Drive India Enterprise Solutions Limited vs Btm Exports Limited

Court: National Company Law Appellate Tribunal
Case type: Company Appeal(AT)(Ins)
Decided on: 25-02-2026

<div> NATIONAL COMPANY LAW APPELLATE TRIBUNAL, PRINCIPAL BENCH, NEW DELHI Company Appeal (AT) (Insolvency) No. 54 of 2024 [Arising out of Order dated 14.09.2023 passed by the Adjudicating Authority (National Company Law Tribunal), New Delhi Court-VI in (IB)- 933(ND)2020] In the matter of: Drive India Enterprise Solutions Ltd. ...Appellant Vs. BTM Exports Ltd. ...Respondent For Appellant: Mr. Jitender Chaudhary, Ms. Shilpa Chohan and Ms. Aditi Tripathi, Advocates. For Respondent: Mr. Sidharth Datta and Mr. Pratyush Singh, Advocates. J U D G M E N T th (25 February, 2026) Ashok Bhushan, J. This Appeal by Operational Creditor has been filed challenging the order dated 14.09.2023 passed by the Adjudicating Authority (National Company Law Tribunal) New Delhi Court-VI dismissing Section 9 application filed by the Appellant. 2. Brief facts of the case necessary to be noticed for deciding the Appeal are:- 2.1. Appellant entered into Master Agreement with the Corporate Debtor on 05.02.2016 for sale/purchase of goods/products to Respondent or their 2 distribution channel. In terms of Master Agreement, the Appellant entered into several transactions with the Respondent and the parties identified by the Respondent. The Appellant and the Corporate Debtor entered into amendment to the Master Agreement on 25.04.2017. Auditors of the Operational Creditor on 23.04.2018 had sent audit confirmation letter to the Corporate Debtor asking the Corporate Debtor to confirm the amount as mentioned in the said letter which is owed by the Operational Creditor to the Corporate Debtor. Appellant had sent a notice on 02.06.2020 to the Corporate Debtor claiming dues which legal notice dated 02.06.2020 was replied by the Corporate Debtor- M/s. BTM Exports Limited on 19.06.2020 denying the claim. The Operational Creditor thereafter on 06.12.2019 issued a notice under Section 8 of the IBC claiming an amount in default of Rs.6,94,33,151/. The said notice of demand was immediately replied by Corporate Debtor on 14.12.2019 denying its claim of Rs.6,94,33,151/-. Operational Creditor thereafter filed an application under Section 9 on 22.07.2020 to which reply was filed by the Corporate Debtor. Rejoinder as well as sur-rejoinder was also filed by the Appellant. An IA No.1227 of 2022 was filed by the Appellant to file additional documents which were allowed by the Adjudicating Authority on 21.03.2022. Adjudicating Authority after hearing the parties by impugned order rejected Section 9 application. Adjudicating Authority in the impugned order has noticed the plea which was taken by the Corporate Debtor. Adjudicating Authority also noticed that the Operational Creditor has initially filed voluminous petition running more than 2000 pages but subsequently filed an IA No.1227 of 2022 where the claim has been reduced to Rs.3,22,84,414/-. Adjudicating Authority noticed the plea of Corporate Company Appeal (AT) (Insolvency) No. 54 of 2024 3 Debtor alleging fraud and forgery against the Appellant. Adjudicating Authority has also referred to an earlier order dated 15.11.2021 passed by the Adjudicating Authority, New Delhi Bench II in CP (IB)- 932 (ND) 2020 filed by the Appellant against M/s. Essline Engineers and Consultants Private Limited. Findings returned in the earlier order dated 15.11.2021 were also noticed. Adjudicating Authority also held that some of the invoices raised in Section 9 application are also there in the matter of Appellant filed against M/s. Essline Engineers and Consultants Private Limited which application stand rejected by order dated 15.11.2021. Challenging the order of the Adjudicating Authority, this Appeal has been filed. 3. We have heard Counsel for the Appellant and Counsel appearing for the Respondent. 4. Counsel for the Appellant in support of the Appeal submits that the Adjudicating Authority made incorrect observations that by IA No.1227 of 2022, the Operational Creditor has reduced its claim to Rs.3,22,84,414/-. It is submitted that by IA No.1227 of 2022 only individual claim against M/s. BTM Exports Limited was referred to which was debt and default in terms of the agreement dated 05.02.2016. It is submitted that there was a Essline debt also of Rs.4,54,94,251/- in capacity of guarantor for Essline debt. Thus, Operational Creditor never reduced its claim rather reduction of the claim in the IA was only confined to individual debt of M/s. BTM Exports Limited. It is submitted that the Adjudicating Authority did not deal with the issue of debt and default and failed to return any finding. Order of the Adjudicating Authority is non-speaking judgment which does not deal or adjudicate or Company Appeal (AT) (Insolvency) No. 54 of 2024 4 make any observations. It is submitted that the conclusion of Adjudicating Authority that Section 9 application against M/s. Essline Engineers and Consultants Private Limited has been dismissed then application filed against M/s. BTM Exports Limited was liable to be dismissed is erroneous. Adjudicating Authority was required to advert to the materials on record and return a finding. 