner in this CP, hereby holds that the default payment being disputed by the Corporate Debtor, for the petitioner has admitted that the notice of dispute dated 27 th December 2016 has been received by the operational creditor, the claim made by the Petitioner is hit by Section (9)(5)(ii)(d) of The Insolvency and Bankruptcy Code, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r arbitration proceedings filed must be read as existence of a dispute or record of the pendency of the suit or arbitration proceedings filed, i.e. disjunctively. According to the learned counsel, the definition of dispute under Section 5(6) of the Code is an inclusive one and the original draft bill not only had the word means instead of the word includes , but also the word bona fide before the words suit or arbitral proceedings , which is missing in the present Code. Therefore, learned counsel argued that the moment there is existence of a dispute, meaning thereby that there is a real dispute to be tried, and not a sham, frivolous or vexatious dispute, the Tribunal is bound to dismiss the application. Learned counsel went on to argue that there is a fundamental difference between applications filed by financial creditors and operational creditors. A financial creditor s application is dealt with under Section 7 of the Code, in which the adjudicating authority has to ascertain the existence of a default on the basis of the records of an information utility or other evidence furnished by the financial creditor. In contrast to this scheme, all that a corporate de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore going into the contentions of fact and law argued by both counsel, it is a little important to trace the background of this path-breaking legislation viz. the Insolvency and Bankruptcy Code, 2016. The starting point is a Resolution of the UN General Assembly, Resolution No.59/40, passed on 2 nd December, 2004, by which it was stated: Legislative Guide on Insolvency Law of the United Nations Commission on International Trade Law The General Assembly , Recognizing the importance to all countries of strong, effective and efficient insolvency regimes as a means of encouraging economic development and investment, Noting the growing realization that reorganization regimes are critical to corporate and economic recovery, the development of entrepreneurial activity, the preservation of employment and the availability of finance in the capital market, Noting also the importance of social policy issues to the design of an insolvency regime, Noting with satisfaction the completion and adoption of the Legislative Guide on Insolvency Law of the United Nations Commission on International Trade Law by the Commission at its thirty-seventh session, on 25 June 2004, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s directly concerned with that financial difficulty, principally creditors and other parties with a stake in the debtor s business, as well as with public policy concerns. The Guide discusses issues central to the design of an effective and efficient insolvency law, which, despite numerous differences in policy and legislative treatment, are recognized in many legal systems. It focuses on insolvency proceedings commenced under the insolvency law and conducted in accordance with that law, with an emphasis on reorganization, against a debtor, whether a legal or natural person, that is engaged in economic activity. Issues specific to the insolvency of individuals not so engaged, such as consumers, are not addressed. In stating some of the key objectives of effective and efficient insolvency law, the Legislative Guide goes on to state: When a debtor is unable to pay its debts and other liabilities as they become due, most legal systems provide a legal mechanism to address the collective satisfaction of the outstanding claims from assets (whether tangible or intangible) of the debtor. A range of interests needs to be accommodated by that legal mechanism: those of the parties a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appropriate solution. While referring to the commencement of insolvency proceedings, the Legislative Guide states: The standard to be met for commencement of insolvency proceedings is central to the design of an insolvency law. As the basis upon which insolvency proceedings can be commenced, this standard is instrumental to identifying the debtors that can be brought within the protective and disciplinary mechanisms of the insolvency law and determining who may make an application for commencement, whether the debtor, creditors or other parties. As a general principle it is desirable that the commencement standard be transparent and certain, facilitating access to insolvency proceedings conveniently, cost-effectively and quickly to encourage financially distressed or insolvent businesses to voluntarily commence proceedings. It is also desirable that access be flexible in terms of the types of insolvency proceedings available (reorganization and liquidation), and the ease with which the proceedings most relevant to a particular debtor can be accessed, and that conversion between the different types of proceeding can be achieved. Restrictive access can deter both debtor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tters for which it has responsibility). It may also prove difficult to ensure that the decision-making body adheres to the established limit and to provide appropriate consequences where there is no