Armour Security India Private Limited vs Ambience Private Limited

[Arising out of the Order dated March 05, 2024 passed by the 'Adjudicating Authority' (National Company Law Tribunal, New Delhi Bench) in (RCP) IB-1/ND/2024]

IN THE MATTER OF: Armour Security (India) Private Limited B-87, 2nd Floor, Defence Colony New Delhi - 110024 E-mail: ocean.laws@gmail.com ...Appellant

Versus

Ambience Private Limited L-4, Green Park Extension New Delhi - 110016 E-mail: ambience@ambiencegroup.in ...Respondent

Present: For Appellant : Mr. Abhijeet, Mr. Ankur Aggarwal and Mr. Nitin Sharma, Advocates

For Respondent : Mr. V. Anush Raajan, Advocate

JUDGMENT

(Hybrid Mode)

[Per: Arun Baroka, Member (Technical)]

The present Appeal is being preferred by the Appellant, being the

Operational Creditor against the Impugned Order dated 05.03.2024

(Impugned Order) wherein the Adjudicating Authority, New Delhi, Bench-III,

inter-alia, dismissed / rejected the Application being (RCP) IB-1/ND/2024.

Brief facts of the case

2. The present Appeal is being preferred by the Operational Creditor /

Appellant against the Impugned Order dated 05.03.2024 passed by the Adjudicating Authority in (RCP) IB-1/ND/2024. The Appellant had filed an

Application under the provisions of Section 9 of Insolvency and Bankruptcy

Code (IBC), 2016, against the Respondent for initiation of insolvency

resolution process against the Corporate Debtor for the non-payment of dues

arising from supply of manpower services.

3. During the pendency of the said Application, the CIRP against the

Corporate Debtor stood commenced in some other proceedings due to which

the Application of the Appellant, then numbered as CP IB No. 531/ND/2020

was disposed of by the Adjudicating Authority vide order dated 13.02.2021,

with a liberty to file a claim with Resolution Professional on the grounds that

the insolvency resolution process against the Respondent was already

initiated in another matter i.e. Vistra (ITCL) India Private Limited versus

Ambience Private Limited being CP No. IB 1600/ND/2018 vide order dated

21.12.2020.

4. The said Order dated 21.12.2020 was challenged before this Appellate

Authority in Company Appeal (Insolvency) No. 06/2021 by the Respondent

and vide Order dated 02.08.2022, inter alia, this Appellate Tribunal had set

aside the Order of Adjudicating Authority Order dated 21.12.2020.

Consequently, the CIRP proceedings against the Respondent were quashed.

5. Thereafter, the Appellant preferred an Application being Rest. A No

81/2022 under the provisions of Rule 11 of National Company Law Tribunal

Rules, 2016 for restoration of application, filed earlier under the provisions of

Section 9 of IBC being CP (IB) No 531/ND/2020. The said Restoration Company Appeal (AT) (Insolvency) No. 1343 of 2024 2 of 21 Application was dismissed by the Adjudicating Authority vide Order dated

10.11.2022 for non-prosecution.

6. To pursue its case yet again, the Appellant filed RA 101/2022 in

Company Petition (IB) No 531/ND/2020, inter alia, seeking the restoration of

Rest. A No 81/2022. This was finally heard at length and the Adjudicating

Authority vide Order dated 21.04.2023 dismissed the said Application being

Rest. A 101/2022.

7. The Appellant preferred an Appeal against the Order dated 21.04.2023

passed by the Adjudicating Authority in Rest. A 101/2022 being Company

Appeal No. 1270 of 2023 and this Hon'ble Appellate Authority vide Order

dated 16.10.2023 was pleased to allow the Appeal and, inter alia, directed to

restore the Application being IA No. 81/2022 before the Adjudicating

Authority.

8. Accordingly, to place the Order dated 16.10.2023 passed by this

Appellate Authority, the Appellant filed an Application being IA No.

