Next Education India Pvt Ltd vs K12 Techno Services Pvt Ltd
- CitationCompany Appeal (AT) (Insolvency) No. 98 of 2019
Ratio decidendi
The rule this decision rests on
A dispute raised by the corporate debtor only after the issuance of a demand notice under Section 8(1) of the Insolvency and Bankruptcy Code, 2016 cannot be treated as a pre-existing dispute capable of defeating an application under Section 9; only a dispute raised before the invoice or demand notice, whether as to quality of goods or services or by way of pending suit or arbitration, qualifies as a pre-existing dispute. An Adjudicating Authority that rejects a Section 9 application on the ground of existence of dispute, without examining whether the dispute was raised before the demand notice, commits an error warranting setting aside the order and remand for admission of the application after notice to the corporate debtor.
Written by Miss Lucy from the judgment below, not taken from a headnote.
Judgment
As delivered
IN THE MATTER OF: M/s. Next Education India Pvt. Ltd. ...Appellant Versus M/s. K12 Techno Services Pvt. Ltd. ...Respondent
Present: For Appellant : Mr. Kumar Sudeep, Mr. D. Pavan Kumar and Ms. Shraddha Gupta, Advocates
For Respondent : Mr. Anand Sanjay M. Nuli and Mr. Nanda Kumar K.B., Advocates ORDER
01.08.2019 The Appellant - M/s. Next Education India Pvt. Ltd.
('Operational Creditor') filed an application under Section 9 of the 'Insolvency
and Bankruptcy Code, 2016' (for short, 'the I&B Code') against M/s. K12
Techno Services Private Limited (Corporate Debtor), the Adjudicating Authority
(National Company Law Tribunal), Bengaluru Bench by impugned order dated
20th December, 2018 rejected the application on the ground of 'existence of
dispute'.
The Appellant brought on record (Form 5) of 'debt' and 'default'. It is also
brought on record the Demand Notice u/s 8(1) of the 'I&B Code' was issued on
8th August, 2017. The Adjudicating Authority on the ground that the respondent
has filed reply on 8th September, 2017 to the Demand Notice noticed that several
disputes had been raised. They have also annexed several correspondence about
the defective services provided by the Appellant. However, when we asked, the
learned counsel for the Respondent could not lay hand on any of the
correspondence to show that prior to Section 8 notice, the Respondent
(Corporate Debtor) intimated that there were defective services provided by the
Appellant.
It is a settled law that if any dispute is raised prior to the issuance of the
invoices or Demand Notice u/s 8(1) of the I&B Code with regard to quality of
service or goods or pendency of the suit or arbitration, in such case one may
take the plea that there is an 'existence of dispute' but if any dispute is raised
after issuance of Demand Notice u/s 8(1) that cannot be termed to be a 'pre-
existing dispute'.
We find that the Adjudicating Authority has failed to notice the aforesaid
issue and observed that 'debt' in question is not only serious dispute but also
barred by limitation and laches and not discussed under which provision the
'Master Service Agreement' with 'Sri Gowtham Academy of General and Technical
Education' was consequentially issued on 8th February, 2016 and the reply to
the Demand Notice was issued on 8th August, 2017.
For the reasons aforesaid, we set aside the impugned order dated 20th
December, 2018 and remit the case to the Adjudicating Authority (National
Company Law Tribunal), Bengaluru Bench for admitting the application u/s 9
of the 'I&B Code' after notice to the 'Corporate Debtor'. We allow the 'Corporate
Debtor' to settle the claim before its admission, if it so chooses.
The appeal is allowed with aforesaid observations and directions.
[Justice S.J. Mukhopadhaya] Chairperson
[ Justice A.I.S. Cheema ] Member (Judicial)
[ Kanthi Narahari ] Member (Technical) /ns/gc
This page reproduces a public judgment and a summary of it. It is research material, not legal advice, and it is no substitute for advice from an advocate on your own facts.
Research this judgment with Miss Lucy
Ask what it holds, what has followed it, and what it means for your matter — in plain English, with the citations.
Try Miss Lucy free