Gaurav Dhawan vs Ee Limited & Anr

[Arising out of order dated 17.05.2022 passed by the Adjudicating Authority, National Company Law Tribunal, New Delhi in CP (IB) No. 1765/ND/2018]

IN THE MATTER OF:

Gaurav Dhawan N-68, Greater Kailash, Part-1, New Delhi - 110 048 ...Appellant

Versus

1. EE Limited & ANR Trident Place, Mosquito Way, Hatfield Hertfordshire, AL 10 9BW U.K. ...Respondent No. 1

2. Falcon Business Resources Pvt Ltd. Through Interim Resolution Professional Nitish Kumar Chugh D-158-B, Okhla Industrial Area, Phase-I New Delhi ...Respondent No. 2

Present:

For Appellant: Mr. Saurabh Kalia, Mr. Siddharth Tandon, Advocates

For Respondents: Mr. Rishabh Govila, Advocate for R-2

JUDGMENT

[Per: Barun Mitra, Member (Technical)]

The present appeal, filed under Section 61 of the Insolvency and

Bankruptcy Code, 2016 ('IBC' in short) by the Appellant arises out of order

dated 17.05.2022 (hereinafter referred to as 'Impugned Order') and was

Company Appeal (AT) (Ins.) No.650 of 2022 1 passed by the Adjudicating Authority (National Company Law Tribunal, New

Delhi, Court-III) in CP (IB) No.1765/ND/2018. By the impugned order, the

Adjudicating Authority admitted the application filed under Section 9 of the

IBC by the Operational Creditor, present Respondent No. 1 and initiated

Corporate Insolvency Resolution Process ('CIRP' in short) against the

Corporate Debtor. Aggrieved by this Impugned Order, the present appeal has

been preferred by the suspended Director of the Corporate Debtor.

2. The brief facts of the case, as brought before us by the Appellant, are

that M/s Falcon Business Resources Private Limited, the Corporate Debtor

entered into EE Framework Reseller Agreement (hereinafter referred to as the

Agreement) dated 20.03.2015 with EE Limited, the Operational

Creditor/Respondent No.1 by which the Operational Creditor was to provide

SIM cards to the Corporate Debtor for reselling to Indian clients travelling to

U.K. to provide them mobile telecom services in U.K. The Agreement

guaranteed the Operational Creditor a minimum spend commitment over 2

years of GBP 4,50,000 and required the Operational Creditor to maintain

7000 accounts. The agreement was valid for a period of 24 months and the

parties had agreed on the price to be levied on the customers and also sharing

all revenue between them. The contract between the two parties was

terminable by giving 30 day notice.

3. Admitting that the Agreement was operationalised and the Operational

Creditor had started providing the services, the Learned Counsel for the

Appellant submitted that the Corporate Debtor had raised a complaint with

Company Appeal (AT) (Ins.) No.650 of 2022 2 the team of the Operational Creditor that the SIM cards provided by the

Operational Creditor was not connected to the network and hence unusable.

This complaint e-mail was sent by the Corporate Debtor to the Operational

Creditor on 07.07.2015 as placed at page 69 of Appeal Paper Book ('APB' in

short) clearly stating that the Corporate Debtor has not been able to use the

EE Sim Cards for 3 months and therefore not able to generate revenues.

4. It was also emphatically submitted that the Corporate Debtor had

regularly exchanged Call Details Record ("CDR" in short) with the Operational

Creditor to substantiate the wrong charging of tariffs and that they had

claimed credits due to them. Stating that the Operational Creditor had

repeatedly submitted wrong and inflated invoices, these billing discrepancies

were communicated from time to time. It is submitted that disputes regarding

January CDR was raised on 10.03.2016 and that later on 05.07.2016, the

Corporate Debtor had mentioned that 13000 GBP was to be received from the

Operational Creditor against inflated invoices raised by the Operational

Creditor for the preceding months. Similarly, billing discrepancy on data

bundle from May to July had also been sent on 03.08.2016 by the Corporate

Debtor to the Operational Creditor. The ongoing credit issues with the

Operational Creditor and wrong charging of tariffs had persisted even in

September, October and December 2016. In-spite of such regular

communications having been sent to the Operational Creditor to settle the

billing error related disputes, no proper remedial action was taken.

