TMI Blog2018 (10) TMI 1337X X X X Extracts X X X X X X X X Extracts X X X X ..... is no award of the Arbitral Council with respect to invoices at Sl. Nos. 1-57. There is no order of any other court as well qua these invoices. In fact, Arbitral Council specifically rejected the claim of the respondent as time barred. It is pertinent to mention that respondent had moved an application before the Arbitral Council for determination of amount to be paid by the appellant. However, this application was specifically dismissed by the Arbitral Council as not maintainable. In a recent judgment of this Court in Mobilox Innovations Private Limited vs. Kirusa Software Private Limited [2017 (9) TMI 1270 - SUPREME COURT OF INDIA] this Court has categorically laid down that IBC is not intended to be substitute to a recovery forum. It is also laid down that whenever there is existence of real dispute, the IBC provisions cannot be invoked. We allow this appeal and set aside the impugned order dated September 04, 2018 passed by the NCLAT. - Civil Appeal No. 9597 of 2018 - - - Dated:- 23-10-2018 - A. K. Sikri And Ashok Bhushan, JJ. JUDGMENT A. K. Sikri, J. The order of the National Company Law Appellate Tribunal, New Delhi (for short, NCLAT) dated September 0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the respondent was not maintainable as the claims which were preferred by the respondent against the appellant and on the basis of which respondent asserts that it has to receive monies from the appellant are not tenable and in any case these are not disputed claims. This assertion is based on the fact that these very claims of the respondent were subject matter of arbitration and the award was passed rejecting these claims as time barred. Moreover, the company petition itself suffers various fundamental defects. On that basis, NCLT held that there is a valid dispute, rather no dispute as issue in question was substantially dealt with by various courts as mentioned in the order passed by NCLT. 3. Before going into the details of the said order passed by NCLT it would be appropriate to refer to some important events in chronological order, which have a bearing on the present case. 4. The appellant is a Transmission Corporation of Andhra Pradesh Government and is successor of Andhra Pradesh State Electricity Board (for short, APSEB ) and is in the activities relating to transmission of electricity. It had awarded certain contracts to the respondent herein for supply of goo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is concerned, as noted above the respondent s claim pertaining to Invoice Nos. 58-82 was allowed and the execution thereof was sought. The respondent, however, filed another execution petition seeking execution of amount in respect of Invoice Nos. 1-57 also. This application was entertained and both the petitions were directed to be dealt with simultaneously vide orders dated August 17, 2016. That order was challenged by the appellant herein by filing Revision Petition before the High Court of Judicature at Hyderabad. The High Court vide its order dated November 08, 2016 allowed the said Revision Petition holding that there was no award in respect of claim towards Invoice Nos. 1-57 and, therefore, it was not permissible for the respondent to seek the execution. The relevant portion of the orders passed by the High Court of Judicature at Hyderabad is reproduced hereinbelow: 17. From the above, once there is no re-determination of the disallowed claim, much less by allowing the claim in respect of Item Nos. 1 to 57 of annexure-1 by the Arbitration Court-cum-Additional District Judge Chandigarh under Section 34 of the Act in the Arbitration Case No. 361 of 2010 for review also e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 233/- which was not paid by the appellant. As mentioned above, this petition was dismissed by the NCLT vide its order dated April 09, 2018. Against this order, the respondent has filed appeal before the NCLAT in which impugned orders dated September 04, 2018 have been passed. 9. Section 9 provides for initiation of corporate insolvency resolution process by operating creditor on the basis of application filed by such a creditor. It, inter alia, states that whenever a notice, demanding the payment as per notice or invoice, under subsection (1) of Section 8 of IBC and the operational creditor does not receive payment from the corporate debtor, after the expiry of a period of 10 days from the date of delivery of such notice or invoice demanding payment operational creditor may file an obligation before the adjudicating authority for initiating CIRP. Section 8 deals with insolvency resolution. Sub-section (1) thereof stipulates that an operational creditor may, on the occurrence of a default, deliver a demand notice of unpaid operational debtor copy of an invoice demanding payment of the amount involved in the default to the corporate debtor in such form and manner as may be prescri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e operational creditor and the corporate debtor if,- (a) the application made under sub-section (2) 