Dispute-Only pre-existing dispute

The pre-existing dispute must relate to the transaction or debt that forms the basis of the Section 9 application under IBC | 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 – R.A.J. Krishna Construction Company Pvt. Ltd. Vs. Newera Solutions Pvt. Ltd. – NCLAT New Delhi

The Hon’ble NCLAT held that:

(i) The existence of dispute and its communication to the Operational Creditor is statutorily provided for in Section 8.
(ii) It is also a well settled proposition of law 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.
(iii)The pre-existing dispute must relate to the transaction or debt that forms the basis of the Section 9 application.
(iv) As an arbitration notice is a formal communication from one party to the other, initiating arbitration proceedings, the arbitration notice evidences a pre-existing dispute. This therefore constitutes sufficient ground for rejection of a Section 9 application.

The pre-existing dispute must relate to the transaction or debt that forms the basis of the Section 9 application under IBC | 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 – R.A.J. Krishna Construction Company Pvt. Ltd. Vs. Newera Solutions Pvt. Ltd. – NCLAT New Delhi Read Post »

Dispute between the parties regarding contractual conditions relating to place of delivery and obligation of parties for transport of goods is a pre-existing dispute as per IBC and the application for CIRP against Corporate Debtor cannot be allowed – Sanam Fashion & Design Exchange Ltd. Vs. Ktex Nonwovens Pvt. Ltd. – NCLAT New Delhi

Hon’ble NCLAT held that:

(i) In the present case, the appellant had placed an advance with the respondent for supply of goods, it does not matter who is the supplier or the receiver of goods and services Consolidated Construction Consortium Ltd. v. Hitro Energy Solutions Pvt. Ltd. (2022) ibclaw.in 09 SC,
(ii) There was a pre-existing dispute between the parties regarding contractual conditions relating to place of delivery and obligation of parties for transport of goods and therefore the application for CIRP against Corporate Debtor cannot be allowed.

Dispute between the parties regarding contractual conditions relating to place of delivery and obligation of parties for transport of goods is a pre-existing dispute as per IBC and the application for CIRP against Corporate Debtor cannot be allowed – Sanam Fashion & Design Exchange Ltd. Vs. Ktex Nonwovens Pvt. Ltd. – NCLAT New Delhi Read Post »

The arbitration application was also not relevant for IBC Section 9 proceedings, since, the arbitration application was filed by Corporate Debtor much after the initiation of proceedings under Section 9 – Balasore Alloys Ltd. Vs. MSTC Ltd. – NCLAT New Delhi

Hon’ble NCLAT held that:

(i) The observation of the Hon’ble Supreme Court in order dated 28.11.2023 as noted above, clearly indicate that arbitration order passed in the arbitration proceedings shall not affect proceedings in Section 9 Application under the Code, which was filed by the Operational Creditor.
(ii) The arbitration application, on which order dated 13.09.2023 was passed, was also not relevant for Section 9 proceedings, since, the arbitration application was filed by Corporate Debtor before the High Court on 31.08.2023, i.e., much after the initiation of proceedings under Section 9.

The arbitration application was also not relevant for IBC Section 9 proceedings, since, the arbitration application was filed by Corporate Debtor much after the initiation of proceedings under Section 9 – Balasore Alloys Ltd. Vs. MSTC Ltd. – NCLAT New Delhi Read Post »

If Corporate Debtor admitted the outstanding debt and agreed to pay to Operational Creditor after raising dispute in reply of demand notice u/s 8 of IBC, CIRP u/s 9 of IBC can be admitted – Naresh Choudhary (Suspended Director of NIK-SAN Engineering Company Ltd.) Vs. Sterling Enamelled Wires Pvt. Ltd. – NCLAT New Delhi

NCLAT observed that the Corporate Debtor had acknowledged the outstanding amount which was due and payable to the Operational Creditor. Not only was the outstanding amount acknowledged but an assurance had also been given by Corporate Debtor to clear the said amount and make extra payment towards old outstanding dues. Letters of dispute had been raised by the Corporate Debtor on several occasions. Since these letters pertain to the period June 2020 to September 2020, there is no dispute that these pertain to a period prior to the date of demand notice. Subsequent to these communications, the Corporate Debtor has acknowledged his liability on 23.07.2021. At the time of acknowledging the outstanding operational debt, the question of any pre-existing dispute having subsisted lacks foundation.

If Corporate Debtor admitted the outstanding debt and agreed to pay to Operational Creditor after raising dispute in reply of demand notice u/s 8 of IBC, CIRP u/s 9 of IBC can be admitted – Naresh Choudhary (Suspended Director of NIK-SAN Engineering Company Ltd.) Vs. Sterling Enamelled Wires Pvt. Ltd. – NCLAT New Delhi Read Post »

An order of the Hon’ble High Court shall be binding on the Adjudicating Authority (Tribunal) established under Section 419(4) of the Companies Act, 2013 exercising Territorial Jurisdiction – M/s. Indra Marshal Power Pvt. Ltd. Vs. M/s. Akshaya Irrigation Products Pvt. Ltd. – NCLAT Chennai

NCLAT held that an Order of the Hon’ble High Court passed in a given case shall be binding on the Adjudicating Authority (Tribunal) established under Section 419(4) of the Companies Act, 2013 exercising Territorial Jurisdiction. To put it differently, the propriety, sobriety and the comity of judicial discipline require an Adjudicating Authority (Tribunal) is to follow the Order of the Hon’ble High Court in true letter and spirit and without any deviation, whatsoever. No wonder, an order / decision, is an Authority for what it actually decides. It is highly inappropriate and impermissible for an Adjudicating Authority (Tribunal) not to follow the Order, passed by the Hon’ble High Court.

