National Company Law Appellate Tribunal Upholds Payment Dispute Dismissal Application

National Company Law Appellate Tribunal Upholds Payment Dispute Dismissal Application

The Appellate Tribunal concluded that there existed a dispute prior to issuance of 'Demand Notice' dismissed the appeal

The National Company Law Appellate Tribunal (NCLAT) upheld the order of the National Company Law Tribunal dismissing the application u/S 9 of the Insolvency and Bankruptcy Code 2016 (IBC) on the ground of pre-existence of a dispute between the parties.

The Division Bench of the National Company Law Appellate Tribunal at Chennai, comprising Justice M. Venugopal and Mr Kanthi Narahari heard the matter titled Precision Hydraulics Private Limited v Bhairavi Cargo and Logistics Private Limited.

The present appeal was filed by the Appellant – Operational Creditor against the order of the National Company Law Tribunal, wherein the Appellant's application u/S 9 of the Insolvency and Bankruptcy Code 2016 (IBC) against the Respondent – Corporate Debtor was dismissed on the ground of pre-existing of a dispute between the parties.

The factual background was that the Appellant – Operational Creditor had supplied material which fell under the category of 'Goods' and the same was delivered to the Respondent – Corporate Debtor along with its ownership through the execution of different transfer letters. However, it was alleged that Respondent – Corporate Debtor failed to pay the money due to the Appellant – Operational Creditor towards the said purchase of the 'Goods' and therefore, it was the contention of the Appellant that the money due against them became an 'Operational Debt'.

The Appellate Tribunal went on to analyse whether any dispute between the parties existed prior to the issuance of 'Demand Notice' u/S 8 of the IBC as mandated under the said Code.

The Appellate Tribunal noted a legal notice issued by the Respondent – Corporate Debtor, which showed that the Respondent had raised a dispute with regard to the payments made to the Appellant. This event occurred prior to the issuance of 'Demand Notice' u/S 8 of the IBC by the Appellant.

It was thus concluded that there was a prima facie view that there existed a dispute prior to issuance of 'Demand Notice' and therefore, the appeal was dismissed.