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TMI Blog2023 (10) TMI 604X X X X Extracts X X X X X X X X Extracts X X X X ..... n of Corporate Insolvency Resolution Process ("CIRP" in short) against the Corporate Debtor-M/s Hi-Tech Gears Ltd. (the present Respondent). Aggrieved by this impugned order, the present appeal has been preferred by the Operational Creditor. 2. The brief factual matrix of the case is that the Corporate Debtor had entered into two separate contracts dated 12.02.2018 and 08.03.2018 with Amrop India Consultants Pvt. Ltd. ("AICPL" in short) for filling up two vacancies in their company. AICPL raised four invoices for the services rendered. AICPL subsequently sold their business to Amrop India Pvt. Ltd., the present Appellant by entering into a Slump Sale Agreement with them. Claiming that all properties, assets, liabilities, rights, benefits and interests of AICPL stood transferred to them, the Appellant sent a letter on 28.06.2018 demanding payment of Rs.29,65,732/- from the Corporate Debtor. The Corporate Debtor replied on 13.07.2018 denying the outstanding amount and instead raised a counter-claim of Rs.137.53 lakh. The 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nformed by an email dated 29.04.2018 about gaps in the performance of the search contract which were followed up by several other emails highlighting their performance failure in filling up the two vacancies as per the search contract besides calling them for meetings to discuss how to find a solution to the impasse which had arisen. These emails having been issued prior to the Section 8 demand notice clearly signify the existence of pre-existing disputes. It was also pointed out by the Learned Counsel for the Respondent that due to gross deficiencies in the services of the Operational Creditor, the Corporate Debtor had to suffer substantial damages due to non- appointment of executives and opportunity costs. The Corporate Debtor had claimed from the Operational Creditor Rs.137.53 lakhs towards damages and loss caused to them. It was also submitted that the Corporate Debtor had not unequivocally agreed to making any payments but had made them conditional upon resolution of performance issues. It has therefore been contended that the Adjudicating Authority was fully justified in rejecting the Section 9 application of the Operational Creditor. 5. We have duly considered the argument ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... file an Application under Section 9(1) of the Code. 8. For convenience, we reproduce Section 9(1) of IBC which is to the following effect: "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 insolvency resolution process." Section 9(5)(ii) is as follows: "(5) The Adjudicating Authority shall, within fourteen days of the receipt of the application under subsection (2), by an order- (i)..... (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 payment of the unpaid operational debt; (c) the creditor has not delivered the invoice or notice for payment to the corporate debtor; (d) no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntract and the Operational Creditor not having discharged their primary obligation in terms of the contract, they were not entitled to their claims of payment. There have been gross deficiencies in the services rendered by the Operational Creditor. The candidates sent for the relevant positions clearly did not meet the specifications. When the objection was raised by the Corporate Debtor, the Managing Partner of the Operational Creditor on 04.04.2018 admitted error on her part in sending the list of the candidates who did not meet the specifications. Thereafter, the deficiencies in the services have been pointed out by the Corporate Debtor repeatedly in their emails dated 29.04.2018, 11.05.2018, 28.05.2018 which pre-dated the issuance of demand notice. Thus, the debt claimed by the petitioner is highly disputed and requires a proper and thorough adjudication which does not fall within the purview of the summary jurisdiction of the Adjudicating 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 disput ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore us, we can safely conclude that there exists a genuine dispute between the parties to the Case. 22. In the present matter, there exists a pre-existing dispute between the parties to the case. The conditions laid down under Section 9 of the Code are not fulfilled. Therefore, we are not inclined to initiate CIRP of the Corporate Debtor as envisaged under the provisions of IBC. This order shall not act as a bar to the Applicant in pursuing any other remedies available to it, under the prescribed provisions of law." ( Emphasis supplied ) 14. Before we go into the reply filed by the Corporate Debtor to the Section 8 Demand Notice, we feel it pertinent to notice the reply which had been fielded by the Corporate Debtor on 13.07.2018 in response to the legal notice dated 28.06.2018 sent to them by the Operational Creditor. The reply clearly articulates the ongoing disputes between the two parties as may be seen from the excerpts 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 28.6.2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in adherence to the specifications. 8. Immediately after this fiasco, the representatives of the company had a reflection session with Ms Preety Kumar, Managing Partner, Amrop India Private Limited and it was admitted by her that there was a gross error on their part in sending a list of candidates who did not meet the specifications. She also admitted during this session that: a. The candidates presented were not as per the specification given by HTG b. Candidate assessment by Amrop was inadequate c. Candidate assessment parameters were to be re-done and signed off by the Board Selection committee 9. Post this meeting, the Company has been requesting representatives of Amrop India Private Limited to come and have a discussion and to explain as to how Amrop_India Private Limited could make up for the significant non-performance but despite various e-mails and telephonic requests 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Debtor cannot escape their liability to repay the claim raised in the first invoice. In support of their contention, reference has been made to the judgment of this Tribunal in Aroon Kumar Aggarwal v. ABC Consultants Pvt. Ltd. in CA (AT) (Ins.) No. 409 of 2020 wherein it has been held that the plea of pre-existing dispute must co-relate with the amount claimed by the Operational Creditor and the dispute should be qua the payable debt to the Operational Creditor and default on the part of the Corporate Debtor thereto. We however are of the view that the facts of the two cases are distinguishable since in that case the issue related to employment agreement and terms and conditions of termination contained therein but in the present case dispute has been raised on the tenability of payment with respect to part-invoice raised in respect of a consolidated, full-fledged contract 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 t ..... 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