5. Learned Counsel for the Respondent submits that there is no operational debt in existence in Part-IV of Section 9 application. No date of default having been mentioned application deserves to be dismissed on that ground. In the application, different amounts have been claimed by the Appellant as outstanding from time to time. Own audit confirmation letter dated 28.04.2018 issued by the Operational Creditor to M/s. BTM Exports Limited clearly mentioned that dues payable by Operational Creditor to BTM is Rs.5.88 Crores. It is submitted that when there was own balance confirmation shows dues on Operational Creditor, the application filed by the Operational Creditor deserves rejection. It is submitted that the Corporate Debtor has given a notice of dispute immediately after receiving demand notice and notice of dispute having been issued, there was no occasion for admitting Section 9 application. Counsel further submitted that the legal notice dated 07.06.2020 was issued by Operational Creditor to the Corporate Debtor which was replied and claim was disputed on 19.06.2020 which clearly indicate that there was pre-existence of dispute between the parties and the claim of the Appellant was never admitted by the Corporate Debtor. It is further submitted that in the balance sheet filed by the Operational Company Appeal (AT) (Insolvency) No. 54 of 2024 5 Creditor with the Ministry of Corporate Affairs for the F.Y. 2017-18 which is placed on record by the Corporate Debtor in its reply to IA No.1227 of 2022 clearly mentioned that amount of Rs.5.88 Crore are due towards the Corporate Debtor. Thus, the statement in Section 9 application that the amount is due on Corporate Debtor is wholly incorrect and materials were concealed by the Appellant. It is submitted that as per adjustment of amount of Rs.3.99 Crores which was communicated to the Operational Creditor vide letter of M/s. Essline Engineers and Consultants Private Limited along with the ledger of the M/s. Essline Engineers and Consultants Private Limited as well as the Corporate Debtor, the said account adjustment was never denied, by e-mail dated 23.10.2018. Operational Creditor sought the same record in excel format which were supplied. Adjudicating Authority did not commit any error in relying on earlier order dated 15.11.2022 dismissing Section 9 application filed by the Appellant against M/s. Essline Engineers and Consultants Private Limited since some of the invoices which was claimed against M/s. Essline Engineers and Consultants Private Limited were also claimed against the Corporate Debtor. It is submitted that there was no question of any guarantee given by M/s. BTM Exports Limited as is claimed by the Appellant. There being clear pre-existing dispute and notice of dispute has already been issued by the Corporate Debtor, application was liable to be rejected. 6. We have considered the submissions of the Counsel for the parties and perused the record. Company Appeal (AT) (Insolvency) No. 54 of 2024 6 7. When we look into the order of the Adjudicating Authority dated 14.09.2023 rejecting Section 9 application, although Adjudicating Authority in the impugned order has noted the case of the Operational Creditor in Paragraph 1, the case of Corporate Debtor in Paragraph 2 and has also noticed IA No.1227 of 2022 by which claim was reduced to Rs.3,22,84,414, as well as the order of the Adjudicating Authority dated 15.11.2021 by which application filed by the Appellant against M/s. Essline Engineers and Consultants Private Limited has been rejected but the observation of the Adjudicating Authority that serious allegation of fraud and forgery has been made in pleading which Adjudicating Authority did not adjudicate and Adjudicating Authority is not expected to ascertain veracity of documents produced. On making the said observation in paragraph 6, application has been dismissed. 