[Answer 2]

The definition of dispute has been narrowly defined in the IBC making it susceptible to be
misused. The issue of existence of dispute is elemental because this is widely utilised as a
legal defence by the corporate debtor in order to prevent itself from getting involved in the
insolvency or liquidation proceedings. As per the code, the dispute incorporates suits as well
as arbitration proceedings w.r.t the presence of the debt amount, quality of goods and services
or breach of representation or warranty. Now when it comes to the existence of dispute, there
are two way in which this phrase has been interpreted by the tribunals. Some went to opt for a
strict interpretation while the others interpret it liberally. The case wherein the strict
interpretation was taken up by the tribunal is Essar Projects India Ltd. v. MCL Global Steel
Pvt. Ltd. In this case the tribunal stated that the existence of dispute signifies that a suit or an
arbitral proceeding has been instituted before the court of law or arbitral tribunal prior to the
demand notice is handed over. furthermore, the tribunal ruled that the contentions made by
the corporate debtor in the reply subsequent to the demand notice would amount to the
existence of a dispute. Furthermore, the Delhi tribunal took a liberal approach while
interpreting the existcne of the dispute. In the case of One coat Plaster v. Ambience Pvt. Ltd.,
the tribunal considered and allowed the dispute put forth by the corporate debtor in the form
of a reply to the demand notice. Furthermore, the tribunal stated the existence of a valid
dispute needs to be dependent from the facts and circumstances of the case, here the bench
had observed that the operational creditor was unable to put forth any evidence to prove that
the acceptance was made vis a vis the finished work from the part of the corporate debtor or
any other certificate to show that the task done by it was finished in all its entirety. In the case
of Chetan Sharma v. Jai Lakshmi Solvents Pvt. Ltd and Ors., the brief facts of the case are
that the corporate debtor used to place order for buying the crude rice bran oil from the
operational debtor quite often. But, no delivery of the same has happened, yet, the operational
creditor has sent many invoices to the corporate debtor. It was found that the managing
director of the appellant who held shares in the same, had deceptively placed order. When
this came to light, an MOU was subsequently signed between the appellant company and the
shareholder mentioning that all the amount will be taken back from the shareholders and not
the appellant. The bench in this case had stated that a unilateral transfer of liability wouldn’t
amount to a dispute under the ambit of section 5(6) of the IBC. The most elemental condition
of section 5(6) is that a dispute should happen between the corporate debtor and operational
creditor and a dispute arising between the shareholders of the appellant company wouldn’t
amount to a dispute w.r.t the operational creditors. Furthermore, the bench stated that prima
facie, the agreement happened between the shareholder and the appellant company
inexorably amounts to a unilateral transfer of liability and doesn’t include the operational
creditor per se. Hence, cannot be said to be a dispute under the ambit of Section 5(6) of IBC.
In Raj Duplex Pvt. Ltd. v. Sardhana Papers, the bench explicitly stated that for a dispute to
exist the conditionalities mentioned in section 5(6) of the code has to be mandatorily satisfied
and it is the responsibility of the company to bring before the court the evidence signifying
the substantial question of the dispute. Finally, the court has determined the scope of dispute
in the case of Mobilox Innovations Pvt. ltd. v. Kirusa Software Pvt. Ltd. It had elucidated on
the scope of the definition of dispute, the existence of the same and degree to which the
adjudicating authority can ascertain the disputes arising in Section 8 and Section 9 of the
IBC. The brief factual matrix of the case is that Kirusa Software instituted a petition in the
capacity of the operational creditor under the aegis of section 9 of the code. The claims made
in the petition were argued against Kirusa and it was contended that confidential information
about the clients and other related information was published on a public platform by Kirusa.
It was further contended that this disclosure of confidential information amounted to breach
of NDA singed among the parties. This breach result in holding back of the payments due to
Kirusa. The matter was taken up to the adjudicating authority wherein the application of the
insolvency u/s 95iid was set aside. This decision was appealed before NCLAT. The NCLAT
was of the opinion that on the prior consideration of notice w.r.t the dispute, there is nothing
concrete to establish that a genuine dispute exists between the parties and claims were
rendered to be vague and made with the purpose of avoiding the liability.
However, when the ruling was appealed before the Supreme Court, it was of the opinion that
there is an establishment of a valid dispute between the parties. Upon the analysis of the
Insolvency and Bankruptcy Bill 2015, it observed that the phrase the existence of a dispute
has been used instead of "existence of a dispute, if any and record of pendency of the suit or
arbitration proceeding, mentioned in the current code. Furthermore, it has also observed that
the word ‘includes has been replaced by the word means in the definition of dispute. Section
5[4] in the bill has connoted a dispute to be a bonafide suit or arbitration proceedings,
however the word bonafide has been excluded from section 5[6]. The court further went on to
say that it is possible that a dispute comes to existence some days prior to the initiation of the
insolvency process, rendering it unable to go to the court or an arbitral tribunal. Also, as per
the limitation provisions, if the disputes are not taken up to the court or arbitral proceedings
for more than three years such individual would not be under the ambit of section 8[2]
inexorably leading up to the initiation of bankruptcy proceedings against them. This is
apparently not the intention of the legislature. The court said that the definition of dispute
under the aegis of the Code is widened and is not limited to the suit or arbitral proceeding
which are pending. Dispute includes the agreements and communication traded between the
parties signifying a dispute w.r.t the payment of the debt as well. The strict interpretation
limiting the scope of dispute to the pending suits or arbitral proceedings would render the
institution of irrelevant suit and proceedings by the corporate debtor in the forethought that
CIRP would be instituted against them by the operational creditor.
https://www.mondaq.com/india/insolvencybankruptcy/590894/insolvency-and-bankruptcy-
code-meaning-of-dispute-in-existence
https://www.lexology.com/library/detail.aspx?g=1d560a33-ba70-4e6f-9b9b-994341f71053
https://www.mondaq.com/india/insolvencybankruptcy/631534/supreme-court-interprets-the-
definition-of-dispute-under-the-insolvency-and-bankruptcy-code-2016
http://www.legalserviceindia.com/legal/article-348-dispute-an-ibc-perspective.html-- IS
VALE MEIN BOHOT CASES H KUCH AUR DAAL DENA