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; (d) no notice of dispute has been received by the operational creditor or there is no record of dispute in the information utility; and (e) there is no disciplinary proceeding pending against any resolution professional proposed under sub-section (4), if any; (ii) reject the application and communicate such decision to the operational creditor and the corporate debtor, if- (a) the application made under sub-section (2) is incomplete; (b) there has been repayment of the unpaid operational debt; (c) the creditor has not delivered the invoice or notice for payment to the corporate debtor; (d) notice of dispute has been received by the operational creditor or there is a record of dispute in the information utility; or (e) any disciplinary proceeding is pending against any proposed resolution professional: Provided that Adjudicating Authori ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s also stated that though the matter is posted for admission on the next date, the appeal would be disposed of at the stage of admission itself. There is a clear message in the aforesaid order directing the appellant to pay the amount to the respondent, failing which CIRP shall be initiated against the appellant. 14. The only argument advanced by learned counsel for the respondent before this Court was that the High Court of Punjab and Haryana while setting aside the remand order passed by the Additional District Judge did not hold that Invoice Nos. 1-57 are time barred. Therefore, the respondent had a valid claim under those invoices. This argument cannot be countenanced. As of today, there is no award of the Arbitral Council with respect to invoices at Sl. Nos. 1-57. There is no order of any other court as well qua these invoices. In fact, Arbitral Council specifically rejected the claim of the respondent as time barred. It is pertinent to mention that respondent had moved an application before the Arbitral Council for determination of amount to be paid by the appellant. However, this application was specifically dismissed by the Arbitral Council as not maintainable. 15. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ority) Rules, 2016 in Form 5, accompanied with documents and records that are required under the said form. Under Rule 6(2), the applicant is to dispatch by registered post or speed post, a copy of the application to the registered office of the corporate debtor. Under Section 9(3), along with the application, the statutory requirement is to furnish a copy of the invoice or demand notice, an affidavit to the effect that there is no notice given by the corporate debtor relating to a dispute of the unpaid operational debt and a copy of the certificate from the financial institution maintaining accounts of the operational creditor confirming that there is no payment of an unpaid operational debt by the corporate debtor. Apart from this information, the other information required under Form 5 is also to be given. Once this is done, the adjudicating authority may either admit the application or reject it. If the application made under subsection (2) is incomplete, the adjudicating authority, under the proviso to sub-section (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 complet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch dispute? If any one of the aforesaid conditions is lacking, the application would have to be rejected. Apart from the above, the adjudicating authority must follow the mandate of Section 9, as outlined above, and in particular the mandate of Section 9(5) of the Act, and admit or reject the application, as the case may be, depending upon the factors mentioned in Section 9(5) of the Act. xx xx xx 37. It is now important to construe Section 8 of the Code. The operational creditors are those creditors to whom an operational debt is owed, and an operational debt, in turn, means a claim in respect of the provision of goods or services, including employment, or a debt in respect of repayment of dues arising under any law for the time being in force and payable to the Government or to a local authority. This has to be contrasted with financial debts that may be owed to financial creditors, which was the subjectmatter of the judgment delivered by this Court on 31-8- 2017 in Innoventive Industries Ltd. v. ICICI Bank (Civil Appeals Nos. 8337-38 of 2017). In this judgment, we had held that the adjudicating authority under Section 7 of the Code has to ascertain the existenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompanies Act. 44. 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. 45. The expression existence has been understood as follows: 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. (P. 894, Oxford English Dictionary) xx xx xx 51. It is clear, therefore, that once the operational creditor has filed an application, which is otherwise complete, the adjudicating authority must reject the application under Section 9(5)(2)(d) if notice of dispute has been receive ..... X X X X Extracts X X X X X X X X Extracts X X X X
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