CIRP plea against the corporate debtor was rightly rejected on ground of pre-existing dispute

Case Details: Talbot & Company v. Austin Distributers (P.) Ltd. - [2023] 148 taxmann.com 275 (NCLAT-New Delhi)

Judiciary and Counsel Details

• • Justice Ashok Bhushan, Chairperson & Barun Mitra, Technical Member
  • Gaurav Kejriwal & Ankit Kohli, Advs. for the Appellant.
  • Ashish Choudhury & Anand Kamal, Advs. for the Respondent.

Facts of the Case

In the instant case, the appellant (i.e. an operational creditor) had provided a range of security services solutions to the respondent who is a corporate debtor. In pursuance of the said services, the appellant raised monthly invoices for payment upon the respondent.

Consequently, on default in making an outstanding payment, the appellant issued a demand notice u/s 8 of the IBC, demanding payment of an outstanding amount.

In response to the said notice, the respondent claimed that the appellant provided poor and deficient services, which resulted in theft and damage to the respondent’s property. Further, the respondent argued that it had communicated this deficiency in services to the appellant vide e-mails from time to time.

Subsequently, the appellant filed an application u/s 9 of the IBC for initiating the CIRP against the respondent. However, the Adjudicating Authority (NCLT) by the impugned order dismissed the said application on the grounds of a pre-existing dispute between the parties.

It was noted that the appellant, vide e-mail communication, had admitted the deficiency in services. Subsequently, an appeal was made to the National Company Law Appellate Tribunal (NCLAT).

NCLAT Held

The NCLAT held that since the defence raised by the respondent in its reply filed in the section 9 application was not illusory or false, there was a disputed debt for which insolvency could not be initiated against the respondent.

Therefore, the NCLT had rightly dismissed the application filed by the appellant. Accordingly, the appeal was to be dismissed.

List of Cases Reviewed

• • Talbot & Company v. Austin Distributers (P.) Ltd. [2023] 148 taxmann.com 274 (NCLT – Kol.) (para 17) affirmed [See Annex].
  • Mobilox Innovations (P.) Ltd. v. Kirusa Software (P.) Ltd. [2017] 85 taxmann.com 292/144 SCL 37 (SC) (para 16) followed.

List of Cases Referred to

• • Mobilox Innovations (P.) Ltd. v. Kirusa Software (P.) Ltd. [2017] 85 taxmann.com 292/144 SCL 37 (SC) (para 7).