6329/2023 which was listed before the Adjudicating Authority on 24.11 2023

wherein the Adjudicating Authority after taking consideration of the Order

dated 16.10.2023 passed by this Hon'ble Appellate Authority directed RA No.

81/2022, the Adjudicating Authority on 07.12.2023 heard the arguments of

both parties and vide order dated 19.12.2023 allowed the said IA being RA

No. 81/2022 and directed to list the main matter (Company Petition) on

18.01.2024. The Adjudicating Authority vide Order dated 08.02.2024 was

pleased to reserve the orders in the main CP which was renumbered to (RCP) Company Appeal (AT) (Insolvency) No. 1343 of 2024 3 of 21 IB-1/ND/2024 and subsequently vide Order dated 05.03.2024, inter alia,

dismissed the Application filed under the provisions of Section 9 by the

Appellant.

Submissions of the Appellant

9. The Appellant has been providing security services to the Respondent

i.e., Ambience Pvt. Ltd. since year 2013 and later on, this arrangement was

converted into writing vide an Agreement dated 1st May 2017 for its site at

Ambience Tiverton, Sector - 50, Noida valid for one-year up to 30th April

2018. After the expiry of the agreement, arrangements between the parties

were going on verbally.

10. In terms of the said agreement, the Appellant was to provide the

security services to the Corporate Debtor at its site located at Ambience

Triverton, Sector 50 Noida, which was then under construction. It is common

ground that the said agreement expired on 30.04.2018 and was never

renewed. The parties continued to be engaged together and the Appellant

provided the manpower services which were demanded by the Corporate

Debtor. As per the terms of the invoices, the credit period for payments was

30 days.

11. That on failure on the part of Respondent to pay an outstanding of Rs.

89 lakhs approx., the Appellant approached the Hon'ble NCLT, Delhi by filing

a Petition under Section 9 of the IBC. The Hon'ble NCLT, Delhi dismissed the

Petition filed by the Appellant vide Impugned Order dated 05.03.2024.

Company Appeal (AT) (Insolvency) No. 1343 of 2024 4 of 21

12. The Adjudicating Authority vide Order dated 05.03.2024 has

erroneously dismissed the Application filed by the Appellant on the grounds

that there is a pre-existing dispute between the parties, which was raised by

the Corporate Debtor prior to the issuance of demand notice under the

provisions of Section 8 of IBC, 2016.

13. With respect to the alleged pending disputes considered by the

Adjudicating Authority while arriving at decision, four emails dated

18.12.2018, 22.05.2019, 30.07.2019 and 02.01.2020, have been read and

mentioned incorrectly. The Adjudicating Authority failed to appreciate that

the first email dated 18.12.2018 sent to the Appellant by the Corporate Debtor

was about theft and issuance of debit notes and claimed to be dispute is

concerning some other site at Sector 115, Noida. In response to the email of

18.12.2018, the Appellant had responded and stated its position, which was

ignored by the Adjudicating Authority. Further, the alleged issue of theft stood

resolved as stated by the Appellant in its email of 26.09.2019. Also the

petition under Section 9 is filed for the Respondent's site at Sector 50, Noida.

14. While in the email of 18.12.2018 (which is totally irrelevant to the

subject matter at hand) the Corporate Debtor raised the issue of deputing

lesser number of guards at site, the due payments for the services already

given by the Appellant as on that date stood at Rs. 70 lakhs approx. While

the payments to the tune of more than Rs. 70 lakhs, were pending / withheld,

the Corporate Debtor could not have expected the Appellant to keep providing

Company Appeal (AT) (Insolvency) No. 1343 of 2024 5 of 21 security guards who are to be paid on daily / weekly / monthly basis by the

Appellant.

