Summary
The Court restored rejection of an operational creditor’s insolvency application because a genuine dispute existed over refund of a project advance. Contemporaneous agreements and correspondence supported the corporate debtor’s case that the money had been routed through the claimant on behalf of the project owner and was adjustable under a replacement contract. Admission of receipt did not eliminate that dispute. The Court applied Mobilox’s limited inquiry, left operational-debt and creditor-status questions undecided, and set aside NCLAT’s direction to admit the application.
Issues
- Whether the documentary record disclosed a genuine dispute barring admission under Section 9.
- Whether the insolvency forum should decide the ultimate merits of the disputed refund liability.
Provisions considered
- Sections 8(2)(a), 9(1) and 9(5)(ii)(d), Insolvency and Bankruptcy Code, 2016A genuine, evidenced dispute notified in response to the demand required rejection of the operational creditor’s application, without adjudicating ultimate liability. (¶¶ 12, 13, 14, 15, 16, 17, 18, 21, 22, 23, 31, 32, 33)
Held
- The adjudicating authority must examine whether there is a plausible contention requiring investigation, rather than a patently feeble argument or unsupported assertion. It must exclude spurious defences but need not decide whether a genuine defence will ultimately succeed. (¶¶ 14, 15, 16, 17)
- Kay Bouvet’s demand-notice reply disputed refund liability and explained that the advance was received on Mashkour’s behalf and adjusted under the replacement contract. The tripartite terms, contemporaneous payment correspondence and diplomatic communication provided substantial documentary support. (¶¶ 19, 20, 21, 22, 23, 24, 25, 26, 27, 28, 29, 30, 31)
- The dispute was neither illusory nor unsupported. NCLT correctly rejected the Section 9 application, and NCLAT erred in directing admission after a limited opportunity to settle. (¶¶ 31, 32, 33)
- Whether the claimed refund was an operational debt and whether Overseas was an operational creditor were expressly left undecided because the existence of dispute disposed of the appeal. (¶¶ 12, 18)
Result
Appeal allowed; NCLAT order set aside and NCLT’s rejection of the Section 9 application maintained; pending applications disposed of.