The NCLAT Delhi bench today held that Section 9 Application cannot be accepted if the dispute raised by the Corporate debtor is not a moonshine dispute.
The National Company Law Appellate Tribunal, New Delhi bench comprising Justice Ashok Bhushan, Chairperson and Barun Mitra, Technical Member was hearing an Appeal today and held that Section 9 Application cannot be accepted if the dispute raised by the Corporate debtor is not a moonshine dispute.
In the present case, the appeal was filed under Section 61 of the Insolvency and Bankruptcy Code, 2016 by the Appellant arising out of the Order passed by the Adjudicating Authority. By the Impugned Order, the Adjudicating Authority has rejected the Section 9 application filed by the Appellant. Aggrieved by this impugned order, the present appeal had been preferred by the Appellant/Operational Creditor.
The learned counsel for Respondents No. 2 and 3 submitted that the Appellant and Respondent No. 2 had signed a Consultancy Agreement by virtue of which the Appellant had agreed to provide certain services to Respondent No.2 to assist them in setting up an entity in India and for overseeing its operations. However, this fact had not been deliberately disclosed by the Appellant before the Adjudicating Authority.
It was further pointed out that the Appellant had breached the terms and conditions of the aforesaid Consultancy Agreement of 04.11.2013. Elaborating further, it was stated that the Corporate Debtor company was engaged in the business of water testing and sanitation products and services related to purchasing, the Appellant violated various clauses of the Consultancy Agreement having engaged himself in the activities of a competing entity thus causing loss to the business of the Corporate Debtor. In addition, the Appellant had made excess withdrawals from the accounts of the Corporate Debtor purportedly on account of the tour and travelling without supporting documents to substantiate such withdrawals. Pointing out these pre-existing disputes, it was submitted that the present Section 9 application was not maintainable.
Having answered items 9 (i) and (ii), we now proceed to examine whether there was any pre-existing dispute between the Appellant and the Corporate Debtor company. It has been submitted by learned counsel for Respondents No. 2 and 3 that the Appellant had deliberately withheld information from the Adjudicating Authority about the Consultancy Agreement which had been signed between the Appellant and Respondent No. 2.
It has been further submitted by the learned counsel for the Respondent that the Appellant without prior authorisation had made excess withdrawals purportedly on account of the tour and travelling without supporting documents to substantiate such withdrawals. The Appellant has contended that these averments have been made without any basis and valid proof.
The Appellate Authority were of the considered view that given the framework of Section 9 of IBC, the remit of the Appellate Tribunal is summary in nature and it, therefore, does not behove the Appellate Tribunal to undertake either the comparative examination of the areas of specialisation of Corporate Debtor company or to enquire into the veracity of the emails. All that the Appellate Authority observed at this stage was that a dispute centring around breach of fiduciary duty by the Appellant in the context of the Consultancy Agreement has been raised by the Respondents as their defence against the claim of the Appellant which was evidenced from the material placed on record.
The Appellate Tribunal noted that the claims by the Appellant were disputed. Further, they have denied that any amount was due and payable by the Corporate Debtor to the Appellant. In the light of the submissions and pleadings made by the learned counsel for Respondent No.2 and 3 and after seeing the material on record the Appellate Authority was satisfied that the dispute raised on behalf of the Corporate Debtor company was not a moonshine dispute or a bluster.
The Appeal was dismissed.