15. Another email which is considered while arriving at the decision of pre-

existing dispute is of 22.05.2019. It is claimed that the said email of

22.05.2019 was placed by the Corporate Debtor in its reply which was sent

to the Appellant requesting the Appellant for increasing the manpower. It is

relevant to mention that, on 23.03.2019, the Appellant had issued an email,

inter alia, asking for the payments from the Corporate Debtor. As per said

email and attachment thereof, the dues of the Appellant concerning the

transactions germane to the subject matter of this Appeal were Rs.

85,26,176.70/- (rupees eighty-five lakhs, twenty-six thousand, one-hundred

and seventy-six and seventy paise only). Vide the said email, fresh terms of

payments were also decided. The said email has been completely ignored by

the Adjudicating Authority in the Impugned Order, while considering the

pendency and as to why and for what reasons, the security / manpower was

not enhanced by the Appellant even after receiving requests from the

Corporate Debtor.

16. While dealing with the third email of 30.07.2019, the Adjudicating

Authority has committed an error. The Appellant actually left the site of the

Corporate Debtor in or around September 2019, which is evident from the

email of 24.09.2019, 25.09.2019, 26.09.2019 and 27.09.2019 which, inter

alia, provides that actually the Appellant was constrained to withdraw the

Company Appeal (AT) (Insolvency) No. 1343 of 2024 6 of 21 services due to pending dues of Rs. 81 lakhs approx., as of September 2019

which even after repeated requests stood unpaid.

17. With respect to the fourth email which is reiterated under the Impugned

Order with the date mentioned as 02.01.2020. Appellant contends that the

said mentioned date is incorrect. This email was sent by the Corporate Debtor

to the Appellant on 26.05.2019. And as on the said date also, the dues of the

Appellant which remained unpaid were Rs. 79 lakhs approx.

18. Appellant contends that the issue qua the deployment of number of

manpower is totally based on oral discussion between the parties.

Accordingly, the email qua the shortage of manpower was only a request from

the Respondent for increase of manpower. Further, it is pertinent to mention

that the Operational Creditor has raised the invoices only with respect to the

manpower supplied by it and the Corporate Debtor has never raised any

dispute on the invoices raised by the Operational Creditor. Further as far as

the concern qua leaving the work site is concerned, since the parties are not

bound with any contract, the same was discussed and decided by the parties

orally. It is pertinent to mention that the Corporate Debtor has not paid a

large sum of money to the Operational Creditor and it has to bear all the

expenses of manpower supplied by them, hence it was not possible for the

Operational Creditor to continue with the service provided to Corporate

Debtor. Further, requests for increasing the manpower were entertained and

ignored at times solely due to the non-payment by the Corporate Debtor of

the pending dues of the Appellant for which undisputed services were already

Company Appeal (AT) (Insolvency) No. 1343 of 2024 7 of 21 received. The Adjudicating Authority failed to appreciate the said facts and

separate the grain from chaff that as on the date of the invoice, there was no

dispute whatsoever concerning any particular invoice which otherwise was

acknowledged. The emails raising frivolous disputes started emanating at the

time when the Appellant already had dues for more than Rs. 50 lakhs and

started following up for payments.

19. The Adjudicating Authority has failed to appreciate the facts mentioned

above. Accordingly, present Appeal is preferred for seeking prayers for setting

aside order dated 05.03.2024 passed by Adjudicating Authority in (RCP) IB-

1/ND/2024 and directing for admission of the Corporate Debtor for CIRP.

Submissions of the Respondent

20. Basis the records in the APB filed with the Adjudicating Authority, the

Corporate Debtor contends that it is incorporated in the year 1986 and one

of India's trusted real estate group. 'Ambience Group' claims to an acclaimed

real estate company and enjoys tremendous goodwill for its pioneering work

in the real estate field. Ambience Group enjoys an unparalleled reputation

and goodwill in the field of real estate. The Corporate Debtor Company is

having an annual turnover of about Rs. 100 crores. The Corporate Debtor

Company is commercially solvent.