8. Although Adjudicating Authority ought to have returned relevant finding but in the facts of the present case which has been noticed by the Adjudicating Authority itself in the impugned order, we are of the view that the present is a case where Section 9 application deserves to be rejected. Adjudicating Authority noticed that the Corporate Debtor has made allegation of fraud and forgery against the Operational Creditor. Adjudicating Authority has referred to case of the Corporate Debtor that in own audit confirmation letter dated 23.04.2018, an amount of Rs.5,88,85,999/- was noticed to be payable by the Operational Creditor to the Corporate Debtor. Adjudicating Authority has also noticed that the balance sheets filed with the Ministry of Corporate Affairs for the F.Y. 2017-18 of the Operational Creditor establishes Company Appeal (AT) (Insolvency) No. 54 of 2024 7 the acceptance that amount of Rs.5.88 Crore is due from Operational Creditor to M/s. BTM Exports Limited. In paragraph 2(G) of the judgment, Adjudicating Authority has noticed following:- “G. The Operational Creditor has with mala fide intent and to defraud this Tribunal concealed its own Audit Confirmation Letters dated 23.04.2018 wherein its own Auditor admitted a sum of Rs. 5,88,85,999 as being due and payable by the Operational Creditor upto the end of Financial Year 2017-2018. The same Audit Confirmation Letters in favour of the Corporate Debtor are part of record reproduced in the judgement of NCLT Delhi Bench -2 in the matter of Drive India Enterprises Solution Limited Vs. M/s. Essline Engineers and Consultants Private Limited, (IB)-932(ND)2020 dated 15.11.2021 dismissing the Section 9 Petition of the same Operational Creditor. Furthermore, the Operational Creditors own Audited Balance Sheets filed with MCA for the financial year 2017-18 clearly establishes the acceptance of an amount of due of Rs. 5.88 Crores towards the Corporate Debtor from entry no.479-496. Thus, the statements made in Form 5 Application claiming dues from 01.02.2017 or even from 2016 are wholly false and contrary to statutory record of the Operational Creditor who has concealed these facts to mislead this Tribunal and hence the present Section 9 Petition is a gross abuse of process.” 9. As noted above, the Corporate Debtor immediately after receiving the demand notice has sent reply to demand notice which is clearly a notice of dispute within the meaning of Section 8(1). Apart from giving notice of dispute, Corporate Debtor in its reply to Section 9 application has replied the claim of Company Appeal (AT) (Insolvency) No. 54 of 2024 8 the Operational Creditor. In reply to Section 9, the Corporate Debtor has brought on record the legal notice dated 02.06.2020 issued by the Operational Creditor to the Corporate Debtor where the Operational Creditor has claimed from Corporate Debtor the amount of Rs.6,94,33,151/- which was amount claimed by Operational Creditor from Corporate Debtor in its demand notice dated 06.12.2019. It is useful to notice certain averments of legal notice dated 02.06.2020. In paragraphs 1, 2 and 3 of the legal notice, the Operational Creditor has given details of the transactions and in paragraph 7 of the legal notice, following has been stated:- “7. After adjusting the dues payable by our client to Addressee no. 5, BTM is liable to pay Rs.6,94,33,151/- to our clients. The details to the receivables is given in a separates table and marked as Annexure - A. Our client repeatedly demanded the payments from you addressees, however, in spite of repeated demands, addressee nos. 1 and 5 have not paid the said amount.” 10. The said legal notice was also replied by the Corporate Debtor by letter dated 19.06.2020 again claiming that there are no dues on the Corporate Debtor. It was after the aforesaid reply dated 19.06.2020, demand notice dated 06.12.2019 and Section 9 application was filed in July 2020. Thus, there was written communication between the parties prior to issuance of demand notice dated 06.12.2019, which proved pre-existing dispute. 11. In the reply which was filed to Section 9 notice Corporate Debtor has subsequently pleaded denying the claim. Company Appeal (AT) (Insolvency) No. 54 of 2024 9 12. IA No.1227 of 2022 was filed wherein in paragraph 3, it was pleaded that the total owed amount by the Corporate Debtor is Rs.3,22,84,414/- and by the application, the said documents were prayed to be taken on record. In reply to the above application IA No.1227 of 2022 reply was filed by the Corporate Debtor in which reply Corporate Debtor has referred to the financial statement of the Operational Creditor. We have already noticed that the Adjudicating Authority in paragraph G has noted the audited balance sheet which is on Ministry of Corporate Affairs’ record for the F.Y. 2017-18 where amount payable by Operational Creditor to Corporate Debtor is mentioned as Rs.5.88 Crore. Thus, the present is a case where all relevant