REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 21824 OF 2017

K. KISHAN             …APPELLANT VERSUS

M/S VIJAY NIRMAN COMPANY PVT. LTD. ...RESPONDENT

WITH

CIVIL APPEAL NO. 21825 OF 2017

J U D G M E N T  

R.F. Nariman, J.

1. The present  appeals  raise an important  question as to

whether  the  Insolvency  and  Bankruptcy  Code,  2016

(hereinafter referred to as “the Code”) can be invoked in respect

of  an  operational  debt  where  an  Arbitral  Award  has  been

passed against the operational debtor, which has not yet been

finally adjudicated upon.

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2. The brief facts necessary to appreciate the controversy at

hand are as follows:-

i) In the present case, M/s Vijay Nirman Company Pvt. Ltd.

(the Respondent) entered into a sub-Contract Agreement with

one M/s Ksheerabad Constructions Pvt. Ltd. (for short ‘KCPL’)

on  01.02.2008,  to  undertake  50%  of  Section  2  work  of

‘Construction and widening of the existing two lane highway to

four lanes on NH 67 at KM 190000 to KM 218215 admeasuring

a total of 28.215 KM for and on behalf of KCPL.’   

ii) Apart from this Agreement, a separate agreement of the

same date was entered into between the said KPCL and one

M/s SDM Projects  Private Limited,  Bangalore,  as a result  of

which, a tripartite Memorandum of Understanding was entered

into on 09.05.2008 between KCPL, M/s SDM Projects Pvt. Ltd.

and the Respondent.

iii) During the course of the project, disputes and differences

arose between the parties and the same were referred to an

Arbitral Tribunal, which delivered its Award on 21.01.2017.  One

of the claims that was allowed by the said Award was in favour

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of the respondent for a sum of Rs.1,71,98,302/- which arises

out of certain interim payment certificates.  Another claim that

was allowed related to higher rates of payment in which a sum

of  Rs.13,56,98,624/-  was awarded.   Three  cross  claims that

were made by the Respondent were rejected.   

iv) It is pertinent to note that, at this stage, a notice dated

06.02.2017 was sent by the Respondent to KCPL to pay an

amount  of  Rs.  1,79,00,166/-.  This notice was stated to be a

notice under Section 8 of the Code. Within 10 days, by a letter

dated 16.02.2017, KCPL disputed the invoice that was referred

to in the said notice, stating that the said amount was, in fact,

the  subject-matter  of  an  arbitration  proceeding,  and  as  per

KCPL’s  accounts,  the  Respondent  was  liable  to  pay  larger

amounts to them.   

v) It  may  be  noted  that  after  the  notice  and  reply,  on

20.04.2017, a Section 34 petition was filed by KCPL under the

Arbitration and Conciliation Act, 1996 (hereinafter referred to as

“the Act”) challenging the aforesaid Award.  Needless to add,

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this petition was filed within the period of limitation set down in

Section 34(3) of the Act.   

vi) It is only thereafter that a petition was filed under Section

9 of the Code, on 14.07.2017.  In the gist of the case presented

to the National Company Law Tribunal (‘NCLT’), it was clearly

stated as follows:-

“The above amount was included in the Statement of Claims filed before the Arbitral Tribunal duly constituted on 17.8.2014 along with other  claims.   The Tribunal gave  its  award  on  21.1.2017 and upheld  the  above claim of  VNCPL and  awarded  the  above amount  in favour  of  VNCPL  and  against  KCPL.  (Award  copy enclosed)

Thus, the above amount has become an 'Operational Debt' to be paid by the corporate debtor M/s KCPL as defined u/Sec. 3(11) of the I&B Code 2016.

A notice in Form-3 U/Sec. 8(1) of the I&B Code 2016 has already been served on the Corporate Debtor, M/s KCPL and a reply received from KCPL is also enclosed herewith for ready reference.”

In the Counter Affidavit before the NCLT, it was stated:

“10. I respectfully submit that the case of the petitioner in short is that since an award has been passed against the  respondent  here  in  an  arbitration  proceeding, though  a  petition  U/Sec  34  of  the  Arbitration  and Conciliation  Act,  has  been  filed  by  the  respondent

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before the competent court challenging the award the present application is maintainable U/Sec. 9 of the code though  the  respondent  had  raised  a  dispute  in  its replies dated 06-02-2017 & 05-06-2017 to the notice issued U/Sec.8(2) of the code by the applicant.

11. I  respectfully  submit  that  a  dispute  had  been raised  by  the  respondent  company  even  before  the present  application  has  been  filed,  in  the  arbitration proceedings by way of a counter claim and presently the same is sub judice before the Hon'ble Commercial Court cum XXIV  Additional  Chief  Judge,  City  Civil  Court  at Hyderabad in petition filed U/Sec. 34 of the Act.  Copy of the section 34 application filed and pending before the Hon'ble Court is enclosed herewith as Annexure R-6.”

vii) The NCLT, by its order dated 29.08.2017, referred to the

aforestated facts, and also referred to the fact that the Award

which was challenged under Section 34 specifically stated that

learned  counsel  for  the  first  Respondent  (i.e.  the  corporate

debtor) was fair enough to admit that the claimant is entitled to

the said sum of Rs.1,71,98,302/-.  According to the NCLT, the

fact that a Section 34 petition was pending was irrelevant for

the reason that the claim stood admitted, and there was no stay

of  the  Award.   For  these  reasons,  therefore,  the  Section  9

petition was admitted.

