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<!DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd"> <html xmlns="http://www.w3.org/1999/xhtml"> <head> </head> <body> <div style="font-family:Verdana, Geneva, sans-serif; font-size:12px; text-align:justify"> <table width="800" border="0" style="border:1px solid #ccc;padding:5px;" align="center" cellpadding="6" cellspacing="0"> <tr> <td align="left" valign="top"> NATIONAL COMPANY LAW APPELLATE TRIBUNAL Dispute must pre-exist before the receipt of the demand notice for admitting an application under Section 9 of IBC MANU/NL/0293/2020 - (10 Aug 2020) </td> </tr> <tr> <td align="left" valign="top">Adish Jain Vs. Sumit Bansal and Ors.</td> </tr> <tr> <td align="left" valign="top" style="background-color:#FDEDCE">Challenge in present Appeal is to the Order passed by the Adjudicating Authority (National Company Law Tribunal, New Delhi), by which Order, the Adjudicating Authority has admitted the Section 9 Application filed by Worldwide Metals Pvt. Ltd., the Operational Creditor. Aggrieved by the said Order, the shareholder of the Corporate Debtor J.P. Engineers Pvt. Ltd., preferred present Appeal under Section 61 of the Insolvency and Bankruptcy Code, 2016 (IBC). 
The facts in brief are that, the Corporate Debtor was a regular buyer of Aluminium Ingots and Wire Rods and had a running account with the Operational Creditor. Appellant claims that, the Principle Operational Debt claimed by the Operational Creditor pertains to purchase of Aluminium Ingots and Wire Rods. While admitting the Application under Section 9, the Adjudicating Authority observed that, the dispute raised by the Corporate Debtor is illusionary and moonshine, which is up-stretched with an intention to erase its liability and defeat the claim made by the Operational Creditor. 
It is relevant to examine the ratio laid down by the Hon'ble Supreme Court in "Mobilox Innovations Pvt. Ltd. Vs. Kirusa Software (P) Limited-" wherein the Supreme Court held that, the 'existence of the dispute' must be pre-existing - i.e. it must exist before the receipt of the demand notice or invoice, as the case may be. The adjudicating authority must follow the mandate of Section 9 of IBC, 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." 
The existence of dispute must be pre-existing i.e. it must exist before the receipt of the demand notice or invoice. If it comes to the notice of the Adjudicating Authority that the 'operational debt' is exceeding Rs. 1 lakh and the application shows that, the aforesaid debt is due and payable and has not been paid, in such case, in absence of any existence of a dispute between the parties or the record of the pendency of a suit or arbitration proceeding filed before the receipt of the demand notice of the unpaid 'operational debt', the application under Section 9 cannot be rejected and is required to be admitted. 
In the reply to the legal notice, the Corporate Debtor has specifically stated that, as on 31st March, 2018 all amounts have been reconciled between both the Parties, but remain silent about any subsequent transactions. Even in the reply to the demand notice, there is no specific pleading with respect to any dispute regarding quality, quantity, price of the goods and services per se. It is significant to mention that, in the statement of 'Confirmation of Accounts', relied upon by the Appellant, is dated 1st April, 2019 and is for the period subsequent to 31st March, 2018. This document date is subsequent to the issuance of the demand notice and there are no tenable grounds to explain the reasons for the Operational Creditor to have signed this document, specially keeping in view that, the 'Confirmation of Accounts' shows 'Nil' balance. 
There is no documentary evidence filed by the Appellant to substantiate their plea that, all accounts have been reconciled and signed by both the Parties except for filing confirmatory letters which portray so many discrepancies and therefore, inspire no confidence. Both the defences raised by the Appellant's Counsel are mutually exclusive and cannot co-exist as a debt cannot be disputed and discharged at the same time. The Appellant did not raise any plausible contention requiring further investigation and the argument raised is not substantiated by any evidence. Hence, the 'dispute' does not truly exist in fact and is spurious and the principle laid by the Hon'ble Supreme Court in Mobilox Innovations Pvt. Ltd. Vs. Kirusa Software (P) Limited is squarely applicable to the facts of present case. Therefore, there is no illegality or infirmity in the Order passed by the Adjudicating Authority. Appeal dismissed.</td> </tr> <tr> <td align="left" valign="top" ></td> </tr> <tr> <td align="left" valign="top" >Tags : Dispute, Existence, Mandate, Provision</td> </tr> <tr> <td align="left" valign="top">&nbsp;</td> </tr> <tr>  <td align="left" valign="top">Source : newsroom.manupatra.com</td> </tr> <tr> <td align="left" valign="top">&nbsp;</td> </tr> <tr> <td align="left" valign="top">Regards</td> </tr> <tr> <td align="left" valign="top">Team Manupatra</td> </tr> <tr> <td align="left" valign="top">&nbsp;</td> </tr> </table> </div> </body> </html>