21. Operational Creditor/Armour Security (India) Pvt. Ltd. represented to

the Corporate Debtor/Respondent that it is a premier security agency with

goodwill in the market and the experience and human resources to provide

Company Appeal (AT) (Insolvency) No. 1343 of 2024 8 of 21 security services. Relying upon the said representations and assurances,

Respondent Company agreed to engage Applicant's services at its under-

construction housing project site i.e. Ambience Tiverton, Sector-50, Noida,

Uttar Pradesh. The security at Respondent's site was a big responsibility and

the best security had to be provided to take care of materials lying at the site

such as bricks, cement, concrete, sand, steel, scaffolding, stone, tiles, mud,

wood, glass, plastic, and several other construction tolls and equipment

(concrete mixtures, cranes, rollers etc.). The Applicant had to provide

adequate number of trained security guards, gunmen and supervisors

without any lapse as the security and goodwill of the Respondent depended

upon it. However, it turned out to be a false premise used by the Applicant

to get the security service contract.

22. Believing the representation and assurances made by the Applicant,

the Respondent awarded the agreement for providing the security services

dated 01.05.2017 to the Respondent. Under the said security service

agreement, the Applicant had agreed that it shall provide the staff with the

following strength (i) Security Guards 20 in number (ii) Security Gunmen 1

in number and (iii) Security Supervisor 1 in number at the Respondent's said

under construction housing project site i.e. Ambience Tiverton, Sector-50,

Noida, Uttar Pradesh. It was agreed in the said security service agreement

that the Applicant and its staff shall take proper and due care and reasonable

precautions to preserve life, property and goods of the Respondent from loss,

destruction, damage, waste, pilferage of the site and shall not lend anyone to

Company Appeal (AT) (Insolvency) No. 1343 of 2024 9 of 21 effect the asset of the Respondent. It was agreed that the Applicant shall

provide adequate required number of competent, trained and uniformed

personnel and shall ensure to operate the services as per agreement. It was

also agreed that in case of any theft/loss and it is proved that the theft/loss

occurred due to negligence of the security staff of the Applicant/Appellant,

the Applicant shall compensate the Respondent for the loss caused.

23. But due to the security staff/personnel deputed by the

Applicant/Appellant, the Respondent suffered loss of goods and theft, mental

tension, agony, and loss of reputation and goodwill. The security guards,

gunmen and supervisor (staffs) provided by Applicant were not sufficient in

numbers as per the agreement. Several complaints were made to the

Applicant by the management of Respondent against the loss of goods and

theft and security personnel and security staff for their shortage in number,

which was never resolved. An email dated 18.12.2018 was sent to the

Applicant about theft at the site and a police complaint was also filed and

even a debit note was issued. The Applicant's security personnel and security

staff completely failed in providing security at the Respondent's said under

construction housing project site. However, the Applicant failed to not resolve

the issues and the Respondent suffered losses because of the Applicant.

Number of times the security and staff of the Applicant/Appellant went

missing in duty time and on several occasions left the site without completing

the time and also absented themselves from the duty. The complaints

regarding the deficit number of manpower were communicated to the

Company Appeal (AT) (Insolvency) No. 1343 of 2024 10 of 21 Applicant/Appellant, vide email dated 22.05.2019 by the Respondent.

Through email dated 22.05.2019 it was pointed out that there are only 12

number of security guards during day time and only 8 in night shifts and the

Applicant was requested to bring up the deficiency and however, the problem

was not resolved by the Applicant.

24. The complaints of shortage of manpower was again pointed out vide

email dated 26.05.2019 by the Respondent to the Applicant/Appellant. It

was again pointed out that there are only 12 number of security guards

during day time and only 7 in night shifts and due to which it has become

difficult to run the site. Due to negligent attitude and security lapse of the

Applicant and its staff, the Respondent's site was completely exposed to loss,

destruction, damage, waste and even incidents of theft and pilferage

occurred. Through email dated 25.08.2019, it was pointed out that there is

daily shortage of manpower and the repeated remarks have been made in the

manpower register. Despite above all, the Applicant deliberately abandoned

and withdrew its security without giving prior notice for which an email dated

25.09.2019 was also sent. The efficiency and performance of manpower

provided by Applicant/Appellant was not as per the said service agreement

and the number of manpower provided was also short of the desired

numbers. Regarding the deficiency in service several complaints were made

by the Respondent to the Applicant, which were never resolved the

Applicant/Appellant.