compliance. The time period between application and the decision to commence proceedings should also reflect the type of proceeding applied for, the application procedure and the consequences of commencement in any particular regime. For example, the extent to which notification of parties in interest and information gathering must be completed prior to commencement will vary between regimes, requiring different periods of time. For these reasons, it is desirable that an insolvency law adopt a flexible approach that emphasizes the advantages of quick decision-making and provides guidance as to what is reasonable, but at the same time also recognizes local constraints and priorities. ( d) Denial of an application to commence proceedings The preceding paragraphs refer to a number of instances where it will be desirable, in those cases where the court is required to make the commencement decision, for the court to have the power to deny the application for commencement, either ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... commencement: (a) Notice of the application promptly is given to the debtor; (b) The debtor be given the opportunity to respond to the application, by contesting the application, consenting to the application or, where the application seeks liquidation, requesting the commencement of reorganization proceedings; and (c) The court will promptly determine its jurisdiction and whether the debtor is eligible and the commencement standard has been met and, if so, commence insolvency proceedings. (A determination that the commencement standard has been met may involve consideration of whether the debt is subject to a legitimate dispute or offset in an amount equal to or greater than the amount of the debt. The existence of such a set-off may be a ground for dismissal of the application (see above, paras. 61-63). 11. The legislative history of legislation relating to indebtedness goes back to the year 1964 when the 24 th Law Commission recommended amendments to the Provincial Insolvency Act of 1920. This was followed by the Tiwari Committee of 1981, which introduced the Sick Industrial Companies Act, 1985. Following economic liberalization in the 1990s, two Narsimham Committe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... debt is bona fide disputed, i.e. that the defense of the debtor is genuine, substantial and is likely to succeed on a point of law. The interim report also adverted to an amendment made in the Companies Act, 2003, by which the threshold requirement of ₹ 500 was replaced by ₹ 1 lakh. 15. The interim report found: Once the petitioning creditor has proved the inability of the debtor company to pay debts, van Zwieten states that courts in India have recognised a wide discretion that enabled it to give time to the debtor to make payment or even dismiss the petition. This is in stark contrast with the position in the UK (from where the law was transplanted) where once the company s inability to pay debts has been proven, the petitioning creditor is ordinarily held to be entitled to a winding up order (although it should be noted that there is an alternative corporate rescue procedure, administration , which a debtor may be entitled to enter). The effect of these abovementioned judicial developments has been to add significant delays in the liquidation process under CA 1956 and to add uncertainty regarding the rights of the creditors in the event of the company s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... test and the balance sheet insolvency test are alternate grounds for determining a company s inability to pay debts under Sections 123(1) (a),123 (1) (e) and 123(2), respectively). 16. By the final report dated November 2015, the recommendation of the interim report was shelved. The Committee made a distinction between financial contracts and operational contracts. It stated: 4.3.3 Information about the liabilities of a solvent entity Operational contracts typically involve an exchange of goods and services for cash. For an enterprise, the latter includes payables for purchase of rawmaterials, other inputs or services, taxation and statutory liabilities, and wages and benefits to employees. xxx xxx xxx The Code specifies that if the Adjudicator is able to locate the record of the liability and of default with the registered IUs, a financial creditor needs no other proof to establish that a default has taken place. xxx xxx xxx The second set of liabilities are operational liabilities, which are more difficult to centrally capture given that the counterparties are a wide and heterogeneous set. In the state of insolvency, the record of all liabilities in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... where the liability to the debtor arises in the form of future payments in exchange for goods or services already delivered. In cases where a creditor has both a solely financial transaction as well as an operational transaction with the entity, the creditor will be considered a financial creditor to the extent of the financial debt and an operational creditor to the extent of the operational debt is more than half the full liability it has with the debtor. 