Company Appeal (AT) (Ins.) No.650 of 2022 3

5. Advancing the arguments further, it was pointed out by Learned

Counsel for Appellant that there is evidence of admission on the part of the

Respondent No. 1 in their communication (at page 120 of APB) dated

04.05.2016 and repeat communications later that their invoices were inflated

and will be credited back. It was also added that towards reconciling the

billing discrepancies, the Operational Creditor was approached several times

for holding a meeting. However, these requests were not responded to and

therefore the disputes persisted between the parties. Even for other types of

complaints lodged by the Appellant with the Operational Creditor like the non-

working of data services, meetings were sought for purpose of resolution,

which did not materialize. The Learned Counsel for the Appellant also stated

that the Corporate Debtor had also claimed entitlement to damages for sub-

par service levels and compensation for suffering business loss.

6. Despite the Operational Creditor acknowledging the invoice related

issues, the Learned Counsel for the Appellant submitted that the Respondent

No.1 not only took no steps to correct the situation but instead disconnected

the SIM cards in January 2017, which even by the contract date was 3 months

earlier than the date of termination, without giving notice. This was a breach

of Clause 20 of the Agreement which stipulated 30 days' notice prior to

disconnection. Ignoring the fact that this sudden disconnection created

inconvenience to the customers of the Corporate Debtor and caused huge loss

and damage to the business of the Corporate Debtor, the Respondent No.1

had instead made a baseless demand of GBP 50000 in January 2017 to

reinstate the network lines.

Company Appeal (AT) (Ins.) No.650 of 2022 4

7. Eventually, the Indian Collection Agency of the Operational Creditor

demanded GBP 78,296.31 from the Corporate Debtor and threatened

initiation of legal proceedings in October 2017. This was contested by the

Corporate Debtor on grounds of the Operational Creditor having breached the

Agreement; by not providing credits for staged technology fund and staged

airtime; non-revision of pricing; faulty invoicing system; inflated billings and

claim for damages etc. To the Notice under Section 8 of IBC issued by the

Operational Creditor on 23.06.2018, it was submitted by Learned Counsel for

Appellant that the Corporate Debtor replied on 29.06.2018 denying the claim

as false and fraudulent and that no adjudicated amount was due from them.

Further, the Operational Creditor was also informed about the counter-claim

against them. The Operational Creditor thereafter filed the Section 9 IBC

application dated 08.10.2018 claiming a total debt of GBP 76,394.16 along

with interest at the rate of 18% per annum. The Adjudicating Authority issued

notice and after hearing the parties admitted the Section 9 application. The

Learned Counsel for the Appellant contended that since the alleged debt

claimed by the Operational Creditor being a disputed debt and in the face of

sufficient cause to show that there was pre-existing dispute, admission of the

Section 9 application by the Adjudicating Authority was erroneous.

8. We have duly considered the detailed arguments advanced by the

Learned Counsel for the Appellant and perused the records carefully. The

Respondent No. 1 was not represented during the final hearing.

Company Appeal (AT) (Ins.) No.650 of 2022 5

9. To appreciate the facts of the case, at the outset, it would be useful to

refer to Section 8 of the IBC regarding conditions for admission of Section 9

application:--

"8. Insolvency resolution by operational creditor-

(1) An operational creditor may, on the occurrence of a default, deliver

a demand notice of unpaid operational debtor copy of invoice

demanding payment of the amount involved in the default to the

corporate debtor in such form and manner as may be prescribed.

(2) The corporate debtor shall, within a period of ten days of the receipt

of the demand notice or copy of the invoice mentioned in sub-section (1)

bring to the notice of the operational creditor -

(a) existence of a dispute, if any, or record of the pendency of the

suit or arbitration proceedings filed before the receipt of such notice

or invoice in relation to such dispute;

(b) the payment of unpaid operational debt-

(i) by sending an attested copy of the record of electronic

transfer of the unpaid amount from the bank account of the

corporate debtor; or

Company Appeal (AT) (Ins.) No.650 of 2022 6

(ii) by sending an attested copy of the record that the

operational creditor has encashed a cheque issued by the

corporate debtor.

Explanation: For the purposes of this section, a "demand notice" means

a notice served by an operational creditor to the corporate debtor

demanding payment of the operational debt in respect of which the

default has occurred."

10. A reading of Section 8 of IBC indicates that the requisite conditions

necessary to trigger CIRP under Section 9 of the IBC are existence of a

debt due and its default by the corporate debtor; that there has taken

place delivery of demand notice of an unpaid and undisputed debt; that

there has been no payment of the unpaid and undisputed debt within the

period of 10 days of receipt of demand notice and no real pre-

existing dispute is discernible.

