Cowgule Construction Chemicals (P) Ltd. v. Pride Hotel (P) Ltd.

INSOLVENCY AND BANKRUPTCY CODE, 2016,

--Initiation of corporate insolvency resolution process by operational creditor--Existence of dispute prior to issuance of demand notice Whether CIRP application maintainable----Where corporate debtor raised the dispute of quality of the work done by operational creditor much prior to issuance of demand notice by operational creditor, application to initiate CIRP against corporate debtor was to be rejected. --Operational creditor rendered its services towards work orders placed by corporate debtor and raised invoices, however, the corporate debtor neglected in making the payment. Despite number of reminders and requests, the corporate debtor did not make the payment, therefore, the operational creditor issued demand notice to corporate debtor. In reply to said notice, corporate debtor submitted that the work carried out by the operational creditor was not according to the work standards, therefore, the dispute existed between the parties. In spite of dispute, operational creditor filed application to initiate CIRP against corporate debtor. Held: It was observed that the corporate debtor had not merely denied his liability, however, it was brought to the notice of the operational creditor that the work carried out by the creditor was not according to the work standards and because of the same the debtor had to do that work by another expert and consequently the debtor had incurred huge losses. Further, it was not the first time when the debtor had questioned about the quality of work of the operational creditor but via e-mail, the debtor had raised the issue of quality of the work done by the operational creditor. There was existence of dispute between parties regarding quality of work done much prior to issuance of demand notice, therefore, application under section 9 was rejected.