4. The Code will require different documentation for a debtor, a financial creditor, and an operational creditor to trigger the IRP. These are listed in Box 5.3 under what the Adjudicator will accept as requirements to trigger the IRP. 5.2.1 Who can trigger the IRP? Here, the Code differentiates between financial creditors and operational creditors. Financial creditors are those whose relationship with the entity is a pure financial contract, such as a loan or a debt security. Operational creditors are those whose liability from the entity comes from a transaction on operations. Thus, the wholesale vendor of spare parts whose spark plugs are kept in inventory by the car mechanic and who gets paid only after t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efault has been filed with an information utility, it shall be incontrovertible evidence of the existence of a default) or otherwise confirms the existence of default through the additional evidence adduced by the financial creditor, and puts forward the proposal for the RP to the Regulator for validation. In case the operational creditor triggers the IRP, the Adjudicator verifies the documentation. Simultaneously, the Adjudicator requests the Regulator for an RP. If either step cannot be verified, or the process verification exceeds the specified amount of time, then the Adjudicator rejects the application, with a reasoned order for the rejection. The order rejecting the application cannot be appealed against. Instead, application has to be made afresh. Once the documents are verified within a specified amount of time, the Adjudicator will trigger the IRP and register the IRP by issuing an order. The order will contain a unique ID that will be issued for the case by which all reports and records that are generated during the IRP will be stored, and accessed. 17. Annexed to this Committee Report is the Insolvency and Bankruptcy Bill, 2015. Interestingly, Section 5(4) defined d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shall be filed in such form and manner and accompanied with such fee as may be prescribed. (3) The operational creditor shall, along with the application furnish- (a) the invoice demanding payment or notice delivered by the operational creditor to the corporate debtor; (b) affidavit to the effect that there is no notice given by the corporate debtor relating to a dispute of the unpaid operational debt; (c) a confirmation from the financial institutions maintaining accounts of the operational creditor that there is no payment of an unpaid operational debt by the corporate debtor; and (d) such other information or as may be specified. (4) The Adjudicating Authority shall, within two days of the receipt of the application under sub-section (2), admit the application and communicate such decision to the operational creditor and the corporate debtor if, - (a) the application is complete; (b) there is no repayment of the unpaid operational debt; (c) the invoice or notice for payment to the corporate debtor has been delivered by the operational creditor; and (d) no notice of dispute has been received by the operational creditor or there is no record of disput ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ute through an information utility or by registered post or courier or by such electronic mode of communication as may be specified; (b) the repayment of unpaid operational debt- (i) by sending an attested copy of the record of electronic transfer of the unpaid amount from the bank account of the corporate debtor; or (ii) by sending an attested copy of record that the operational creditor has encashed a cheque issued by the corporate debtor. Explanation .- For the purposes of this section, a demand notice means a notice served by an operational creditor to the corporate debtor demanding repayment of the operational debt in respect of which the default has occurred. 9. Application for initiation of corporate insolvency resolution process by operational creditor. (1) After the expiry of the period of ten days from the date of delivery of the notice or invoice demanding payment under sub-section (1) of section 8, if the operational creditor does not receive payment from the corporate debtor or notice of the dispute under sub-section (2) of section 8, the operational creditor may file an application before the Adjudicating Authority for initiating a corporate ins ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sub-section, shall give a notice to the applicant to rectify the defect in his application within three days of the date of receipt of such notice from the Adjudicating Authority. (6) The corporate insolvency resolution process shall commence from the date of admission of the application under sub-section (5). 19. The notes on clauses annexed to the Bill are extremely important and read as follows: Notes on Clauses Clause 6 provides that where a corporate debtor has defaulted in paying a debt that has become due and payable but not repaid, the corporate insolvency resolution process under Part II may be initiated in respect of such corporate debtor by a financial creditor, an operational creditor or the corporate debtor itself. Early recognition of financial distress is very important for timely resolution of insolvency. A default based test for entry into the insolvency resolution process permits early intervention such that insolvency resolution proceedings can be initiated at an early stage when the corporate debtor shows early signs of financial distress rather than at the point where it would be difficult to revive it effectively. It also provides a simpl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or admission of the application. It is important that parties are not allowed to abuse the legal process by using delaying