TMI Blog2023 (10) TMI 604X X X X Extracts X X X X X X X X Extracts X X X X ..... that for a pre-existing dispute to be a ground to nullify an application under Section 9, the dispute raised must be truly existing at the time of filing a reply to notice of demand as contemplated by Section 8(2) of IBC or at the time of filing the Section 9 application. The Adjudicating Authority has taken note of the correspondences exchanged between the two parties prior to the Section 8 demand notice to determine the issue of pre-existing dispute. Two of such communications dated 29.04.2018 and 30.04.2018 sent by the Corporate Debtor to the Operational Creditor have been reproduced at para 18 of the impugned order. From the email of 29.04.2018, it is clear that the Corporate Debtor gave opportunities to the Operational Creditor to sit across the table to sort out their problems amicably - A holistic analysis of the emails leads us to the inescapable conclusion that genuine pre-existing disputes were there and the Adjudicating Authority therefore committed no error in drawing similar conclusion of pre-existing disputes. It is well settled that in Section 9 proceeding, there is no need to enter into final adjudication with regard to existence of dispute between the parties ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Appellant thereafter sent a demand notice under Section 8 of IBC to the Corporate Debtor on 30.07.2018 to which the Corporate Debtor sent a notice of dispute on 09.08.2018. The Appellant then filed the Section 9 application before the Adjudicating Authority to which the Corporate Debtor filed reply affidavit on 29.03.2022. The Adjudicating Authority passed the impugned order on 16.06.2023 rejecting the Section 9 application. Assailing the impugned order, the Operational Creditor has preferred this appeal. 3. The Learned Counsel for the Appellant while making his submissions stated that the Adjudicating Authority after examining the Slump Sale Agreement had gone into the question of whether an operational debt had become due and payable to the Appellant. The Adjudicating Authority had rightly held that in view of the Slump Sale Agreement, the invoices raised by AICPL on the Corporate Debtor had become payable to the Appellant. However, where the Adjudicating Authority went wrong was in coming to the conclusion that there was a pre-existing dispute between the parties by relying on certain emails of the Corporate Debtor in which the deficiency of services had been raised. It was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contended that the Adjudicating Authority was fully justified in rejecting the Section 9 application of the Operational Creditor. 5. We have duly considered the arguments advanced by the Learned Counsel for the parties and perused the records carefully. The short point for consideration is whether there was any genuine pre-existing dispute surrounding the debt claimed by the Operational Creditor to be due and payable to them by the Corporate Debtor. 6. Before dwelling on the facts of the present case, a quick glance at the relevant statutory construct of IBC would be useful. Section 8 of the IBC requires the Operational Creditor, on occurrence of a default by the Corporate Debtor, to deliver a Demand Notice in respect of the outstanding Operational Debt. Section 8(2) lays down that the Corporate Debtor within a period of 10 days of the receipt of the Demand Notice would have to bring to the notice of the Operational Creditor, the existence of dispute, if any. Section 8 of the IBC is as follows: 8. Insolvency resolution by operational creditor- (1) An operational creditor may, on the occurrence of a default, deliver a demand notice of unpaid operational debt or copy of an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... application made under sub-section (2) is incomplete; (b) there has been payment 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 Authority, shall before rejecting an application under sub-clause (a) of clause (ii) give a notice to the applicant to rectify the defect in his application within seven days of the date of receipt of such notice from the adjudicating Authority. 9. From a plain reading of the above provisions, it is clear that the existence of dispute and its communication to the Operational Creditor is therefore statutorily provided for in Section 8. In the present case, it is an undisputed fact that the demand notice was issued by the Operational Creditor on 30.07.2018 and notice of dispute raised by the Corporate Debtor on 09.08.2018. It is also an undisputed fact in the present matter that the Operational Creditor did ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Authority. It is also the case of the Corporate Debtor that a civil suit demanding damages of Rs. 137.53 lakhs stood registered as Civil Suit which also testifies a dispute. 