Company Appeal (AT) (Insolvency) No. 1343 of 2024 11 of 21

25. The Applicant/Appellant has filed the above-mentioned Application on

wholly wrongful and frivolous grounds. As on date, there is no debt or liability

existing against the Corporate Debtor/Respondent. The Application is wholly

malafide and has been filed for ulterior motives and oblique purposes. The

Applicant/Appellant is scandalously trying to abuse the IBC procedure for

ulterior motives. The Corporate Debtor/Respondent Company is

commercially solvent. Financial Creditor cannot be allowed to use the

Insolvency and Bankruptcy Code procedure as a tool to blackmail and harass

the Corporate Debtor.

26. Also, there is a dispute in existence between the parties and the

Operational Creditor cannot trigger the insolvency process under the IBC.

The deficiencies in the services and abandonment of service, incidents of

theft and issuing debit notes have been duly communicated to the

Operational Creditor. There is an existence of dispute relating to service

provided and abandonment of service. The Corporate Debtor seriously

disputes the amount because there is a dispute regarding the deficiencies in

the services and abandonment of service and loss of reputation and goodwill

due to the Operational Creditor. The Operational Creditor has neither filed

any invoice/bill for the alleged amount of Rs. 29,27,109/- (rupees twenty-

nine lakhs, twenty-seven thousand, one-hundred and nine only) at serial no.

1 (page 3 of brief synopsis of Petition) in the alleged chart nor has provided

any explanation as to how and in what manner/basis the said alleged

amount is outstanding. Out of alleged invoice/bills filed by the Applicant

Company Appeal (AT) (Insolvency) No. 1343 of 2024 12 of 21 (page no. 47-77 of Petition) allegedly claimed to be outstanding as mentioned

at serial no. 2-23 (at page no. 3 and 4 of chart of brief synopsis of Petition)

has already been paid by the Respondent. Chart of invoice/bills already paid

with their proof of payment are annexed as Annexure-4 colly. For the rest of

the alleged bills/invoice (serial no. 24-31 of the alleged chart) there is dispute

regarding the service and abandonment of the service. Moreover, the alleged

bills are not verified by the Corporate Debtor and are false, forged, fabricated

and never been submitted to the Corporate Debtor. The Operational Creditor

has furnished false information and has filed false affidavit and statement on

oath. The Operational Creditor has deliberately furnished false information

about the payments of invoices/bills (serial no. 2-23) which has already been

made by the Corporate Debtor and whereas the Operational Creditor has

claimed them to be outstanding/due. Apart from this, there is a dispute

about the enforceability of the contract between the parties and the alleged

amount is not admitted by the Corporate Debtor. The dispute raised by the

Corporate Debtor is bonafide and fall within the meaning of 'dispute' under

Sub-Section 6 of Section 5 of the IB Code. Therefore, the Hon'ble Tribunal

should reject the above mentioned Application.

27. That the Application under reply is not maintainable under Section 9

of IBC, 2016. The Operational Creditor has not filed any certificate from the

financial institution maintaining accounts of the Operational Creditor

certifying that there is no payment of unpaid operational debt by the

Corporate Debtor. The Operational Creditor has not come before this Hon'ble

Company Appeal (AT) (Insolvency) No. 1343 of 2024 13 of 21 Tribunal with clean hands and has not filed its true statement of account

and/or ledger. There was no valid notice issued under Section 8 of IBC, 2016,

and the same is false and frivolous, without following the due procedure,

having no merit. An appropriate reply dated 22.01.2020 was duly sent to the

said frivolous notice within limitation stating that there is a dispute regarding

the alleged claim made by the Applicant as well, regarding the deficiency in

the service. There is no existing debt/liability or due payment against the

Corporate Debtor.