tactics at the admissions stage. Clause 8 lays down the procedure for the initiation of the corporate insolvency resolution process by an operational creditor. This procedure differs from the procedure applicable to financial creditors as operational debts (such as trade debts, salary or wage claims) tend to be small amounts (in comparison to financial debts) or are recurring in nature and may not be accurately reflected on the records of information utilities at all times. The possibility of disputed debts in relation to operational creditors is also higher in comparison to financial creditors such as banks and financial institutions. Accordingly, the process for initiation of the insolvency resolution process differs for an operational creditor. Once a default has occurred, the operational creditor has to deliver a demand notice or a copy of an invoice demanding payment of the debt in default to the corporate debtor. The corporate debtor has a period of ten days from the receipt of the demand notice or invoice to inform the operational creditor of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovided in the rules. The Committee, therefore, decide to substitute words in such form as may be prescribed, through an information utility, wherever applicable, or by registered post or courier or by such electronic mode of communication, as may be specified as appearing in clause 8(1) with the words in such form and manner, as may be prescribed . Besides as a consequential amendment words through an information utility or by registered post or courier or by such electronic mode of communication as may be specified as appearing in clause 8(2) may also be omitted. The Committee also revised the time limits set out in various sections of the Code from 2, 3 and 5 days to a longer uniform period of 7 days. 21. The stage is now set for setting out the relevant provisions of the Code insofar as operational creditors and their corporate debtors are concerned. 3. Definitions. In this Code, unless the context otherwise requires,- xxx xxx xxx (12) default means non-payment of debt when whole or any part or instalment of the amount of debt has become due and payable and is not repaid by the debtor or the corporate debtor, as the case may be; 5. Definitions. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the operational creditor may file an application before the Adjudicating Authority for initiating a corporate insolvency resolution process. (2) The application under sub-section (1) shall be filed in such form and manner and accompanied with such fee as may be prescribed. (3) The operational creditor shall, along with the application furnish- (a) a copy of the invoice demanding payment or demand notice delivered by the operational creditor to the corporate debtor; (b) an affidavit to the effect that there is no notice given by the corporate debtor relating to a dispute of the unpaid operational debt; (c) a copy of the certificate from the financial institutions maintaining accounts of the operational creditor confirming that there is no payment of an unpaid operational debt by the corporate debtor; and (d) such other information as may be specified. (4) An operational creditor initiating a corporate insolvency resolution process under this section, may propose a resolution professional to act as an interim resolution professional. (5) The Adjudicating Authority shall, within fourteen days of the receipt of the application under sub-section (2), by an order- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mail service to a whole time director or designated partner or key managerial personnel, if any, of the corporate debtor. (3) A copy of demand notice or invoice demanding payment served under this rule by an operational creditor shall also be filed with an information utility, if any. 6. Application by operational creditor. (1) An operational creditor, shall make an application for initiating the corporate insolvency resolution process against a corporate debtor under section 9 of the Code in Form 5, accompanied with documents and records required therein and as specified in the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. (2) The applicant under sub-rule (1) shall dispatch forthwith, a copy of the application filed with the Adjudicating Authority, by registered post or speed post to the registered office of the corporate debtor. FORM 3 (See clause (a) of sub-rule (1) of rule 5) FORM OF DEMAND NOTICE / INVOICE DEMANDING PAYMENT UNDER THE INSOLVENCY AND BANKRUPTCY CODE, 2016 (Under rule 5 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an attested copy of the record of electronic transfer of the unpaid amount from the bank account of the corporate debtor; or (b) an attested copy of any record that [ name of the operational creditor ] has received the payment. 