11. This now brings us to the impugned order which has been assailed

by the Appellant. The relevant portion of the analysis and findings of the

Adjudicating Authority is as reproduced below:

"21. This application complies with the basic

requirements of Section 8/9 of IBC, 2016 and rules and

regulations made thereunder. The crux of the matter is

that whether there exists a dispute between the parties

prior to delivery of notice of demand U/s 8 of IBC. If it is

Company Appeal (AT) (Ins.) No.650 of 2022 7 so, the other question which arises for our consideration

is whether undisputed amount of outstanding liability is

more than the threshold limit as prescribed U/s 4 of IBC,

2016. As far as first aspect is concerned, there have been

a number of communications between the operational

creditor and corporate debtor which make it apparent

that there are certain strong differences between the two.

Thus, it becomes imperative for us to find out what is the

undisputed amount of liability.

22. To find an answer to the above query, we have

carefully gone through the emails exchanged between

them. As per the email dated 31.07.2017 firstly the

corporate debtor has agreed at a sum of GBP 23,544.13.

Subsequently, an email was written by the corporate

debtor on 24.08.2017, wherein various claims have been

made. On this basis of this email, the corporate debtor

has stated that corporate debtor had not agreed for the

amount mentioned in the earlier email referred above.

23. We have noted the contents of the email dated

24.08.2017, it is of general nature, wherein claims for

recovery of damages through litigation has been made.

However, subsequently an email dated 18.09.2017, GBP

10,000 have been agreed as a full and final settlement

Company Appeal (AT) (Ins.) No.650 of 2022 8 by the corporate debtor. In this email, it has also been

mentioned that such offer was without any prejudice to

the legal rights and claims by the corporate debtor for

damages due for loss of business and reputation due to

un-professional behaviour on the part of operational

creditor. It is now settled that the use of words "without

any prejudice" have got no adverse bearing on the

acknowledgement of debt. Thus, the use of these words

in no manner gives any respite to the corporate debtor.

24. Thereafter, we have also perused an email dated

15.02.2019, which is a verbatim repetition of the email

dated 24.08.2017. Hence, in view of its mail dated

18.09.2017, it does not support the claim of the corporate

debtor that it had not accepted liability to pay any

amount. Further, this email is of general nature and the

corporate debtor in this email has not stated that the

amount of liability accepted by it in earlier emails dated

31.07.2017 or 18.09.2017 were not payable. Thereafter,

correspondences with the counsel of the operational

creditor has also happened and finally the legal counsel

of the operational creditor vide its email dated

15.02.2019, it has been informed that outstanding dues

of GBP 78,296.31 were required to be paid by the

corporate debtor and failing to do so would result into

Company Appeal (AT) (Ins.) No.650 of 2022 9 initiation of legal proceedings against the risk and cost of

the corporate debtor.

25. After carefully considering this chain of

communication, we have no hesitation in holding that at

two stages, definite liability to pay has been

acknowledged and accepted by the corporate debtor. The

said liability in both the situations is more than the

threshold limit. Hence, having regards to various judicial

decisions rendered by the Hon'ble NCLAT that in case of

dispute, if the undisputed liability is more than the

threshold limit, the application could be admitted."

(Emphasis supplied)

12. From the findings of the Adjudicating Authority, we find that the

Adjudicating Authority has held that there have been a number of

communication exchanged between the operational creditor and corporate

debtor which make it apparent that there "are certain strong differences"

between the two. In other words, the Adjudicating Authority has endorsed

that there has been dispute between the two parties on the claims amount.

However, going ahead therefrom, the Adjudicating Authority has taken a

conscious decision to further find out if any part of the liability on the part of

the Corporate Debtor is undisputed and if the amount exceeded the threshold

limit to qualify for admission of the Section 9 application.

Company Appeal (AT) (Ins.) No.650 of 2022 10

13. We would however like to proceed by analyzing from the facts of the case

firstly, as to whether there was an admitted debt which was due and payable

and, if so, whether, that a default in payment had been committed and

thereafter find out whether the debt was disputed or not so as to take a

considered view on the legal tenability of the impugned order. This analytical

approach makes more sense being in consonance with the test which has been

laid down by the Hon'ble Supreme Court in Mobilox Innovations (P) Ltd. v.