28. The alleged claim of the Operational Creditor is time-barred. The

Application under reply is not maintainable under the provisions of IBC,

2016, and Insolvency and Bankruptcy Rules, 2016. The Operational Creditor

has received notice of dispute vide Corporate Debtor's Reply/Communication

dated 22.01.2020 and despite that it has filed the above-mentioned

Application, which is not maintainable.

Analysis and Findings:

29. The Appellant Armour Security had sought the initiation of the

Corporate Insolvency Resolution Process against Ambience Private Limited

(Respondent) due to alleged non-payment of dues arising from the provision

of manpower services. However, the Adjudicating Authority dismissed the

Application, citing a pre-existing dispute between the parties. The Appellant

had provided manpower and security services to the Respondent at its

construction site. The business relationship was formalised under a written

agreement dated 01.05.2017, which expired on 30.04.2018. Despite the

Company Appeal (AT) (Insolvency) No. 1343 of 2024 14 of 21 expiry of the agreement, the Appellant had continued to provide services basis

oral agreements, and several invoices were raised for the work performed.

30. The Appellant claimed that the Respondent defaulted on payments

amounting to about Rs. 79 lakhs, despite several requests for payment. In

response, the Respondent contended that there were pre-existing disputes

relating to the quality of services, including incidents of theft, shortage of

manpower, and abandonment of service by the Appellant's staff, as

communicated through various emails dated 18.12.2018, 22.05.2019,

26.05.2019 and 25.08.2019. The Respondent further argued that it had

already made payments for a substantial portion of the invoices and denied

the outstanding amount claimed by the Appellant.

31. The Adjudicating Authority dismissed the Application filed under

Section 9 of the IBC on the ground that there was a pre-existing dispute

between the parties. The Authority has relied on multiple emails exchanged

between the parties, prior to the issuance of the demand notice, which

indicated that the Respondent had raised concerns about the Appellant's

performance and the adequacy of manpower services.

32. The Appellant contended that the Adjudicating Authority had

erroneously relied on emails that did not pertain to the specific services or

invoices in dispute. The Appellant argued that the emails referred to issues

at a different site and that the alleged theft and security issues had been

resolved by September 2019. Furthermore, the Appellant claimed that the

Company Appeal (AT) (Insolvency) No. 1343 of 2024 15 of 21 Respondent's failure to make timely payments led to the withdrawal of its

services, and that there were no disputes regarding the specific invoices

raised for the services provided.

33. The Appellant also submitted that the Respondent's contentions of

service deficiencies were raised only after significant amounts had become

due and were merely a tactic to avoid payment.

34. The Respondent argued that the deficiencies in the Appellant's services

were well-documented and communicated before the issuance of the demand

notice. The Respondent highlighted several instances of service failures,

including theft at the site, the absence of security personnel, and the

Appellant's abandonment of the project without prior notice. These issues,

according to the Respondent, constituted a "pre-existing dispute" within the

meaning of Section 9 of the IBC, 2016, thus barring the initiation of CIRP.

The Respondent further argued that a significant portion of the invoices had

already been paid, and the outstanding amount claimed by the Appellant was

either disputed or unsupported by documentation.

35. We have carefully examined the facts of the case, the contentions of

both parties, and the Impugned Order of the Adjudicating Authority.

36. It is well-settled law that for an Application under Section 9 of the IBC

to be admitted, the Operational Creditor must demonstrate that there is a

'debt' and a 'default' as defined under the IBC. However, if the Corporate

Debtor can prove the existence of a bonafide dispute regarding the debt prior

Company Appeal (AT) (Insolvency) No. 1343 of 2024 16 of 21 to the issuance of the demand notice under Section 8, the Application must

be dismissed.

