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TMI Blog2019 (9) TMI 968X X X X Extracts X X X X X X X X Extracts X X X X ..... ting to the present petition. In this case, the Tribunal observes that, in the statements of accounts, the M/s Colorhomes, the sole proprietorship concern and M/s Colorhome Developers Pvt Ltd, the Respondent herein is used interchangeably. There is no segregation of the amounts paid by both the undertakings from which the liability can be drawn clearly. In view of the above, the Tribunal observes that the petition is liable to be dismissed under Section 5(6) and Section 5(6)(a) of the IBC, 2016 as there is a civil suit pending and there exists a dispute in the amount of debt between both the parties and also under section 7(5)(b) of the IBC, 2016 for being incomplete in details. Therefore, the petition CP/358/(IB)/2018 stands dismissed and there will be no order as to costs." 3. From the perusal of the impugned order it is noted that the Adjudicating Authority dismissed the application which was filed under Section 7 of the IBC read with Rule-4 of Insolvency and Bankruptcy (Application to "Adjudicating Authority") Rules, 2016 (IBC Rules) observing that there are disputes between the Appellants and Respondent, pending proceedings in various Forums and observed that the Statem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... debt to the Corporate Debtor and the Corporate Debtor, towards security, executed Mortgage Deed and also issued Promissory Notes. 5. We have perused the Promissory Notes issued by the Corporate Debtor i.e., M/s Colorhome Developers Pvt Ltd dated 01.12.2012 for a sum of Rs. 8.20 Crores in favour of First Appellant (at page 37 of Paper Book, Volume-I) and Rs. 2 Crores dated 28.09.2012 in favour of Second Appellant and also the Mortgage Deed executed on 05.06.2015 in favour of the Appellants (at page -41, Annexure-A8 of Paper Book, volume-I). 6. The contention of the Respondent that various proceedings are pending before different Forums is concerned, we have perused the records and observe that the proceedings have nothing to do with the claims of the Appellants. The Corporate Debtor filed Civil Suit before the City Civil Court at Chennai arraying the Appellants and others as Defendants in the said suit seeking declaration that the Plaintiff does not owe any amount to the Defendants and also sought permanent injunction restraining the Defendants, their men, agents, servants or anybody who is claiming under them from any way interfering with the Plaintiffs peaceful possession and e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... udicating Authority while rejecting application held that there is a civil suit pending and there exist a dispute in the amount of debt between both the parties and also under Section 7(5)(b) of the IBC for being incomplete in details. Section 7 of the IBC deals with initiation of Corporate Insolvency Resolution Process by Financial Creditor. Sub-section(5) of the said Section reads as under: "(5) Where the Adjudicating Authority is satisfied that- (a) a default has occurred and the application under sub-section(2) is complete, and there is no disciplinary proceedings pending against the proposed resolution professional, it may, by order, admit such application; or (b) default has not occurred or the application under sub-section (2) is incomplete or any disciplinary proceeding is pending against the proposed resolution professional, it may, by order, reject such application: Provided that the Adjudicating Authority, before rejecting the application under clause (b) of sub-section (5), give a notice to the applicant to rectify the defect in his application within seven days of receipt of such notice from the Adjudicating Authority." 10. With regard to definition of Sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ebt becomes due and is not paid, the insolvency resolution process begins. Default is defined in Section 3(12) in very wide terms as meaning nonpayment of a debt once it becomes due and payable, which includes non-payment of even part thereof or an instalment amount. For the meaning of "debt", we have to go to Section 3(11), which in turn tells us that a debt means a liability of obligation in respect of a "claim" and for the meaning of "claim", we have to go back to Section 3(6) which defines "claim" to mean a right to payment even if it is disputed. The Code gets triggered the moment default is of rupees one lakh or more (Section 4). The corporate insolvency resolution process may be triggered by the corporate debtor itself or a financial creditor or operational creditor. A distinction is made by the Code between debts owed to financial creditors and operational creditors. A financial creditor has been defined under Section 5(7) as a person to whom a financial debt is owed and a financial debt is defined in Section 5(8) to mean a debt which is disbursed against consideration for the time value of money. As opposed to this, an operational creditor means a person to whom an operati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 29. The scheme of Section 7 stands in contrast with the scheme under Section 8 where an operational creditor is, on the occurrence of a default, to first deliver a demand notice of the unpaid debt to the operational debtor in the manner provided in Section 8(1) of the Code. Under Section 8(2), the corporate debtor can, within a period of 10 days of receipt of the demand notice or copy of the invoice mentioned in subsection (1), bring to the notice of the operational creditor the existence of a dispute or the record of the pendency of a suit or arbitration proceedings, which is pre-existing - i.e. before such notice or invoice was received by the corporate debtor. The moment there is existence of such a dispute, the operational creditor gets out of the clutches of the Code. 30. On the other hand, as we have seen, in the case of a corporate debtor who commits a default of a financial debt, the adjudicating authority has merely to see the records of the information utility or other evidence produced by the financial creditor to satisfy itself that a default has occurred. It is of no matter that the debt is disputed so long as the debt is "due" i.e. payable unless interdicted by som ..... X X X X Extracts X X X X X X X X Extracts X X X X
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