KAY BOUVET ENGINEERING LTD. versus OVERSEAS INFRASTRUCTURE ALLIANCE (INDIA) PRIVATE LIMITED

Citation: [2021] 8 S.C.R. 109 · Decided: 10-08-2021 · Supreme Court of India · Bench: R.F. NARIMAN · Disposal: Appeal(s) allowed

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Judgment (excerpt)

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KAY BOUVET ENGINEERING LTD.
v.
OVERSEAS INFRASTRUCTURE ALLIANCE (INDIA)
PRIVATE LIMITED
(Civil Appeal No. 1137 of 2019)
AUGUST 10, 2021
[R. F. NARIMAN and B. R. GAVAI, JJ.]
Insolvency and Bankruptcy Code, 2016: ss. 8 and 9 –
Corporate Insolvency Resolution Process – Application for initiation
of CIRP by operational creditor – Maintainability of – Held: When
a dispute truly exists in fact and is not spurious, hypothetical or
illusory; and if a notice has been received by “Operational Creditor”,
the adjudicating authority rejects the application for initiation of
CIRP – It is required that the notice by the “Corporate Debtor”
must bring to the notice of “Operational Creditor” the existence of
a dispute or the fact that a suit or arbitration proceedings relating
to a dispute is pending between the parties – At this stage the
adjudicating authority is to see, 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 – However, the court is not required to go
into the merits of the case or be satisfied as to whether the defence
is likely to succeed or not – On facts, application u/s. 9 filed by
respondents, claiming to be Operational Creditor – NCLT rightly
rejected the application filed by respondents seeking initiation of
CIRP against the appellants after finding that there existed a dispute
between the appellant and the respondents and as such, an order
u/s. 9 would not have been passed – NCLAT patently misinterpreted
the factual as well as legal position and erred in reversing the order
of NCLT and directing admission of petition u/s. 9 of the Code –
Thus, the order passed by NCLAT is quashed and set aside.
Allowing the appeal, the Court
HELD: 1.1 Perusal of the ss. 8 and 9 of the Insolvency and
Bankruptcy Code, 2016 would reveal that an “Operational
Creditor”, on the occurrence of default, is required to deliver a
“Demand Notice” of unpaid “Operational Debt” or a copy of
[2021] 8 S.C.R. 109
109
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SUPREME COURT REPORTS
[2021] 8 S.C.R.
invoice, demanding payment of amount involved in the default to
the “Corporate Debtor” in such form and manner as may be
prescribed. Within 10 days of the receipt of such “Demand Notice”
or copy of invoice, the “Corporate Debtor” is required to either
bring to the notice of the “Operational Creditor” “existence of a
dispute” or to make the payment of unpaid “Operational Debt”
in the manner as may be prescribed. Thereafter, as per the
provisions of Section 9 of the IBC, after the expiry of the period
of 10 days from the date of delivery of notice or invoice demanding
payment under sub-section (1) of Section 8 and if the “Operational
Creditor” does not receive payment from the “Corporate Debtor”
or notice of the dispute under sub-section (2) of Section 8 of the
IBC, the “Operational Creditor” is entitled to file an application
before the adjudicating authority for initiating the Corporate
Insolvency Resolution Process. [Para 13][120-B-E]
1.2 It is clear that once the “Operational Creditor” has
filed an application which is otherwise complete, the adjudicating
authority has to reject the application under Section 9(5)(ii)(d) of
IBC, if a notice has been received by “Operational Creditor” or
if there is a record of dispute in the information utility. What is
required is that the notice by the “Corporate Debtor” must bring
to the notice of “Operational Creditor” the existence of a dispute
or the fact that a suit or arbitration proceedings relating to a
dispute is pending between the parties. All that the adjudicating
authority is required 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 reject a
spurious defence which is a mere bluster. However, at this stage,
the Court is not required to be satisfied as to whether the defence
is likely to succeed or not. The Court also cannot go into the
merits of the dispute except to the extent indicated hereinabove.
So long as a dispute truly exists in fact and is not spurious,
hypothetical or illusory, the adjudicating authority has no
other option but to reject the application. [Para 17][126-E-H;
127-A-B]
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1.3 It can be seen that the claim of the respondent Company
is that in the reply filed t

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