NCLT JUDGEMENT ON SECTION 5(6), 6, 8, 8(2), 8(2)(A), 8(2) OF THE INSOLVENCY AND BANKRUPTCY CODE, 2016


Worldwide Metals Pvt. Ltd Vs. SMW Metal Private Limited, (2020) 06 NCLT CK 0030

NCLT dismissed the petition filed by the petitioner, under Section 9 of the Insolvency and Bankruptcy Code, 2016 (for brevity 'code') read with Rules 6 of the Insolvency and Bankruptcy (Application to Adjudicating Authority), 2016 (for brevity 'the Rules') with a prayer to initiate the Corporate Insolvency process against the Corporate Debtor. While dismissing the petition NCLT held that At this juncture, we would also like to refer the decision of Hon'ble Supreme Court in the case of Mobilox Innovations Private Limited Vs. Kirusa Software Private Limited (2017) 09 SC CK 0075 dated 21.09.2017 in which Hon'ble Supreme Court held that "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 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 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 examined 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."

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