materials were brought on the record by the parties including the ledger statement/ account confirmation by the Operational Creditor. The materials brought on record clearly has raised plausible defence by the Corporate Debtor. Letter issued by the Operational Creditor to Corporate Debtor on 23.04.2018 asking confirmation where according to the letter, amount of Rs.3,53,79,516/- is due to Corporate Debtor as on 31.03.2018 and coupled with the financial statements of Operational Creditor which is filed with the Ministry of Corporate Affairs for F.Y. 2017-18 mentioning the dues to the Corporate Debtor of Rs.5.88 Crore. There was substantial defence raised by the Corporate Debtor that no amount is due. In Section 9 application filed by the Operational Creditor confirmation letter dated 23.04.2018 or the balance sheet for the F.Y. 2017-18 were not filed nor explained. In the present case, notice of dispute was already given by the Corporate Debtor on 06.12.2019 as noted above in which notice of dispute in paragraphs 2, 3 and 4 following was Company Appeal (AT) (Insolvency) No. 54 of 2024 10 stated by the Corporate Debtor which is clearly a notice of dispute within the meaning of Sections 8 and 9:- “2. At the outset, we completely brush aside all the allegations made against us. It is submitted that the aforesaid claim made is false and frivolous. We have been repeatedly communicating over emails and telecom that there is no due whatsoever from us to you 3. Even the account confirmations sent by you clearly states that there is no sum due whatsoever from us. In fact we were in a state of shock and surprise to receive the captioned notice from your office demanding an alleged sum of Rs. 5,94,33,151/-. 4. We have been into business relations since a long time and have been reconciling our accounts from time to time. The account reconciliation clearly shows that no sum is due from us to you.” 13. We need to notice the law laid down by the Hon’ble Supreme Court in reference to Section 9 application. The Hon’ble Supreme Court in “Mobilox Innovations Pvt. Ltd. vs. Kirusa Software Pvt. Ltd.- Civil Appeal No.9405 of 2017” has laid down following in paragraph 40:- “ 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 "existence" of a dispute or the fact that a suit or arbitration proceeding relating to a Company Appeal (AT) (Insolvency) No. 54 of 2024 11 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.” 14. The Hon’ble Supreme Court in subsequent judgment has reiterated the judgment of “Mobilox Innovations Pvt. Ltd.” (supra) and further has laid down that Section 9 application cannot be admitted when any plausible contention is raised by the Corporate Debtor in his defence which cannot be said to be moonshine unsupported by evidence. The Hon’ble Supreme Court in “Transmission Corporation of Andhra Pradesh Limited vs. Equipment Conductors and Cables Limited- (2019) 12 SCC 697” has laid down following in Paragraph 19:- “ 19. In a recent judgment of this Court in Mobilox Innovations (P) Ltd. v. Kirusa Software (P) Ltd. [Mobilox Innovations (P) Ltd. v. Kirusa Software (P) Ltd., (2018) 1 SCC 353 : (2018) 1 SCC (Civ) 311] , this Court has categorically laid down that IBC is not intended to be substitute to a recovery forum. It is also laid down that Company Appeal (AT) (Insolvency) No. 54 of 2024 12 whenever there is existence of real dispute, the IBC provisions cannot be invoked. We would like to reproduce the following discussion from the said judgment: (SCC pp. 392-95, 398 & 402, paras 33-34, 37, 42-45 & 51) “33. The scheme under Sections 8 and 9 of the Code, appears to be that an operational creditor, as defined, may, on the occurrence of a default (i.e. on non-payment of a debt, any part whereof has become due and payable and has not been repaid), deliver a demand notice of such unpaid operational debt or deliver the copy of an invoice demanding payment of such amount to the corporate debtor in the form set out in Rule 5 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 read with Form 3 or 4, as the case may be [Section 8(1)]. Within a period of 10 days of the receipt of such demand notice or copy of invoice, the corporate debtor must bring to the notice of the operational creditor the existence of a dispute and/or the record of the pendency of a suit or arbitration proceeding filed before the receipt of such notice or invoice in relation to such dispute [Section 8(2)(a)]. What is important is that the existence of the dispute and/or the suit or arbitration proceeding must be pre-existing i.e. it must exist before the receipt of the demand notice or invoice, as the case may be. In case the unpaid operational debt has been