Kirusa Software (P) Ltd. (2018) 1 SCC 353 ('Mobilox' in short) while

examining an application under Section 9, the relevant excerpts of which are

as follows: -

"34. Therefore, the adjudicating authority, when

examining an application under Section 9 of the Act will

have to determine:

(i) Whether there is an "operational debt" as defined

exceeding Rs. 1 lakh? (See Section 4 of the Act)

(ii) Whether the documentary evidence furnished with

the application shows that the aforesaid debt is due and

payable and has not yet been paid? and

(iii) Whether there is existence of a dispute between

the parties or the record of the pendency of a suit or

arbitration proceeding filed before the receipt of the

demand notice of the unpaid operational debt in relation

to such dispute?

Company Appeal (AT) (Ins.) No.650 of 2022 11 If any of the aforesaid conditions is lacking, the

application would have to be rejected. Apart from the

above, the adjudicating authority must follow the

mandate of Section 9, as outlined above, and in particular

the mandate of Section 9(5) of the Act, and admit or reject

the application, as the case may be, depending upon the

factors mentioned in Section 9(5) of the Act."

14. We note from the excerpts of the impugned order at Para 11 above that

the Adjudicating Authority reached the conclusion that the Corporate Debtor

had admitted a debt of GBP 23544.13 on 31.03.2017 and GBP 10000 on

18.09.2017 and since a definite liability to pay has been acknowledged and

accepted by the Corporate Debtor and the liability amount having crossed the

threshold limit of Rs. 1 lakh, Section 9 of IBC is attracted. It has also been

held that in their email dated 18.09.2017, the Corporate Debtor had agreed

to GBP 10000 as a full and final settlement and though this offer of settlement

was made by the Corporate Debtor 'without any prejudice' to their legal rights

and claims for damages, it has no adverse bearing on the acknowledgement

of debt.

15. Interestingly, the impugned order also notes that with respect to

liability of payment, the Corporate Debtor in an email dated 24.08.2017

addressed to the Operational Creditor raised some issues of general nature

but held that these issues were not as if the Corporate Debtor had not

accepted the liability to pay any amount. Though the contents of the e-mail

Company Appeal (AT) (Ins.) No.650 of 2022 12 dated 24.08.2017 as placed at page 334 of APB is self-explanatory, for reasons

of clarity, we think it prudent to reproduce the contents of the said email.

This e-mail is addressed to one Sarah of the EE Ltd., Operational Creditor by

one Mohan, the representative of the Corporate Debtor is as reproduced

below: -

"Hello,

Please be informed, currently we are in discussion with your client for the

mentioned O/s, due to several reasons as mentioned below. We are in

discussion to settle the dispute and are in discussions with

mary.mcginn@ee.co.uk & steven.2.winter@bt.com, and also mail was sent

looping you, attached for your reference.

We have already informed EE & they have accepted:

 Overcharge in invoicing.

 Agreed to providing credit for invoicing and outstanding

 Compensate us for disruption of service caused due to faulty

invoicing, non responsive attitude & not providing services on time.

EE suspended service on all our lines without proper or prior notice. This

breach of contract has caused us significant loss of hard earned clients,

revenue and reputation for our Company & EE have accepted it in written/

on calls that the problem is at their end.

Company Appeal (AT) (Ins.) No.650 of 2022 13 If EE continues to pursue any of the overcharges, we will be required to

pursue damages from EE for numerous breach of contracts, culminating

with the disconnection of services. This clearly shows EE bad faith in its

dealings with us, its wilful disregard of its contractual obligations, and its

desire to cause damage to us and our customers. In light of all this, EE

must immediately provide credit for all wrong invoicing & settle credits for

poor service. To this point it is clear that despite our continued efforts, EE

has not made any good faith efforts to resolve our claims.

We find it very disingenuous that despite our disputes and documented

overcharges & EE acceptance of the same.

We would advise you to immediately refund all overcharges & compensate

us for disruption of services, or we will be required to pursue recovery of

damages through litigation.

(Emphasis supplied)

16. A plain reading of the contents of the said e-mail dated 24.08.2017

indicates that the Corporate Debtor had disputed in unambiguous terms the

claim amount on grounds of numerous breach of contract, faulty billing, over-

charge in invoicing, etc. and had infact even raised a counter claim. A letter

reiterating the disputes on same lines was issued again on 13.10.2017 as

placed at Page 342-343 of APB with the additional sentences "Please be aware

your client will be liable for extortion, breach of trust & compensation for

fraudulent invoicing / loss of business. This email is without any prejudice to

our legal rights." This validates the fact that both parties were aware of the

invoice disputes and that counterclaims were made by the Corporate Debtor

Company Appeal (AT) (Ins.) No.650 of 2022 14 by way of demanding compensation for service disruption and damages for

business loss. These two emails of 24.08.2017 and 13.10.2017 clearly

indicate that there was serious ongoing dispute surrounding the liability

amount which has erroneously not been taken into reckoning by the

Adjudicating Authority.