37. In the present case, the emails dated 18.12.2018, 22.05.2019,

26.05.2019 and 25.08.2019 clearly indicate that the Respondent had raised

concerns regarding the adequacy of services provided by the Appellant,

including manpower shortages and security lapses. These communications

occurred prior to the issuance of the demand notice, which was issued on

14.01.2020, and provides sufficient evidence of a pre-existing dispute.

38. The Appellant's contention that these emails pertain to a different site

and are irrelevant to the dispute at hand is unconvincing. The Respondent

has provided consistent evidence of service deficiencies at the construction

site where the Appellant was engaged. Moreover, the Appellant's withdrawal

of services in September 2019, allegedly due to non-payment, only

exacerbates the existing dispute between the parties.

39. Some of the emails, which are reflecting pre-existing dispute as

produced in the Reply are as follows:

a) Email dated 18.12.2018 at 11:31 AM from Ambience to Armour Security (Appeal/ pg. 172): Armour Security was informed about that there have been instances of theft from the construction site on account of lack of security guards. Armour Security was put on notice that immediate action must be taken against the erring security personnel deployed by Armour Security at the site. Hence, Ambience would be entitled to issue debit note to recover its losses caused by the theft.

b) Email dated 18.12.2018 at 03:16 PM from Armour Security to Ambience [Appeal/ pg. 173) Armour Security acknowledged in writing that there was lack of security guards deployed by them

Company Appeal (AT) (Insolvency) No. 1343 of 2024 17 of 21 despite request to increase manpower. Armour Security further acknowledged that there were thefts from the site, and that police complaints have been filed. Armour Security requested for payments to be released, which were accordingly complied with.

However, Armour Security failed to recover any money or material against the theft at the site in view of lack of security.

c) Email dated 22.05.2019 at 01:33 PM from Ambience to Armour Security (Appeal/ pg. 278): Despite several reminders in the past there was lack of security guards at the site and therefore, Armour Security was put on notice that the requisite number of security personnel were not present at the site. There were only 12 presents during the day and only 8 at night. That there were manpower problems at Armour Security which requires immediate action.

d) Email dated 26.05.2019 at 12:06 PM from Ambience to Amour Security [Appeal/ pg. 279): There was continuous shortage of manpower at Noida Sector-50 site. Despite earlier notice there were only 12 guards during the day and 7 guards in night. There is risk of theft of valuable items and materials at the project site.

e) Email dated 30.07.2019 at 01:19 PM from Ambience to Armour Security (Appeal/ pg. 280] Armour Security was warned that abandonment of site with 2 days' notice is not acceptable. A minimum of 30 days' notice was required before withdrawal of services. Armour Security cannot abandon the site at its own sweet will. Armour Security has been paid for Noida and also payment was released for other sites. It is shocking that Armour Security would threaten to abandon site after receiving complete payments up to 30.07.2019. It was reiterated that Armour Security has failed to provide up to date muster roll and was also not taking responsibility to the various thefts that took place at various site on account of lack/quality of services provided by Armour Security. Therefore, a debit (penalty) has been imposed on Armour Security which is sought to be avoided.

40. It is to be noted that Armour Security issued demand notice in Form 3

and Form 4, under Rule 5 of Insolvency and Bankruptcy (Application to

Adjudicating Authority) Rules, 2016 upon Ambience, which was issued on

14.01.2020. Immediately in response thereto, a notice of dispute was issued

by Ambience vide letter dated 22.01.2020.

Company Appeal (AT) (Insolvency) No. 1343 of 2024 18 of 21

41. The above communication exchanged between the parties, prior to

issuance of demand notice under the Code, proves that the quality of services

and quantum of invoices were matters of dispute between the parties. The

Adjudicating Authority after perusing the above said emails came to the

conclusion that there are pre-existing disputes between the parties,

rendering the Section 9 Petition not maintainable against the Respondent. In

fact, the Adjudicating Authority has noted as follows:

"...It can be seen from these emails that the Corporate Debtor highlighted instances of theft from the construction site on account of lack of security guards but all the efforts of the Corporate Debtor have fell on deaf ears as the Operational Creditor was not responding at all. It is clear from the correspondence between the parties that there is an undeniable dispute with respect to shortage of manpower and the quality of service provided by the Applicant."