5. The undersigned, hereby, attaches a certificate from an information utility confirming that no record of a dispute raised in relation to the relevant operational debt has been filed by any person at any information utility, (if applicable) 6. The undersigned request you to unconditionally repay the unpaid operational debt (in default) in full within ten days from the receipt of this letter failing which we shall initiate a corporate insolvency resolution process in respect of [ c ]. Yours sincerely, Signature of person authorised to act on behalf of the operational creditor Name in block letters Position with or in relation to the operational creditor Address of person signing Instructions 1. Please serve a copy of this form on the corporate debtor, ten days in advance of filing an application under section 9 of the Code. 2. Pleas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2. IDENTIFICATION NUMBER OF OPERATIONAL CREDITOR (IF ANY) 3. ADDRESS FOR CORRESPONDENCE OF THE OPERATIONAL CREDITOR Part - II PARTICULARS OF CORPORATE DEBTOR 1. NAME OF THE CORPORATE DEBTOR 2. IDENTIFICATION NUMBER OF CORPORATE DEBTOR 3. DATE OF INCORPORATION OF CORPORATE DEBTOR 4. NOMINAL SHARE CAPITAL AND THE PAID-UP SHARE CAPITAL OF THE CORPORATE DEBTOR AND/OR DETAILS OF GUARANTEE CLAUSE AS PER MEMORANDUM OF ASSOCIATION (AS APPLICABLE) 5. ADDRESS OF THE REGISTERED OFFICE OF THE CORPORATE DEBTOR 6. NAME, ADDRESS AND AUTHORITY OF PERSON SUBMITTING APPLICATION ON BEHALF OF OPERATIONAL CREDITOR (ENCLOSE AUTHORISATION) 7. NA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A STATEMENT OF BANK ACCOUNT WHERE DEPOSITS ARE MADE OR CREDITS RECEIVED NORMALLY BY THE OPERATIONAL CREDITOR IN RESPECT OF THE DEBT OF THE CORPORATE DEBTOR (ATTACH A COPY) 8. LIST OF OTHER DOCUMENTS ATTACHED TO THIS APPLICATION IN ORDER TO PROVE THE EXISTENCE OF OPERATIONAL DEBT AND THE AMOUNT IN DEFAULT I, [ Name of the operational creditor / person authorised to act on behalf of the operational creditor ] hereby certify that, to the best of my knowledge, [ name of proposed insolvency professional ], is fully qualified and permitted to act as an insolvency professional in accordance with the Code and the rules and regulations made thereunder. [ WHERE APPLICABLE ] [ Name of the operational creditor ] has paid the requisite fee for this application through [ state means of payment ] on [ date ]. Yours sincerely, Signature of person authorised to act on behalf of the operational creditor Name in block letters Position with or in relation to the operational creditor Address of person sign ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ATIONAL CREDITORS EXCEPT WORKMEN AND EMPLOYEES [ Under Regulation 7 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 ] [Date] To The Interim Resolution Professional / Resolution Professional [ Name of the Insolvency Resolution Professional / Resolution Professional ] [ Address as set out in public announcement ] From [ Name and address of the operational creditor ] Subject: Submission of proof of claim. Madam/Sir, [ Name of the operational creditor ], hereby submits this proof of claim in respect of the corporate insolvency resolution process in the case of [ name of corporate debtor ]. The details for the same are set out below: PARTICULARS 1. NAME OF OPERATIONAL CREDITOR 2. IDENTIFICATION NUMBER OF OPERATIONAL CREDITOR (IF AN INCORPORATED BODY PROVIDE IDENTIFICATION NUMBER AND PROOF OF INCORPORATION. IF A PARTNERSHIP OR INDIVIDUAL PROVIDE IDENTIFICATION RECORDS* OF ALL THE PARTNERS OR THE INDIVIDUAL) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tility, wherever applicable, or by registered post or courier or by any electronic communication have been deleted. Likewise, in Section 8(2), the period of at least 60 days through an information utility or by registered post or courier or by any electronic communication has also been deleted. In Section 9(5), the absence of a proviso similar to the proviso occurring in Section 7(5) was also rectified. Further, the time periods of 2 and 3 days were uniformly substituted, as has been seen above, by 7 days, so that a sufficiently long period is given to do the needful. 24. The scheme under Sections 8 and 9 of the Code, appears to be that an operational creditor, as defined, may, on the occurrence of a default (i.e., on non-payment of a debt, any part whereof has become due and payable and has not been repaid), deliver a demand notice of such unpaid operational debt or deliver the copy of an invoice demanding payment of such amount to the corporate debtor in the form set out in Rule 5 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 read with Form 3 or 4, as the case may be (Section 8(1)). Within a period of 10 days of the receipt of such d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 5, may give a notice to the applicant to rectify defects within 7 days of the receipt of the notice from the adjudicating authority to make the application complete. Once this is done, and the adjudicating authority finds that either there is no repayment of the unpaid operational debt after the invoice (Section 9(5)(i)(b)) or the invoice or notice of payment to the corporate debtor has been delivered by the operational creditor (Section 9(5)(i)(c)), or that no notice of dispute has been received by the operational creditor from the corporate debtor or that there is no record of such dispute in the information utility (Section 9(5)(i)(d)), or that there is no disciplinary proceeding pending against any resolution professional proposed by the operational creditor (Section 9(5)(i)(e)), it shall admit the application within 14 days of the receipt of the application, after which the corporate insolvency resolution process gets triggered. On the other hand, the adjudicating authority shall, within 14 days of the receipt of an application by the operational creditor, reject such application if the application is incomplete and has not been completed within the period of 7 days granted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y with an extension of 15 further days and no more. 27. Section 64 of the Code mandates that where these