17. Further, that the Corporate Debtor had not admitted definite liability

has infact been acknowledged by the Operational Creditor themselves as is

evident from an email sent by the Operational Creditor to the Corporate

Debtor on 23.03.2017 seeking confirmation as to when payment will be

received for "any undisputed amount". The e-mail as placed at page 281 of

APB is as reproduced below: -

Hi Mohan,

I hope you are well?

A couple of things from me if I may,

 Can you confirm when payment will be received for any

undisputed amount?

 When would you be free to discuss the future trading options in

detail?

Kind regards,

Steven

(Emphasis supplied)

We also find emails dated 24.03.2017 and 30.03.2017 as placed at page 280

of the APB where the Corporate Debtor had sought updated statement of

Company Appeal (AT) (Ins.) No.650 of 2022 15 accounts including adjustment of credits and there is no admission of any

definite liability on their part.

18. More importantly, the provision under Section 8(2)(a) of IBC makes it

clear that the Corporate Debtor has to bring to the Operational Creditor the

fact of the existence of a dispute within ten days of the receipt of the demand

notice. We find that the Corporate Debtor in its reply on 29.06.2018 to the

Section 8 notice dated 21.06.2018 has denied the claim raised by the

Operational Creditor on the grounds that they are not legally due or payable

besides making a mention of ongoing and unresolved disputes related to the

debt amount that has been claimed. It will be useful to extract the reply sent

by the Corporate Debtor to Section 8 Notice placed at page 345 of APB:

"1. That the claim of EE Ltd, Trident Place, Mosquito way, Harsfield,

Hertfordshire, AL 109 BW, UK are false and fraudulent and totally

lacking in details of the services rendered.

2.That they have already admitted wrong billing and as such

there is no settled amount payable to them.

3.That there is no adjudicated amount due to them.

4.That we are advised that such fraudulent claims which have not

been adjudicated do not come in the scope of proceedings under THE

INSOLVENCY AND BANKRUPTCY CODE, 2016.

5.That due to summer holidays in the court our counsel is not

available and a detailed reply by him will follow.

Company Appeal (AT) (Ins.) No.650 of 2022 16

6.That in fact we have a counter claim against the EE LIMITED for

disruption of the services and losses suffered by us."

(Emphasis supplied)

Thus, in the background of these communications/correspondences, we are

of the considered view that present is not a case where the Corporate Debtor

has unconditionally admitted to any outstanding amount.

19. We now come down to examine whether mention was made of any pre-

existing dispute by the Appellant / Corporate Debtor prior to or during the

stage of notice under Section 8 of the IBC or whether there was any dispute

on the date of filing the application by the Operational Creditor under Section

9 of the IBC.

20. From the material of record, we find that one of the major areas of

dispute was billing discrepancies arising out of inflated invoices which infact

has been admitted by both parties. The Learned Counsel for Appellant has

submitted that on 05.07.2016, the Corporate Creditor had sent an email to

the Operational Debtor mentioning that 13000 GBP was receivable against

inflated invoices raised by the Operational Creditor as placed at Page 72 of

the APB. It is also seen from page 75-76 of the APB that vide email dated

20.07.2016 the Operational Creditor had not only agreed to the calculations

made by the Corporate Debtor regarding inflated invoices but also agreed to

re-calculate the credit payable to the Corporate Debtor. Similarly, another

communication on billing discrepancy on data bundle from May-July 2016

had also been sent on 03.08.2016 by the Corporate Debtor to the Operational

Company Appeal (AT) (Ins.) No.650 of 2022 17 Creditor as placed at Page 77 of the APB. The ongoing credit issues with the

