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Synopsis

The National Company Law Tribunal has recently observed that IBC is not a substitute for a recovery forum.

“The IBC is not intended to be a substitute to recovery forum and whenever there was existence of a real dispute, the IBC provisions cannot be invoked and accordingly conclude that there is no merit in the application filed by the applicant,” the order states.

The NCLT bench of Hyderabad, comprising Judicial Member Rajeev Bhardwaj and Technical Member Sanjay Puri, was hearing a section 9 application filed by the operational creditor seeking to initiate Corporate Insolvency Resolution Process (CIRP) against the corporate debtor (CD).

The operational creditor (OC) was supplying structural steel components along with the construction of civil work.

The OC claimed that the corporate debtor (CD) failed to pay Rs. 65,62,266 as the principal amount and Rs. 3,93,734 as interest at the rate of 24% per annum from 23.05.2019 to 23.08.2019.

The CD also brought to the notice of the operational creditor (OC) the complaint made by M/s. Sunny Opticals about the leakages. However, the OC failed to respond to him and has not rectified the defects.

It was claimed that there was a pre-existing dispute between both parties, and it is reflected in various e-mails. Furthermore, the reply dated 04.09.2019 to the demand notice dated 23.08.2019 was not put on record by the operational creditor.

The operational creditor failed to disclose that an amount of Rs. 39,60,000 was paid by the CD through 4 Demand Drafts, including another payment of Rs. 10 lakhs.

Therefore, the tribunal concluded that there was a pre-existing dispute between the parties and rejected the application of the OC.

“The leakages in the shed is material and there are allegations and counter allegations about the leakages. However, the fact remains that there was bonafide dispute between both the parties regarding the quality of the work done by the applicant prior to the issuance of demand notice,” the order reads.

Advocate Sandhya Rani appeared for the applicant.

Advocate M.V.Pratap Kumar appeared for the respondent.

Case title: Ms.Polygon Steel Building System vs Ms.Seven Hills Digital Park Private Limited,