*IBC, 2016 : Order passed by NCLT Quashed and Set Aside*
Introduction
In a recent decision, the appeal filed against Order of NCLT has been allowed and Order of NCLT was set aside.
In this case, an application under S.9 of IBC, 2016 was filed which was allowed by NCLT. Suspended Director filed appeal and Order of NCLT was found to be unsustainable.
Scope of S.9 of IBC, 2016
In the present case, the reliance was placed on Section 9(5)(ii)(d) of IBC, which refers to two grounds for rejection of Section 9 application, they are – (i) notice of dispute has been received by the Operational Creditor; or (ii) there is a record of dispute in the information utility. The second ground, i.e. record of dispute in the information utility was examined. In Section 9 application, the Operational Creditor has brought on record, the record of default with the information utility.
It was held that proceedings under S.9 of IBC are summary proceedings, which an Operational Creditor can initiate on there being existence of debt and default having been committed by the CD. Section 9, subsection (5)(ii) requires the Adjudicating Authority to reject the application, if any of the circumstances from (a) to (e) are found. When there is record of dispute in the Information Utility, the Adjudicating Authority is obliged to reject the application. The legislative scheme of Section 9 is not for resolving any dispute between the Operational Creditor and the CD and when the record of Information Utility contains mention of dispute, the Adjudicating Authority is obliged to reject the application.
Role of Record of Dispute in Insolvency Proceedings
There being Record of Dispute in the Information Utility, the Adjudicating Authority was obliged to reject Section 9 application as required by Section 9, sub-section (5)(ii)(d) and the order of admission of Section 9 application, cannot be sustained.
Case reference is Bhuvan Kumar Gupta v. Maverick Developers and Colonisers Pvt. Ltd [2025] GCtR 1855 (NCLAT).
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