12. It is a well settled proposition that for a pre-existing dispute to be a ground to nullify an application under Section 9, the dispute raised must be truly existing at the time of filing a reply to notice of demand as contemplated by Section 8(2) of IBC or at the time of filing the Section 9 application. 13. Given this backdrop, it will be useful to find out how the Adjudicating Authority has considered the spectrum of facts to arrive at the conclusion that there existed pre-existing disputes. The relevant portions of the impugned order is extracted hereunder: 19. It is apparent that the Corporate Debtor has employed the services of the Applicant for engaging candidates for the post of CFO and Business Head. As per the trail of e-mails, it appears that the candidates provided were not as per the specifications laid down by the Corporate Debtor. The same has been pointed out by the Corporate Debtor in its e-mails as well as letters preferred to the Applicant. 20. The Corporate Debtor, in such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xcerpts of the said reply as under: 13th July, 2018 To, MS.SANJU PREET KAUR AMROP INDIA PRIVATE LIMITED GLOBAL BUSINESS PARK, 7TH FLOOR, TOWER B, M.G.ROAD, GURGAON-122002, HARYANA. Dear Ma'am, Kindly refer to your legal notice dated 28.6.2018 which was received by us on 30.6.2018 through hard copy. In this regard all the allegations and claims made in the said legal notice are denied except those specifically referred to in this response. It is stated as follows: 1. At the outset, it is stated that the demand being made by Amrop India Private Limited is without any basis and In fact, The Hi-Tech Gears Ltd., have a substantial claim against you on account of time, cost and opportunity cost due to the significant non-performance by Amrop. 2. While discussing the engagement with Amrop Indla Private Limited, It was represented by you that Amrop having been in this field of offering services in Executive search, had a substantial database and network which could be tapped for suggested candidates for the position of CFO and Business Head (South). Based on this representation and the assurances given by Amrop India Private Limited ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts and Amrop India Private Limited having undertaken to come up with a revised hiring plan and valuation criteria on 9.4.2018, no steps were taken by Amrop India Private Limited to address the issue of non-performance and deficiency of service. 10. In fact, after the fiasco of the meeting on 3rd and 4th April, 2018, Amrop India Private Limited has realised from the contract and taken no further steps. Our clients having banked on Amrop India Private Limited carrying out their obligations as represented by them have suffered substantial damages on account of delay in appointment of the CFO as well as the Business Head, South. Besides this, as mentioned earlier, a substantial amount of the Board's time has been wasted and the company has incurred substantial cost in regard to this by way of meetings organized on 3rd and 4th April, 2018 based on your assurances that you had the candidates suitable for these posts which were admitted by you subsequently that this was an Incorrect assurance given by you. . 11. . 12. Through this letter, we hereby demand that you pay us the above amount of Rs.137.53 Lakh within the next 7 days of receipt of the present notice. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in view of non- performance of obligations to be discharged by Operational Creditor. Thus, the facts being quite different, this ratio does not come to the help of the Appellant. 17. We also notice that the Adjudicating Authority has taken note of the correspondences exchanged between the two parties prior to the Section 8 demand notice to determine the issue of pre-existing dispute. Two of such communications dated 29.04.2018 and 30.04.2018 sent by the Corporate Debtor to the Operational Creditor have been reproduced at para 18 of the impugned order. From the email of 29.04.2018, it is clear that the Corporate Debtor gave opportunities to the Operational Creditor to sit across the table to sort out their problems amicably. In the other email issued on 30.04.2018 as extracted in the impugned order, the Corporate Debtor invited the Operational Creditor to share the revised work plan to take the process of Executive Search forward and made the payment contingent thereto. Besides these two emails reproduced in the impugned order, we find that in another email dated 28.05.2018 the Corporate Debtor highlighted that though significant costs had been incurred yet they were still not ..... X X X X Extracts X X X X X X X X Extracts X X X X
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