NCLAT: Contention that disputes raised were concocted cannot be decided in summary proceeding under Section 9 of IBC

NCLAT: Contention that disputes raised were concocted cannot be decided in summary proceeding under Section 9 of IBC

According to the National Company Law Appellate Tribunal (NCLAT), contention that disputes raised were concocted cannot be decided in summary proceeding under Section 9 of IBC

The NCLAT, Delhi Bench, on 12 April 2021, in the case titled M/s Micra Systems Pvt. Ltd. (Appellant) v. M/s Masters India Pvt. Ltd. (Respondent) upheld the order of the NCLT of rejecting the application filed for initiation of the corporate insolvency resolution process (CIRP) by operational creditor.

The NCLAT coram comprising of Justice A.I.S. Cheema and Dr. Alok Srivastava observed that the Corporate Debtor raised various issues including that Operational Creditor failed to complete the project in time and whatever Operational Creditor worked-the project was found not working.

It noted that there is already a pre-existing dispute between the parties with regard to services rendered. On behalf of the appellant, it was contended that these disputes raised were concocted and were irrelevant cannot be decided in the summary proceeding under Section 9 of the Insolvency & Bankruptcy Code (IBC).

The factual matrix of the case is that the Corporate Debtor- M/s. Masters India Pvt. Ltd. had approached the Appellant, Operational Creditor- M/s. Micra Systems Pvt. Ltd. in October 2016 for development of GST Portal and presentation of the same to GSTN for grant of License as GSP.

The appellant alleged that the Operational Creditor gave services to the Corporate Debtor on this count and Operational Creditor built solutions for the Corporate Debtor which continued till November 2017.

In November 2017, the Appellant had to discontinue the services on account of non-payment of pending bills and as there was a breach of trust by the Corporate Debtor.

It was further alleged by the Appellant that there were regular payments made by the Corporate Debtor till June 2017 and the appellant started work on design and development of software and automation solution for Respondent at job-wise basis by mutually agreed remuneration of Rs 1 lakh per person per month.

The Appellant was sending invoices through e-mail at the end of the month. After July 2017, payments were infrequent and partial. The Appeal referred to some efforts made with regard to entering into formal agreement and exchange of draft in that regard.

It was alleged that the respondents sent various e-mails raising unfounded and unreasonable issues. The appellant addressed those issues of the respondent in various emails.

It was further mentioned that after a lapse of five months, the respondent sent legal notice raising various issues which were raised earlier in emails along with other concocted and manufactured issues.

The appellant did not reply to the same as those issues had been settled. Respondent-Corporate Debtor did not go to any Court/Forum to follow up the legal notices.

The appellant alleged that a demand notice was sent to the respondent under Section 8 of IBC. The respondent replied repeating the same concocted and irrelevant allegations raised the legal notices. The appellant filed an application under Section 7 of IBC. It was alleged by the appellant that there is a debt of Rs. 88,37,700/- on the respondent.

The said application was rejected by the National Company Law Tribunal (NCLT) New Delhi Bench, and the appellant moved to the Appellate Tribunal against the said order.

The NCLAT observed that there was already a pre-existing dispute between the parties with regard to services rendered. Therefore, according to the Tribunal, the contentions by the Appellant that these disputes raised were concocted or that they were irrelevant cannot be decided in summary proceeding under Section 9 of IBC.

The NCLAT held, "There is no substance in the Appeal. We do not find any reason to interfere with the impugned order. The appeal is dismissed."