"All the e-mails mentioned above were sent prior to the issuance of demand notice u/s 8(1) of the Code dated 14.01.2020 by the Operational Creditor. Considering the facts and circumstances as reflected from the record, we are of the considered opinion, that the dispute existed between the Operational Creditor and the Corporate Debtor prior to issue of the demand notice u/s 8(1). Hence, we hold that there is a pre-existing dispute pending in between the Operational Creditor and the Corporate Debtor."

42. We find that the main ground basis which the Appeal cannot be

accepted is existence of pre-existing dispute, which is noted in series of email

exchange of emails. In such situations of pre-existing disputes, Hon'ble

Supreme Court in Mobilox Innovation Pvt. Ltd. Vs. Kirusa Software

Private Limited (2018) 1 SCC 353, at para 40 had held as under:

"..

40. It is clear, therefore, that once the operational creditor has filed an application, which is otherwise complete, the adjudicating authority must reject the application under Section 9(5)(2)(d) if notice of dispute has been received by the operational creditor or there is a record of dispute in the information utility. It is clear that such notice must bring to the notice of the operational creditor the

Company Appeal (AT) (Insolvency) No. 1343 of 2024 19 of 21 "existence" of a dispute or the fact that a suit or arbitration proceeding relating to a dispute is pending between the parties. Therefore, all that the adjudicating authority is to see at this stage is whether there is a plausible contention which requires further investigation and that the "dispute" is not a patently feeble legal argument or an assertion of fact unsupported by evidence. It is important to separate the grain from the chaff and to reject a spurious defence which is mere bluster. However, in doing so, the Court does not need to be satisfied that the defence is likely to succeed. The Court does not at this stage examine the merits of the dispute except to the extent indicated above. So long as a dispute truly exists in fact and is not spurious, hypothetical or illusory, the adjudicating authority has to reject the application..."

43. The Corporate Debtor had raised a plausible contention about a pre-

existing dispute, which in the instant case is not a moonshine or feeble legal

argument. Therefore, the Adjudicating Authority was not incorrect to reject

the Application filed under Section 9 of the Code. Given the existence of a

bonafide dispute, this Tribunal finds no reason to interfere with the Impugned

Order of the Adjudicating Authority.

44. Appellant/Armour Security in Form-5 of Section 9 Petition has alleged

an outstanding of INR 81,11,787/- (rupees eighty-one lakhs, eleven

thousand, seven hundred and eighty-seven only) for the period 01.04.2017

up to 25.09.2019. There are claims that these entries are exaggerated,

unsupported, disputed and were never verified, acknowledged or admitted by

Ambience without attaching any proof of the existence of debt and default in

payment thereof. We are not going into all this as we have noted earlier that

there is a pre-existing dispute between the parties which is not a moonshine

or feeble legal argument. Therefore, the claims of the Appellant under Section

9 of the Code have to be rejected irrespective of other defences taken up by

the Respondent.

Company Appeal (AT) (Insolvency) No. 1343 of 2024 20 of 21 Conclusion

45. For the reasons outlined above, the Appeal is dismissed. The Impugned

Order dated 05.03.2024 passed by the Adjudicating Authority is upheld.

Order

46. The Appeal is hereby dismissed. All related IAs pending, if any, are

closed. No order as to costs.

[Justice Ashok Bhushan] Chairperson

[Barun Mitra] Member (Technical)

[Arun Baroka] Member (Technical) New Delhi September 17, 2024 pawan

Company Appeal (AT) (Insolvency) No. 1343 of 2024 21 of 21