Order passed by NCLT u/s 9 didn’t need interference as CD had not disputed any existence of debt: NCLAT

Case Details: Arun Mittal v. Sun Control Systems - [2022] 144 taxmann.com 18 (NCLAT-New Delhi)

Judiciary and Counsel Details

• • Justice Ashok Bhushan, Chairperson, M. Satyanarayana Murthy, Judicial Member
    & Barun Mitra, Technical Member
  • Abhijeet Sinha & Kunal Godhwani, Advs. for the Appellant.
  • Bhuvan Arora, Ramesh Gupta, Aakash Bhardwaj, Sanjay Pal, Rishi Sood, Parv Garg, Pawas Kulshreshtha, Piyush Hans, Advs. & Harsh Pratap Shahi for the Respondent.

Facts of the Case

In the instant case, the corporate debtor issued a work order to the operational creditor to supply and install the UPVC Profile of doors and windows. The operational creditor raised invoices. The corporate debtor defaulted in making payment of the debt due.

Thereafter, the operational creditor issued a demand notice claiming operational debt and filed an application u/s 9 of IBC to initiate the CIRP in respect of the corporate debtor. However, the said application was admitted by the Adjudicating Authority (NCLT).

The National Company Law Tribunal (NCLT) came to the conclusion that there was a clear indication of an operational debt due from the corporate debtor. Also, the corporate debtor defaulted in making payment of the debt due and further in the absence of any pre-existing dispute relating to the said debt, the NCLT admitted the section 9 application filed by the operational creditor and ordered initiation of the CIRP.

Aggrieved by the order of the NCLT, the corporate debtor preferred an instant appeal to the National Company Law Appellate Tribunal (NCLAT) praying for termination of the CIRP process initiated against the corporate debtor on the ground that there were defects in work executed and that 50 per cent work was not completed.

NCLAT Held

The NCLAT observed that there was no exchange of correspondence raising any dispute prior to the issue of the demand notice. Further, there was nothing credible to substantiate the pre-existence of the dispute.

The NCLAT held that the corporate debtor had defaulted in payment of the operational debt of an amount exceeding Rs. 1 lakh, i.e., Rs. 2,26,258, which amount had clearly become due and payable.

Further, the NCLAT held that in the absence of any pre-existing dispute, no error had been committed by the Adjudicating Authority (NCLT) in admitting the application u/s 9 of the IBC and initiating the CIRP. Therefore, the impugned order passed by the NCLT in admitting the application u/s 9 of the IBC didn’t require any interference.

Accordingly, the appeal was to be dismissed.

List of Cases Reviewed

• • Sun Control Systems v. Aarcity Infrastructure (P.) Ltd. [2022] 144 taxmann.com 17 (NCLT – New Delhi) (para 17) affirmed. [See Annex]
  • Mobilox Innovations (P.) Ltd. v. Kirusa Software (P.) Ltd. [2017] 85 taxmann.com 292/140 CLA 123/144 SCL 37/4 Comp. LJ 255/205 Comp. Case 324 (SC)/[2018] 1 SCC 353 (para 12) followed.

List of Cases Referred to

• • Mobilox Innovations (P.) Ltd. v. Kirusa Software (P.) Ltd. [2017] 85 taxmann.com 292/140 CLA 123/144 SCL 37/4 Comp. LJ 255/205 Comp. Case 324 (SC)/[2018] 1 SCC 353 (para 3)
  • Amitabh Ray v. Master Development Management (India) (P.) Ltd. [Co. Appeal No. (AT) (Ins.) No. 274 of 2022] (para 6)
  • Innovative Industries Ltd. v. ICICI Bank [2017] 84 taxmann.com 320/140 CLA 39/143 SCL 625/4 Comp LJ 193/205 Comp. Case 57 (SC)/[2018] 1 SCC 407 (para 10)
  • Vidarbha Industries Power Ltd. v. Axis Bank Ltd. [2022] 140 taxmann.com 252/173 SCL 355/233 Comp Case 544 (SC) (para 16).