repaid, the corporate debtor shall within a period of the selfsame 10 days send an attested copy of the record of the electronic transfer of the unpaid amount from the bank account of the corporate debtor or send an attested copy of the record that the operational creditor has encashed a cheque or otherwise received payment from the corporate debtor [Section 8(2)(b)]. It is only if, after the expiry of the period of the said 10 days, the operational creditor does not either receive Company Appeal (AT) (Insolvency) No. 54 of 2024 13 payment from the corporate debtor or notice of dispute, that the operational creditor may trigger the insolvency process by filing an application before the adjudicating authority under Sections 9(1) and 9(2). This application is to be filed under Rule 6 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 in Form 5, accompanied with documents and records that are required under the said form. Under Rule 6(2), the applicant is to dispatch by registered post or speed post, a copy of the application to the registered office of the corporate debtor. Under Section 9(3), along with the application, the statutory requirement is to furnish a copy of the invoice or demand notice, an affidavit to the effect that there is no notice given by the corporate debtor relating to a dispute of the unpaid operational debt and a copy of the certificate from the financial institution maintaining accounts of the operational creditor confirming that there is no payment of an unpaid operational debt by the corporate debtor. Apart from this information, the other information required under Form 5 is also to be given. Once this is done, the adjudicating authority may either admit the application or reject it. If the application made under sub-section (2) is incomplete, the adjudicating authority, under the proviso to sub-section (5), may give a notice to the applicant to rectify defects within 7 days of the receipt of the notice from the adjudicating authority to make the application complete. Once this is done, and the adjudicating authority finds that either there is no repayment of the unpaid operational debt after the invoice [Section 9(5)(i)(b)] or the invoice or notice of payment to the corporate debtor has been delivered by the operational creditor [Section 9(5)(i)(c)], or that no notice of dispute has been received by the operational creditor from the Company Appeal (AT) (Insolvency) No. 54 of 2024 14 corporate debtor or that there is no record of such dispute in the information utility [Section 9(5)(i)(d)], or that there is no disciplinary proceeding pending against any resolution professional proposed by the operational creditor [Section 9(5)(i)(e)], it shall admit the application within 14 days of the receipt of the application, after which the corporate insolvency resolution process gets triggered. On the other hand, the adjudicating authority shall, within 14 days of the receipt of an application by the operational creditor, reject such application if the application is incomplete and has not been completed within the period of 7 days granted by the proviso [Section 9(5)(ii)(a)]. It may also reject the application where there has been repayment of the operational debt [Section 9(5)(ii)(b)], or the creditor has not delivered the invoice or notice for payment to the corporate debtor [Section 9(5)(ii)(c)]. It may also reject the application if the notice of dispute has been received by the operational creditor or there is a record of dispute in the information utility [Section 9(5)(ii)(d)]. Section 9(5)(ii)(d) refers to the notice of an existing dispute that has so been received, as it must be read with Section 8(2)(a). Also, if any disciplinary proceeding is pending against any proposed resolution professional, the application may be rejected [Section 9(5)(ii)(e)]. 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 Company Appeal (AT) (Insolvency) No. 54 of 2024 15 (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? If any one 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. * 37. It is now important to construe Section 8 of the Code. The operational creditors are those creditors to whom an operational debt is owed, and an operational debt, in turn, means a claim in respect of the provision of goods or services, including employment, or a debt in respect of repayment of dues arising under any law for the time being in force and payable to the Government or to a local authority. This has to be contrasted with financial debts that may be owed to financial creditors, which was the subject-matter of the judgment delivered by this Court on 31-8-2017 in Innoventive Industries Ltd. v. I CICI Bank [Innoventive Industries CICI Ltd. v. I Bank, (2018) 1 SCC 407 : (2018) 1 SCC (Civ) 356] . In this judgment, we had held that the adjudicating authority under Section 7 of the Code has to ascertain the existence of a default from the records of the information utility or on the basis of evidence furnished by the financial creditor within 14 days. The corporate debtor is entitled to point out to the adjudicating authority that a default has not occurred; in the sense that a debt, which may also Company Appeal (AT) (Insolvency) No. 54 of 2024 16 include a disputed claim, is not due i.e. it is not payable in law or in fact. This Court then went on to state: (SCC p. 440, paras 29-30) ‘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. 30. On the other hand, as we have seen, in the case of a corporate debtor who commits a default of a financial debt, the adjudicating authority has merely to see the records of the information utility or other evidence produced by the financial creditor to satisfy itself that a default has occurred. It is of no matter that the debt is disputed so long as the debt is “due” i.e. payable unless interdicted by some law or has not yet become due in the sense that it is payable at some future date. It is only when this is proved to the satisfaction of the adjudicating authority that the adjudicating authority may reject an application and not otherwise.’ * Company Appeal (AT) (Insolvency) No. 54 of 2024 17 42. This being the case, is it not open to the adjudicating authority to then go into whether a dispute does or does not exist? 43. It is important to notice that Section 255 read with the Eleventh Schedule of the Code has amended Section 271 of the Companies Act, 2013 so that a company being unable to pay its debts is no longer a ground for winding up a company. The old law contained in Madhusudan [Madhusudan Gordhandas & Co. v. Madhu Woollen Industries (P) Ltd., (1971) 3 SCC 632] has, therefore, disappeared with the disappearance of this ground in Section 271 of the Companies Act. 44. We have already noticed that in the first Insolvency and Bankruptcy Bill, 2015 that was annexed to the Bankruptcy Law Reforms Committee Report, Section 5(4) defined “dispute” as meaning a ‘bona fide suit or arbitration proceedings…’. In its present avatar, Section 5(6) excludes the expression “bona fide” which is of significance. Therefore, it is difficult to import the expression “bona fide” into Section 8(2)(a) in order to judge whether a dispute exists or not. 45. The expression “existence” has been understood as follows: ‘Shorter Oxford English Dictionary gives the following meaning of the word “ existence ”: (a) Reality, as opp. to appearance. (b) The fact or state of existing; actual possession of being. Continued being as a living creature, life, esp. under adverse conditions. Something that exists; an entity, a being. All that exists. (Page 894, Oxford English Dictionary)’ * Company Appeal (AT) (Insolvency) No. 54 of 2024 18 </div><table><thead><tr><th>51. It is clear, therefore, that once the operational</th><th></th><th></th></tr></thead><tbody><tr><td>creditor has filed an application, which is otherwise</td><td></td><td></td></tr><tr><td>complete, the adjudicating authority must reject the</td><td></td><td></td></tr><tr><td>application under Section 9(5)(2)(d) if notice of dispute has</td><td></td><td></td></tr><tr><td>been received by the operational creditor or there is a</td><td></td><td></td></tr><tr><td>record of dispute in the information utility. It is clear that</td><td></td><td></td></tr><tr><td>such notice must bring to the notice of the operational</td><td></td><td></td></tr><tr><td>creditor the “existence” of a dispute or the fact that a suit</td><td></td><td></td></tr><tr><td>or arbitration proceeding relating to a dispute is pending</td><td></td><td></td></tr><tr><td>between the parties. Therefore, all that the adjudicating</td><td></td><td></td></tr><tr><td>authority is to see at this stage is whether there is a</td><td></td><td></td></tr><tr><td>plausible contention which requires further investigation</td><td></td><td></td></tr><tr><td>and that the “dispute” is not a patently feeble legal</td><td></td><td></td></tr><tr><td>argument or an assertion of fact unsupported by evidence.</td><td></td><td></td></tr><tr><td>It is important to separate the grain from the chaff and to</td><td></td><td></td></tr><tr><td>reject a spurious defence which is mere bluster. However,</td><td></td><td></td></tr><tr><td>in doing so, the Court does not need to be satisfied that the</td><td></td><td></td></tr><tr><td>defence is likely to succeed. The Court does not at this</td><td></td><td></td></tr><tr><td>stage examine the merits of the dispute except to the extent</td><td></td><td></td></tr><tr><td>indicated above. So long as a dispute truly exists in fact</td><td></td><td></td></tr><tr><td>and is not spurious, hypothetical or illusory, the</td><td></td><td></td></tr><tr><td>adjudicating authority has to reject the application.”