timelines are not adhered to, either by the Tribunal or by the Appellate Tribunal, they shall record reasons for not doing so within the period so specified and extend the period so specified for another period not exceeding 10 days. Even in appeals to the Supreme Court from the Appellate Tribunal under Section 62, 45 days time is given from the date of receipt of the order of the Appellate Tribunal in which an appeal to the Supreme Court is to be made, with a further grace period not exceeding 15 days. The strict adherence of these timelines is of essence to both the triggering process and the insolvency resolution process. As we have seen, one of the principal reasons why the Code was enacted was because liquidation proceedings went on interminably, thereby damaging the interests of all stakeholders, except a recalcitrant management which would continue to hold on to the company without paying its debts. Both the Tribunal and the Appellate Tribunal will do well to keep in mind this principal objective sought to be achieved by the Code and will strictly adhere to the time fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... long as the debt is due i.e. payable unless interdicted by some law or has not yet become due in the sense that it is payable at some future date. It is only when this is proved to the satisfaction of the adjudicating authority that the adjudicating authority may reject an application and not otherwise. 29. It is, thus, clear that so far as an operational creditor is concerned, a demand notice of an unpaid operational debt or copy of an invoice demanding payment of the amount involved must be delivered in the prescribed form. The corporate debtor is then given a period of 10 days from the receipt of the demand notice or copy of the invoice to bring to the notice of the operational creditor the existence of a dispute, if any. We have also seen the notes on clauses annexed to the Insolvency and Bankruptcy Bill of 2015, in which the existence of a dispute alone is mentioned. Even otherwise, the word and occurring in Section 8(2)(a) must be read as or keeping in mind the legislative intent and the fact that an anomalous situation would arise if it is not read as or . If read as and , disputes would only stave off the bankruptcy process if they are already pending in a sui ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of disputes between the licensee and the generating companies. Such disputes can be adjudicated upon either by the State Commission or the person or persons to whom it is referred for arbitration. In our opinion the word and in Section 86(1)( f ) between the words generating companies and to refer any dispute for arbitration means or . It is well settled that sometimes and can mean or and sometimes or can mean and (vide G.P. Singh s Principles of Statutory Interpretation , 9th Edn., 2004, p. 404). 27. In our opinion in Section 86(1)( f ) of the Electricity Act, 2003 the word and between the words generating companies and the words refer any dispute means or , otherwise it will lead to an anomalous situation because obviously the State Commission cannot both decide a dispute itself and also refer it to some arbitrator. Hence the word and in Section 86(1)( f ) means or . 32. In a recent judgment in Maharishi Mahesh Yogi Vedic Vishwavidyalaya v. State of M.P. (2013) 15 SCC 677 at 718, this Court held: 93. Besides the above two decisions, which discuss about the methodology of interpretation of a statute, we also refer to the following decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontained in Madhusudan (supra) has, therefore, disappeared with the disappearance of this ground in Section 271 of the Companies Act. 35. We have already noticed that in the first Insolvency and Bankruptcy Bill, 2015 that was annexed to the Bankruptcy Law Reforms Committee Report, Section 5(4) defined dispute as meaning a bona fide suit or arbitration proceedings . In its present avatar , Section 5(6) excludes the expression bona fide which is of significance. Therefore, it is difficult to import the expression bona fide into Section 8(2)(a) in order to judge whether a dispute exists or not. 36. The expression existence has been understood as follows: The Shorter Oxford English Dictionary gives the following meaning of the word existence : a) Reality, as opp to appearance. b) The fact or state of existing; actual possession of being. Continued being as a living creature, life, esp. under adverse conditions. Something that exists; an entity, a being. All that exists. ( Page 894 Oxford English Dictionary ) 37. Two extremely instructive judgments, one of the Australian High Court, and the other of the Chancery Division in the UK, throw a great ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the purposes of s 459H of the Corporations Law . What is clear is that in considering applications to set aside a statutory demand, a court will not determine contested issues of fact or law which have a significant or substantial basis. One finds formulations such as: ... at least in most cases, it is not expected that the court will embark upon any extended enquiry in order to determine whether there is a genuine dispute between the parties and certainly will not attempt to weigh the merits of that dispute. All that the legislation requires is that the court conclude that there is a dispute and that it is a genuine dispute . See Mibor Investments Pty Ltd v Commonwealth Bank of Australia (1993) 11 ACSR 362 