Operational Creditor and wrong charging of tariffs had persisted even in

subsequent months. Infact CDR disputes for the period as early as January

2016 had also been raised on 10.03.2016 as placed at page 109 of APB. We

also note that on 09.05.2016, the Corporate Debtor took up the matter with

the senior management of the Operational Creditor for early settlement of

disputes relating to credits raised as placed at page 117 and 118 of APB and

alongside raised issues on back-dating discounts applied on Data Bundles as

well as applicability of 5 MB Rest of World Cap on their accounts. We also

cannot lose sight of the fact that the Corporate Debtor had sent emails to the

Operational Creditor on 26.08.2016, 10.10.2016 and 24.10.2016 (as

respectively placed at pages 168, 180 and 199 of APB) seeking a meeting with

the Operational Creditor in UK to discuss the ongoing inflated invoice and to

reconcile and settle these discrepancies. It is also the Appellant's case that

the dispute between them and Respondent No.1 was on several counts and

both parties were engaged in regular discussions with each other on this

count. Moreover, the fact that these disputes had an early start is also noted

from page 69 of APB wherein the Corporate Debtor has sent a communication

on 07.07.2015 to the Operational Creditor that they have hit a roadblock since

the Sim cards given to them were not working and affecting their

commitments of getting revenue. Even the issue of non-working of data

services was raised on 14.10.2016.

21. We find that the above instances of dispute were not isolated in nature

and that they cogently establish that billing disputes between the two parties

Company Appeal (AT) (Ins.) No.650 of 2022 18 existed much before the issue of Section 8 notice and thus we find that there

is sufficient force in the contention of the Appellant that the claims are

genuinely disputed.

22. As to whether a dispute is a pre-existing dispute, the Learned Counsel

for Appellant has correctly relied upon the judgment of the Hon'ble Supreme

Court in Mobilox supra in support of his contention. In this judgement, the

Hon'ble Apex Court while interpreting Sections 8 and 9 of IBC lays down the

guiding principle that the dispute must exist before the receipt of the demand

notice or issue of invoice. It may be useful to notice the relevant part of the

judgment as reproduced below:

"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

Company Appeal (AT) (Ins.) No.650 of 2022 19 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."

23. If we apply the above-cited test laid down by the Hon'ble Supreme Court

to the facts of the present case, it is clear that the defence which was raised

by the Corporate Debtor in its reply to Demand Notice as well as detailed reply

filed in Section 9 Application cannot be said to be moonshine. The Appellants

case is that there is voluminous correspondence exchanged between the

Corporate Debtor and the Operational Creditor over a long period of time

which clearly establishes that there was real pre-existing dispute. That pre-

existing dispute was very much there is amply supported by material on the

record. We do not wish to go into each and every correspondence as it is not

the remit of IBC to investigate all related contractual disputes and look into

Company Appeal (AT) (Ins.) No.650 of 2022 20 their merits as long as it suffices that a plausible defence has been raised as

has been done in the present case. In the present factual matrix, the defence

raised by the Corporate Debtor cannot be held to be moonshine, spurious,

hypothetical or illusory. And for such disputed amounts, Section 9

proceeding under IBC cannot be initiated at the instance of the Operational

Creditor.

24. What also heavily weighs on our mind is that both the objective of the

IBC and the settled proposition of law laid down by the Hon'ble Supreme

Court is that the provisions of IBC cannot be turned into a debt recovery

proceedings. Reliance has also been placed by the Appellant on the

judgement of the Hon'ble Apex Court in M/s S.S. Engineers Vs. Hindustan

Petroleum Corporation Ltd. MANU/SC/1146/2022 which has held that:

"31. The NCLT, exercising powers under Section 7 or Section 9 of

IBC, is not a debt collection forum. The IBC tackles and /or deals

with insolvency and bankruptcy. It is not the object of the IBC that

CIRP should be initiated to penalize solvent companies for non-

payment of disputed dues claimed by an operational creditor."

Where operational creditor seeks to initiate insolvency process against a

Corporate Debtor, it can only be done in clear cases where no real dispute

exists between the two which however is not so borne out by the facts of the

present case. We are of the considered opinion that the Adjudicating

Company Appeal (AT) (Ins.) No.650 of 2022 21 Authority committed serious error in admitting Section 9 application in the

facts of the present case.

25. With the aforesaid discussion, we are of the considered view that the

Adjudicating Authority has erroneously admitted the application under

Section 9 of the IBC. We therefore set aside the impugned order. The orders

passed by the Adjudicating Authority initiating CIRP against the Corporate

Debtor and appointing Interim Resolution Professional and all other orders

pursuant to impugned order are declared illegal and set aside. The Corporate

Debtor company is released from the rigours of CIRP and is allowed to

function independently through its board of directors with immediate effect.

The appeal is allowed with the aforesaid observations. No order as to costs.

[Justice Ashok Bhushan] Chairperson

[Mr. Barun Mitra] Member (Technical)

Place: New Delhi Date: 22.11.2022

PKM

Company Appeal (AT) (Ins.) No.650 of 2022 22