IBC Laws - Adjudicating Authority exercising summary jurisdiction cannot determine the claim amount of Operational Creditor and initiate the CIRP - Vertex Cranes & Hoists India Ltd. v. Rotodyne Engineering Services Pvt. Ltd.

Adjudicating Authority exercising summary jurisdiction cannot determine the claim amount of Operational Creditor and initiate the CIRP – Vertex Cranes & Hoists India Ltd. v. Rotodyne Engineering Services Pvt. Ltd. – NCLT Hyderabad Bench

December 28, 2023

Hon’ble NCLT Hyderabad Bench held that when the operational creditor did not fix the problems as per the terms and conditions of the agreement, the corporate debtor was within its right to withhold the payment. Such defects were pre-existing before the receipt of the demand notice by the corporate debtor. The dispute was also genuine one and the standard of determining ought not to be equated with the doctrine of preponderance of probability. The Bench also held that besides the pre-existing disputes bar the filing of the present application, the operational creditor is also unable to prove the exact amount due from the corporate debtor. This Authority exercising summary jurisdiction cannot determine the claim amount and initiate the CIRP.

(2023) ibclaw.in 1060 NCLT

IN THE NATIONAL COMPANY LAW TRIBUNAL
Hyderabad Bench

Vertex Cranes & Hoists India Ltd.
v.
Rotodyne Engineering Services Pvt. Ltd.

CP No. 148/9/HDB/2020
Decided on 07-Dec-23

Coram: Shri Rajeev Bhardwaj (Judicial Member) and Shri Sanjay Puri (Technical Member)

Add. Info:

Corporate Debtor: Rotodyne Engineering Services Pvt. Ltd.

For Appellant(s): Mr. T.Sujan Kumar Reddy, Ms. G,Sumathi, Advocates

For Respondent(s): Mr. Mayur Mundhra

Brief about the decision:

Section 9 r/w Section 8 of the IBC lays down the procedure and formalities for initiation of CIRP by an operational creditor. These provisions require a strict proof of debt and default.(p15)
The operational creditor has issued two notices dated 19.07.2019 and 20.12.2019 without explaining properly why need arose to issue fresh notice. Learned Counsel for the operational creditor has tried to say that after issuance of first notice dated 19.07.2019, corporate debtor has paid certain amount, but the amounts claimed in both the notices are the same. Accordingly, first notice dated 19.07.2019 is to be taken as date of default.(p17)
Reply to this notice was given by the corporate debtor on 17.08.2019, wherein it was pointed out that the amount was withheld because the operational creditor did not rectify the defects brought to its notice vide email dated 9.02.2019. Therefore, it is clear that the shortcomings pointed out by the corporate debtor were in the knowledge of the operational creditor prior to the issuance of the demand notice dated 19.07.2019. (p17)
When the operational creditor did not fix the problems as per the terms and conditions of the agreement, the corporate debtor was within its right to withhold the payment. Such defects were pre-existing before the receipt of the demand notice by the corporate debtor. The dispute was also genuine one and the standard of determining ought not to be equated with the doctrine of preponderance of probability.(p11)
Besides the pre-existing disputes bar the filing of the present application, the operational creditor is also unable to prove the exact amount due from the corporate debtor. This Authority exercising summary jurisdiction cannot determine the claim amount and initiate the CIRP.(p12)
As a result, Company Petition No. CP(IB) No.148/9/HDB/2020 is dismissed.(p13)