at 366- 7, followed by Ryan J in Moyall Investments Services Pty Ltd v White (1993) 12 ACSR 320 at 324. Another formulation has been expressed as follows: It is clear that what is required in all cases is something between mere assertion and the proof that would be necessary in a court of law. Something more than mere assertion is required because if that were not so then anyone could merely say it did not owe a debt ... See John Holland Construc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... examine the merits of the dispute other than to see if there is in fact a genuine dispute. The notion of a genuine dispute in this context suggests to me that the court must be satisfied that there is a dispute that is not plainly vexatious or frivolous. It must be satisfied that there is a claim that may have some substance . In Greenwood Manor Pty Ltd v Woodlock (1994) 48 FCR 229 Northrop J referred to the formulations of Thomas J in Re Morris Catering (Australia) Pty Ltd (1993) 11 ACLC 919, 922 and Hayne J in Mibor Investments Pty Ltd v Commonwealth Bank of Australia (supra), where he noted the dictionary definition of genuine as being in this context not spurious ... real or true and concluded (at 234): Although it is true that the Court, on an application under ss 459G and 459H is not entitled to decide a question as to whether a claim will succeed or not, it must be satisfied that there is a genuine dispute between the company and the respondent about the existence of the debt. If it can be shown that the argument in support of the existence of a genuine dispute can have no possible basis whatsoever, in my view, it cannot be said that there is a genuine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at all: against a man now dead. If there was substance in it fit for the court to consider, he should have condescended to a great deal more particularity. At all events, he should have done so if he wished to convince me. I do not think this cross-claim has any substance at all. I would reject it as an answer to this creditor s debt and I would allow the appeal accordingly. On the other hand, Justice Harman in agreeing with the Chancery Division judgment, held: I do not think that on this proceeding we are entitled to adjudicate upon that matter. I do not think we ought to reject out of hand statements on oath by Mr. Hymanson and Mr. Waller which, unsatisfactory as they may be, do yet set up affirmatively this story. There is nobody, of course, to contradict them. I think we must take it that there is at least a chance that the judge will believe that story and will agree that there was such a bargain made, and, moreover, that it was an inherent part of the sale agreement. xxx xxx xxx Therefore, I have had grave doubts about this matter but I have come to the conclusion on the whole that it cannot be said that the story was so vague and the likelihood of success so s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of information that needs to be placed before the adjudicating authority, under Section 9 of the Code, but given the fact that the adjudicating authority has not dismissed the application on this ground and that the appellant has raised this ground only at the appellate stage, we are of the view that the application cannot be dismissed at the threshold for want of this certificate alone. 42. On the other hand, Shri Mohta is on firmer ground when he argues that a dispute certainly exists on the facts of the present case and that, therefore, the application ought to have been dismissed on this ground. 43. According to learned counsel for the respondent, the definition of dispute would indicate that since the NDA does not fall within any of the three sub-clauses of Section 5(6), no dispute is there on the facts of this case. We are afraid that we cannot accede to such a contention. First and foremost, the definition is an inclusive one, and we have seen that the word includes substituted the word means which occurred in the first Insolvency and Bankruptcy Bill. Secondly, the present is not a case of a suit or arbitration proceeding filed before receipt of notice Secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Jasmeet Singh wrote to our Client that he wanted to meet and revive business relationship and exploring common interest points to work together. In fact, in his email, he admits that there should be resolution to the impending payments thereby implying that there was (a) a dispute (as defined under the Code) and (b) there was a breach of the NDA which needed to be resolved. Mr. Singh s emails to our client were sent after 1 year and 6 months had elapsed from the date of our Client s email of 30 January 2015. This clearly shows that your Client was silent during this period and had not bothered to answer the questions raised by our Client. Hence, once again in September, our Client called upon your Client to explain its breach of the NDA. Your Client instead of explaining its breach of the NDA remained silent for about 3 months and thereafter chooses to issue the Notice as a form of pressure tactic and extort monies from our Client for your Client s breach of the NDA. All the conduct of your Client explicitly shows laches on its part. Your Clients should note that under the NDA, it has agreed that a breach of the NDA will cause irreparable damage to our Client and our Client is e ..... X X X X Extracts X X X X X X X X Extracts X X X X
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