An order of the Hon’ble High Court shall be binding on the Adjudicating Authority (Tribunal) established under Section 419(4) of the Companies Act, 2013 exercising Territorial Jurisdiction – M/s. Indra Marshal Power Pvt. Ltd. Vs. M/s. Akshaya Irrigation Products Pvt. Ltd. – NCLAT Chennai Read Post »

The right to apply under the IBC would accrue on the date when default occurs and it is extendable only by application of Section 5 of the Limitation Act and it is incumbent on the Adjudicating Authority to consider the claim for condonation of the delay when once the proceeding concerned is found filed beyond the period of limitation – Sabarmati Gas Ltd. Vs. Shah Alloys Ltd. – Supreme Court

Hon’ble Supreme Court held that when the limitation period for initiating CIRP under Section 9, IBC is to be reckoned from the date of default, as opposed to the date of commencement of IBC and the period prescribed therefor, is three years as provided by Section 137 of the Limitation Act, 1963 and the same would commence from the date of default and is extendable only by application of Section 5 of the Limitation Act, 1963 it is incumbent on the Adjudicating Authority to consider the claim for condonation of the delay when once the proceeding concerned is found filed beyond the period of limitation. The Hon’ble Court held that ‘Sufficient Cause’ is the cause for which a party could not be blamed.

The right to apply under the IBC would accrue on the date when default occurs and it is extendable only by application of Section 5 of the Limitation Act and it is incumbent on the Adjudicating Authority to consider the claim for condonation of the delay when once the proceeding concerned is found filed beyond the period of limitation – Sabarmati Gas Ltd. Vs. Shah Alloys Ltd. – Supreme Court Read Post »

For a pre-existing dispute to be a ground to thwart an application under Section 9 of IBC, the dispute raised must be truly existing at the time of filing a reply to notice of demand as contemplated by Section 8(2) or at the time of filing the Section 9 application – Writers and Publishers Pvt. Ltd. Vs. M/s Oriental Coal Corporation – NCLAT New Delhi

NCLAT held that a plain reading of the Section 8 of IBC reveals that sub-section (2) of Section 8 obligates the Corporate Debtor who has been delivered a Demand Notice under Section 8(1) by Operational Creditor to bring to the notice of the Operational Creditor the “existence of a dispute, if any, or record of the pendency of the suit or arbitration proceedings filed before the receipt of such notice or invoice in relation to such dispute”. There is a statutory purpose for requiring a Corporate Debtor for bringing into notice of the Operational Creditor about the existence of a dispute in its reply to Section 8(1) notice. The purpose is that if there is a dispute in existence, the same be immediately communicated to the Operational Creditor so that he charts out his next actionable step. If no mention of existence of dispute is made by the Corporate Debtor, the Operational Creditor can go ahead and file an application under Section 9(1).

For a pre-existing dispute to be a ground to thwart an application under Section 9 of IBC, the dispute raised must be truly existing at the time of filing a reply to notice of demand as contemplated by Section 8(2) or at the time of filing the Section 9 application – Writers and Publishers Pvt. Ltd. Vs. M/s Oriental Coal Corporation – NCLAT New Delhi Read Post »

Only question to be looked in IBC Section 9 Application is as to whether the objection raised by the Corporate Debtor opposing claim of the Operational Creditor is not a moonshine defense – Krishna Hi-Tech Infrastructure Pvt. Ltd. Vs. Bengal Shelter Housing Development Ltd. – NCLAT New Delhi

NCLAT held that the contractual dispute between the parties if arise, during the contract provisions are made in all contracts for resolution of such disputes. The dispute between the parties are not supposed to be decided, examined and adjudicated in IBC proceeding. Only question to be looked in Section 9 Application is as to whether the objection raised by the Corporate Debtor opposing claim of the Operational Creditor is not a moonshine defense.

Only question to be looked in IBC Section 9 Application is as to whether the objection raised by the Corporate Debtor opposing claim of the Operational Creditor is not a moonshine defense – Krishna Hi-Tech Infrastructure Pvt. Ltd. Vs. Bengal Shelter Housing Development Ltd. – NCLAT New Delhi Read Post »

If a communication issued earlier to the Demand Notice under Section 8(1) of the IBC indicates dispute, it can be taken into account by the Adjudicating Authority – First WalkIn Technologies Vs. Coffee Day Pvt. Ltd. – NCLAT Chennai

NCLAT held that in a Petition under Section 9 of the Insolvency & Bankruptcy Code, 2016, the Question on Merit of Dispute, cannot be gone into by an Adjudicating Authority (Tribunal). Of course, the Adjudicating Authority (Tribunal) is to examine before Admitting, or Rejecting an Application under Section 9 of the Insolvency & Bankruptcy Code, 2016 , 1) Whether the Dispute raised by the Corporate Debtor, qualifies as a Dispute, as defined under Section 5(6) of the Insolvency & Bankruptcy Code, 2016; and 2) The Adjudicating Authority (Tribunal) can examine whether Merits of Dispute, given by the Corporate Debtor, satisfy the Condition specified under Sub Section 2 (8) of the Insolvency & Bankruptcy Code, 2016

If a communication issued earlier to the Demand Notice under Section 8(1) of the IBC indicates dispute, it can be taken into account by the Adjudicating Authority – First WalkIn Technologies Vs. Coffee Day Pvt. Ltd. – NCLAT Chennai Read Post »

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