{PLEASE MAKE SURE KI CASES EK JESE NA HO EXCEPT MOBILOX!!!! VRNA

There are two ways of institution of an application-

The first way is the issuance of demand notice to the Corporate debtor post the happening of
any default. it is done with the purpose of asking back of the payment to the tune of default.
in Anil Syal v. Sanjeev Kapoor, the tribunal stated that the demand notice issued by the
operational creditors w.r.t the amount due of the sister entity wouldn’t be regarded a notice
under the ambit of section 8. Then after this comes the action taken by the corporate debtor as
per which within 10 days of the issuance of demand notice, the corporate debtor is duty
bound to notify the operational creditor about the existence of dispute and the payment of the
amount due as operational debt. In Ahluwalia Contract (India) Ltd. v. Raheja Developers
Limited, the tribunal has held that the suit or arbitral proceeding should exits prior to the
receipt of demand notice as per section 8.

The next step comes in the institution of the application for commencing the CIRP u/s 9. this
is done post the exhaustion of the period of 10 days from the date of handing over of the
notice asking for payment. If the amount due from the default is not paid to the operational
creditor, it can institute an application for commencing CIRP. The court in Sunrise 14 A/S
Denmark v. Ravi Mahajan stated that the petition instituted in this regard by an advocate is
maintainable. In Palogix Infrastructute Pvt. ltd. v. ICICI Bank, it was stated that the
individual having the power of attorney is not allowed to file an application u/s 9 of the code.
The operational creditor shall attach with the application, the copy of the demand notice, or
an affidavit stating that the dispute notice w.r.t unpaid operational debt has not been handed
over by the corporate debt, along with his copies of certificate about the maintenance of the
OCs accounts signifying the non-payment of the debt or any other proof stating that the debt
is not paid by the corporate debtor. S.9 authorises the operational creditor to appoint a
resolution professional on an interim basis. After all these conditionalities have been fulfilled,
the application is presented before the adjudicating authority which is duty bound to admit or
reject the application within 14 days from the date of its institution and convey the same to
the operational debtor stating the grounds and reasons for the rejection. The adjudicating
authority is duty bound to to apprise the applicant about the errors and defects in the
application and direct the applicant rectify the same within 7 days from the date of notice
given by it. In the case of Indo Alusys Industries Limited vs. SMW Metal Private Limited, the
tribunal while taking about the nature of the proceedings under section 9 stated that it is
summary in nature. In State Bank of India vs Sical Logistics Ltd, it was stated that NCLAT
doesn’t have the jurisdiction to decide the whether the application under section 9 is time
barred, it is with the adjudicating authority.

https://ibclaw.in/procedure-of-filing-application-by-operational-creditor-before-nclt-under-
section-8-9-of-the-ibc/. bhai cases same mentions na krna!!!

The utitlity of an additional examination of the pre-existing suit mandatory for the application
of section 9 can possibly for the purpose to check whether the claims made are genuine and
doiesnt allowe the corporate debtor to file the dispute which are simply vexatious or frivolus
and should’ve substance.