</td><td></td><td></td></tr><tr><td>(emphasis in original)”</td><td></td><td></td></tr><tr><td></td><td></td><td></td></tr><tr><td>rther, the Hon’ble Supreme Court in “</td><td>Kay Bouvet Engg. Ltd. v.</td><td></td></tr></tbody></table><div> Overseas Infrastructure Alliance (India) (P) Ltd., (2021) 10 SCC 483” has laid down following in paragraphs 19 and 21:- “ 19. It could thus be seen that this Court has held that one of the objects of IBC qua operational debts is to ensure that the amount of such debts, which is usually smaller than that of financial debts, does not enable Company Appeal (AT) (Insolvency) No. 54 of 2024 19 operational creditors to put the corporate debtor into the insolvency resolution process prematurely or initiate the process for extraneous considerations. It has been held that it is for this reason that it is enough that a dispute exists between the parties. 21. It is thus clear that once the operational creditor has filed an application which is otherwise complete, the adjudicating authority has to reject the application under Section 9(5)(ii)(d) IBC, if a notice has been received by operational creditor or if there is a record of dispute in the information utility. What is required is that the notice by the corporate debtor must bring to the notice of operational creditor the existence of a dispute or the fact that a suit or arbitration proceedings relating to a dispute is pending between the parties. All that the adjudicating authority is required 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 a mere bluster. It has been held that however, at this stage, the Court is not required to be satisfied as to whether the defence is likely to succeed or not. The Court also cannot go into the merits of the dispute except to the extent indicated hereinabove. It has been held that so long as a dispute truly exists in fact and is not spurious, hypothetical or illusory, the adjudicating authority has no other option but to reject the application.” 16. The Hon’ble Supreme Court in subsequent judgment “M/s. S.S. Engineering vs. Hindustan Petroleum Corporation Ltd. & Ors.- Civil Company Appeal (AT) (Insolvency) No. 54 of 2024 20 Appeal No.4583 of 2022” has held that Section 9 application can be admitted only when there is undisputed debt. In paragraph 32 of the judgment, following was laid down:- “32. There are noticeable differences in the IBC between the procedure of initiation of CIRP by a financial creditor and initiation of CIRP by an operational creditor. On a reading of Sections 8 and 9 of the IBC, it is patently clear that an Operational Creditor can only trigger the CIRP process, when there is an undisputed debt and a default in payment thereof. If the claim of an operational creditor is undisputed and the operational debt remains unpaid, CIRP must commence, for IBC does not countenance dishonesty or deliberate failure to repay the dues of an Operational Creditor. However, if the debt is disputed, the application of the Operational Creditor for initiation of CIRP must be dismissed.” 17. In view of the law laid down by the Hon’ble Supreme Court as noted above, it has to be seen as to whether any plausible defence has been raised by the Corporate Debtor or the defence raised by the Corporate Debtor is unsupported by evidence and is a moonshine defence. From the materials brought on record, we are satisfied that plausible defence was raised by the Corporate Debtor. Notice of dispute has already been given which is substantial and based on materials on record which has been filed along with the reply to Section 9 application. Section 9 application deserves rejection. As observed above, although we have noticed the submission of the Appellant that the Adjudicating Authority has not appropriately returned any finding but in the present case, we see no reason to ask the Adjudicating Authority Company Appeal (AT) (Insolvency) No. 54 of 2024 21 to pass a fresh order there being ample material on record from which we are satisfied that Section 9 application deserves rejection. 18. In view of the above, we do not find any error in rejection of Section 9 application of the Appellant but for the reasons as indicated above. In result, Appeal is dismissed. [Justice Ashok Bhushan] Chairperson [Barun Mitra] Member (Technical) New Delhi Anjali Company Appeal (AT) (Insolvency) No. 54 of 2024 </div>