NCLT Hyderabad Rejects Application U/S 9 Of IBC Filed By M/s Isthara Parks Private Ltd On Grounds Of Pre-Existing Dispute

The NCLT Hyderabad Bench of Shri Rajeev Bhardwaj and Shri Sanjay Puri has held that once a prima facie case of a genuine pre-existing dispute is made out prior to issuance of demand notice under Section 8 of the IBC, the Adjudicating Authority must reject an application filed by Operational Creditor under Section 9 of the Code. Observations: The tribunal at the outset referred to the Supreme Court judgment in Mobilox Innovations Private Limited vs. Kirusa Software Private Limited wherein it was held that all that the adjudicating authority is supposed to determine at this stage is whether there is a plausible contention with respect to pre-existing dispute requiring further investigation. It also referred to the NCLAT judgment in 'Aalborg CSP A/S versus Solar Atria Cleantech Private Limited ' where it was held that it is duty of the Adjudicating Authority to see whether there is 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 While applying ratio to the facts of the present case, the tribunal noted that repeated complaints were made by the Respondent, from the commencement of the contracts until their termination on 23.05.2023.The complaints included poor housekeeping services, insufficient manpower provided by Petitioner, inadequate and sub-standard food quality. It further observed that “although the ledger account reflects a liability and the Respondent has expressed readiness to settle accounts, this does not negate the existence of genuine disputes regarding service quality and other related issues.” The tribunal concluded that “these complaints, substantiated by documentary evidence, demonstrate the existence of a genuine pre-existing dispute.