NCLAT New Delhi : Dispute To Be ‘Truly In Existence’ At Time Of Reply Or Section 9 Application For Nullifying CIRP U/S 9 Of IBC

The National Company Law Appellate Tribunal (‘NCLAT’) Principal Bench, New Delhi comprising Mr. Justice Ashok Bhushan (Chairperson) and Mr. Barun Mitra (Technical Member) held that the dispute raised must truly exist at the time of filing a reply to the Demand Notice under Section 8(2) of Insolvency Bankruptcy Code, 2016 (‘IBC’) or at the time of filing the Section 9 application for ‘pre-existing dispute’ to be a ground to nullify the Corporate Insolvency Resolution Plan (‘CIRP’) application u/s 9 IBC. Facts: The Appeal has been filed by Amrop India Pvt. Ltd. (Appellant), the operational creditor against NCLT Jaipur’s Order dated 16.06.2023. NCLT had rejected the Section 9 application filed by the Appellant seeking initiation of a CIRP against the Hi-Tech Gears Ltd. (Corporate Debtor). NCLAT Verdict: The NCLAT held that the existence of a dispute and its communication to the Operational Creditor is statutorily provided under Section 8 of IBC for CIRP application u/s 9 of IBC. Presently, there is no dispute over the fact that the Demand notice was issued by the Appellant on 30.07.2018 and the notice of dispute raised by the Corporate Debtor on 09.08.2018. Moreover, the Appellant did not receive any payment from the Corporate Debtor and therefore proceeded to file a Section 9 application. The Appellate Tribunal observed that it is a well-settled law that the dispute raised must truly exist at the time of filing a reply to the Demand Notice under Section 8(2) of IBC or at the time of filing the Section 9 application for ‘pre-existing dispute’ to be a ground to nullify the CIRP application u/s 9 IBC. Presently, the Corporate Debtor’s defense cannot be held to be moonshine as the tone and tenor of the emails exchanged between the parties clearly manifest the existence of a dispute which antedates Section 8 demand notice. The NCLAT concluded that it is well settled there is no need to enter into final adjudication as to the existence of a dispute between parties regarding the operational debt. Moreover, it held that the NCLT Jaipur was correct in rejecting the CIRP application since the conditions u/s 9 of IBC were not fulfilled. Case Title: Amrop India Pvt. Ltd. vs. The Hi-Tech Gears Ltd. Case No.: Company Appeal (AT)(Insolvency) No. 1251 of 2023 & I.A. No.4417, 4356 of 2023 Counsel for Appellants: Mr. Angad Varma and Mr. Prashat Kumar, Advocates. Counsel for Respondents: Mr. Nishant Datta, Mr. Pradeep Bharwat, Mr. Chirag Rathi, Mr. Aditya Narain, Advocates. Click Here to Read/Download Order

NCLAT New Delhi : Dispute To Be ‘Truly In Existence’ At Time Of Reply Or Section 9 Application For Nullifying CIRP U/S 9 Of IBC

Sachika Vij

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