the petition under Section 9 of the I&B Code was not maintainable there being existence of dispute

 

2

M/s. Meyer Apparel Ltd. & Anr …Appellants and CD

Vs

M/s. Surbhi Body Products Pvt. Ltd. …Respondent and Op Cr

M/s. Meyer Apparel Ltd. & Anr. …Appellants and CD

Vs

M/s. Godolo & Godolo Exports Pvt. Ltd. …Respondent and Op Cr

 

The main ground taken by the Appellant is that the petition under Section 9 of the I&B Code was not maintainable there being existence of dispute between the parties with regard to the debt claimed by Operational Creditor.

 

From the impugned order dated 7th April 2017, we find that the Adjudicating Authority relied on the decision of the Punjab &

Haryana High Court in “Max India Limited vs Unicoat Tapes (P) CP No. 99 of 1994 decided on 4.7.1997” to find out the meaning of ‘dispute’, though we find specific definition of ‘dispute’ has been defined under subSection (6) of Section 5 of the I&B Code.

 

The question as to what does ‘dispute’ and ‘existence of dispute’ means for the purpose of maintaining a petition for Corporate Insolvency Resolution Process under Section 9 of I&B Code was considered by this Appellate Tribunal in “Kirusa Software Private Ltd. v. Mobilox Innovations Private Limited

 

The definition of “dispute” is “inclusive” and not “exhaustive”.

 

The same has to be given wide meaning provided it is relatable to the existence of the amount of the debt, quality of good or service or breach of a representation or warranty. 18. Once the term “dispute” is given its natural and ordinary meaning, upon reading of the Code as a whole, the width of “dispute” should cover all disputes on debt, default etc. and not be limited to only two ways of disputing a demand made by the operational creditor, i.e. either by showing a record of pending suit or by showing a record of a pending arbitration

 

The intent of the Legislature, as evident from the definition of the term “dispute”, is that it wanted the same to be illustrative (and not exhaustive)

 

Admittedly in Section 5(6) of the ‘I & B Code’, the Legislature

used the words ‘dispute includes a suit or arbitration proceedings’. If this is harmoniously read with Section 8(2) of the Code’, where words used are ‘existence of a dispute, if any, and record of the pendency of the suit or arbitration proceedings,’ the result is disputes, if any, applies to all kinds of disputes, in relation to debt and default.

 

The expression used in Section 8(2) of the Code ‘existence of a dispute, if any,’ is disjunctive from the expression ‘record of the pendency of the suit or arbitration proceedings’. Otherwise, the words ‘dispute, if any’, in Section 8(2) would become surplus usage.

 

It is a fundamental principle of law that multiplicity of proceedings is required to be avoided. Therefore, if disputes under sub-section

(2)(a) of Section 8 read with sub-section (6) of Section 5 of the Code’ are confined to a dispute in a pending suit and arbitration in relation to the three classes under sub-section (6) of Section 5 of the Code’, it would violate the definition of operational debt under Section 5(21) of the Code’ and would become inconsistent thereto, and would bar Operational Creditor from invoking Sections 8 and 9 of the Code.

 

27. Section 5(6) read with Section 8(2)(a) also cannot be confined to pending arbitration or a civil suit. It must include disputes pending before every judicial authority including mediation, conciliation etc. as long there are disputes as to existence of debt or default etc., it would satisfy Section 8(2) of the Code’.

 

“In the present case, we find that the Appellants/ Corporate Debtor in both the cases have already raised dispute relating to quality of goods which culminated into pendency of Company Petition before the Punjab & Haryana High Court, no matter whether it was withdrawn, we hold that the dispute as raised by the Appellants/Corporate Debtor fall within the ambit of expression “dispute, if any” as defined under sub-section (6) of Section 6 of the I&B Code and also within he ambit of expression ‘existence of a dispute, if any” as mentioned under sub-Section (2) of Section 8 of I&B Code. The aforesaid fact has also been admitted by both the Respondents. AA order set aside. AA asked to close proceedings. Both appeals

allowed.