Existence of dispute about claim of debt between parties prior to issuance of notice u/s 8 by operational creditor, order passed by AA to admit application filed by operational creditor was to be set aside.- NCLAT in case of A.D. Electro Steel Co. Pvt. Ltd. & Anr. Vs. Anil Steels (Operational Creditor)


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Brief about decision:

Where there was an existence of dispute about claim of debt between parties prior to issuance of notice under section 8 by operational creditor, order passed by Adjudicating Authority to admit application filed by operational creditor was to be set aside.


The Respondent-‘Operational Creditor’ filed an application under section 9 of the Insolvency and Bankruptcy Code, 2016 (“IBC”) for initiation of ‘Corporate Insolvency Resolution Process’ against the Appellants-‘Corporate Debtor’. By impugned order dated 7th September, 2017, the Adjudicating Authority (National Company Law Tribunal), Kolkata Bench, Kolkata, having admitted the application and appointed ‘Interim Resolution Professional’ with direction to take steps as per sections 15, 17 and 18 of the ‘IBC’, the present appeal has been preferred against the said order.

NCLAT verdict:

The main plea taken by the Appellants-‘Corporate Debtor’ is that there is a dispute in existence and therefore the application under Section 9 was not maintainable at the instance of the Respondent- ‘Operational Creditor’.

From the record we find that the Respondent-‘Operational Creditor’ through Advocate issued notice dated 15th June, 2016 under section 138 of the Negotiable Instrument Act, 1881 and made certain claims. In reply to the same, learned counsel for the Appellants- ‘Corporate Debtor’ by reply dated 28th June, 2016 raised the dispute about the supply of certain quantities of Buffer Plunger (Wagon) Casting and Buffer Casing (Wagon) Casting. It was also alleged that the terms and conditions of the agreement have been violated.

In the present case, we find that there was an “existence of dispute” between the parties. Learned Counsel for the Respondent-‘Operational Creditor’ while did not dispute the aforesaid fact and submits that the amount due to the ‘Operational Creditor’ have already been paid.

In view of the fact that there was a dispute between the parties and the decision of the present case is covered by the Hon’ble Supreme Court in “Mobilox Innovations Private Ltd v. Kirusa Software Private Ltd” we have no other option but to set aside the impugned order dated 7th September, 2017 passed in CP (IB) No. 415/KB/2017.
The said order is accordingly, set aside.

In effect, order (s), if any, passed by Ld. Adjudicating Authority appointing any ‘Interim Resolution Professional’ or declaring moratorium, freezing of account, if any, and all other order (s) passed by Adjudicating Authority pursuant to impugned order and action, if any, taken by the ‘Interim Resolution Professional’, including the advertisement, if any, published in the newspaper calling for applications all such orders and actions are declared illegal and are set aside. The application preferred by Respondent under Section 9 of the IBC, 2016 is dismissed. Learned Adjudicating Authority will now close the proceeding. The appellant company is released from all the rigour of law and is allowed to function independently through, its Board of Directors from immediate effect.

Learned Adjudicating Authority will fix the fee of Interim Resolution Professional ‘,if appointed, and the Respondents will pay the fees of the Interim Resolution Professional, for the period he has functioned. The appeal is allowed with aforesaid observation and direction. However, in the facts and circumstances of the case, there shall be no order as to cost.

Case Reference: NCLAT(New Delhi), Company Appeal (AT) (Insolvency) No. 194 of 2017, Date of Order: 06.10.2017

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