Cil Australia North Pty. Ltd vs Sharp Corp Ltd

NATIONAL COMPANY LAW APPELLATE TRIBUNAL NEW DELHI Company Appeal (AT)(Ins.)No. 319 of 2019 IN THE MATTER OF: CIL Australia North Pty.Ltd. .....Appellant Vs. M/s. Sharp Corp Ltd. ......Respondents Present : For Appellant: Mr. Sudhanshu Batra with Ms. Damayanti, Senior Advocates and Mr. Aditya Mishra, Advocates

For Respondents: Mr. Arvind Gupta, Ms. Henna George, Mr. Ishan Bisht, Advocates

02.05.2019 - This appeal has been preferred by Appellant ('Operational

Creditor') against order dated 12th February, 2019 whereby the Adjudicating

Authority (National Company Law Tribunal) (in short 'NCLT'), New Delhi, Court

No. IV rejected the application filed by the Appellant u/s 9 of the Insolvency &

Bankruptcy Code ('I&B' Code), 2016 on the ground of pre-existing dispute.

When the matter was taken up on 5th April, 2019, learned counsel for

Appellant submitted that Demand Notice u/s 8(1) was issued on 5th October,

2018 and suit was filed subsequently on 16th October, 2018 and, therefore, it

cannot be stated to be a pre-existing dispute.

....contd./ Learned counsel for Respondent referred to notice dated 5th October, 2018

and submitted that the said letter is a general notice for arbitration and do not

amount to Demand Notice in terms of section 8(1) of 'Insolvency & Bankruptcy

Code' (in short I&B) Code.

We have also perused the said letter dated 5th October, 2018 and find that

general notice in terms of settlement and is not a Demand Notice u/s 8(1). In

fact the Demand Notice was issued by Appellant subsequent to filing of suit on

30th October, 2018.

Learned counsel appearing on behalf of the Appellant submitted that the

suit is filed in a court which has no jurisdiction and the suit has been filed based

on no evidence. Reliance has been placed on the decision of Hon'ble Supreme

Court in the case of Mobilox Innovations Private Limited Vs. Kirusa Software

Private Limited in civil appeal number 9405 of 2017.

Heard learned counsel for Appellant and learned Counsel for Respondent

and perused the record.

Hon'ble Supreme Court in "Innoventive Industries Ltd. Vs. ICICI Bank

(2018) 1 SCC 407]" observed that the moment the Adjudicating Authority finds

that there is a pre-existing dispute, the 'Operational Creditor' gets out of

clutches of the Court as quoted below:-

COMPANY APPEAL (AT)(INS.)NO. 319 OF 2019 ADMIN 2 "29 The scheme of Section 7 stands in

contrast with the scheme under Section 8

where an operational creditor is, on the

occurrence of a default, to first deliver a

demand notice of the unpaid debt to the

operational debtor in the manner provided in

Section 8(1) of the Code. Under Section 8(2),

the corporate debtor can, within a period of 10

days of receipt of the demand notice or copy

of the invoice mentioned in sub-section (1),

bring to the notice of the operational creditor

the existence of a dispute or the record of the

pendency of a suit or arbitration proceedings,

which is pre-existing--i.e. before such notice

or invoice was received by the corporate

debtor. The moment there is existence of such

a dispute, the operational creditor gets out of

the clutches of the Code."

The aforesaid observation of the Hon'ble Supreme Court was reiterated by

the Hon'ble Supreme Court in the case of Mobilox Innovations Private

Limited Vs. Kirusa Software Private Limited in civil appeal number 9405

of 2017, wherein the Hon'ble Supreme Court also observed:

COMPANY APPEAL (AT)(INS.)NO. 319 OF 2019 ADMIN 3 "51. 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

"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

COMPANY APPEAL (AT)(INS.)NO. 319 OF 2019 ADMIN 4 illusory, the adjudicating authority has to reject the

application"

Admittedly the suit in question relates to same agreement pursuant to

which the claim has been made by the 'Operational Creditor'. The suit has been

filed by the Respondent ('Corporate Debtor') prior to issuance of Demand Notice

u/s 8(1). Whether the suit is maintainable or not, such question cannot be

determined by National Company Law Tribunal (NCLT) or by this Appellate

Tribunal. Therefore, the argument that the suit is not maintainable cannot be

raised nor to be decided. Further the question as to whether the plea as taken

therein is a sham or not also cannot be decided by National Company Law

Tribunal (NCLT) while dealing with an application under section 9. It will

otherwise amount to rendering a decision on merit of the suit which is not

permissible.

The fact being there is pre-existing dispute, we also hold that the

application u/s 9 is not maintainable. In the absence of any merit, the appeal

is dismissed. No costs.

[Justice S. J. Mukhopadhaya] Chairperson

[Justice A. I. S. Cheema] Member (Judicial)

[Kanthi Narahari] Member (Technical) ss/gc

COMPANY APPEAL (AT)(INS.)NO. 319 OF 2019 ADMIN 5