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viii) An  appeal  filed  to  the  Appellate  Tribunal  met  with  the

same  fate,  as  according  to  the  Appellate  Tribunal,  the  non-

obstante clause contained in Section 238 of the Code would

override  the  Arbitration  Act.  Also,  according  to  the  Appellate

Tribunal, since Form V of Part 5 of the Insolvency & Bankruptcy

(Application  to  Adjudicating  Authority)  Rules,  2016  requires

particulars of an order of an arbitral panel adjudicating on the

default,  this  would  have  to  be  treated  as  “a  record  of  an

operational debt”, as a result of which the petition would have to

be admitted, as was correctly done by the NCLT.  The appeal

was, accordingly, dismissed.

3) Mr. Gourab Banerji, learned Senior Advocate, appearing

on behalf of the appellant has relied upon certain observations

made in our judgment in Mobilox Innovations Private Limited

vs.  Kirusa Software Private Limited, (2018) 1 SCC 353 and

argued  that  the  object  of  the  Code  is  not  to  replace  debt

adjudication  and  enforcement  under  other  Acts  including  the

Arbitration Act, 1996.  He has relied, in particular, on para 51

under  which,  according  to  him,  the  moment  there  is  a  real

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dispute between the parties, which need not be a “bona fide

dispute”  which  is  likely  to  succeed  in  point  of  law,  the

Insolvency  Code  cannot  be  applied.   In  the  present  case,

according  to  him,  the  very  fact  that  a  Section 34 petition  is

pending  is  reflective  of  a  real  dispute  between  the  parties,

which  was  pre-existing,  and  which  culminated  in  an  Arbitral

Award which has yet to attain finality.  Also, according to the

learned Senior Advocate, the cross-claims that were rejected by

the learned Arbitral Tribunal far exceeded the amounts awarded

against his client, and if any one of them were to be held to be

wrongly  dismissed,  in  particular,  counter  claim  No.3  of  Rs.

19,88,20,475/-, it is obvious that his client would not owe any

sum of money to the operational creditor.  He also relied upon

certain judgments, which we will discuss later.  To  further

buttress his submissions, he argued that all that is necessary is

that there be a dispute in some form which would include cross

claims made by the corporate debtor  against  the operational

creditor.  According to him, the Appellate Tribunal was wholly in

error in applying Section 238 of the Code as, according to Mr.

Banerji, there is nothing inconsistent between the adjudication 7

and  enforcement  process  under  the  Arbitration  Act  and  the

application of Sections 8 & 9 of the Code.  In fact, according to

the learned Senior Advocate, the fact of pending proceedings,

whether  they  be  proceedings  culminating  in  an  Award,  or

challenge  proceedings  thereafter,  would,  in  fact,  show  that

there is a dispute insofar as an operational debt that is stated to

be owed, and that therefore, the Arbitration Act can be relied

upon for this purpose, there being nothing inconsistent between

it and the Code.

4) Dr. P.V. Amarnadha Prasad, learned Advocate, appearing

on behalf of the respondent has argued in reply that according

to  the  law  in  the  United  Kingdom,  and  Practice  Directions

thereunder,  an  insolvency  process  does  not  get  stultified

because  an  application  to  set  aside  the  judgment,  order  or

decision is pending in an appeal or otherwise.  He also referred

to  the  law in  Singapore,  and  relied upon a judgment  of  the

Singapore High Court  to the effect  that  once it  is  found that

there  is  a  primary  adjudication  between  the  parties  which

indicates the existence of a debt, any further dispute which may

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be pending in appeal or otherwise over the debt could not be

said to be bona fide disputed by the debtor.  According to him,

the  Appellate  Tribunal  was  absolutely  correct  in  applying

Section  238  of  the  Code,  as  there  would  be  a  direct

inconsistency  between  the  application  of  the  Code  and  a

Section  34  proceeding  which  was  said  to  be  pending,  and

which, according to him, was not relevant in view of the law that

he has cited.

5) Having  heard  learned  counsel  for  both  parties,  it  is

important to first advert to Section 9(5) of the Code which states

as follows:-

“9(5) The  Adjudicating  Authority  shall,  within fourteen days of the receipt of the application under sub-section (2), by an order-

(i)  admit  the  application  and  communicate  such decision  to  the  operational  creditor  and  the corporate debtor if,-

(a)the application made under sub-section (2) is complete;

(b)  there  is  no  repayment  of  the  unpaid operational debt;

(c)  the invoice or  notice  for  payment  to  the corporate  debtor  has  been  delivered  by  the operational creditor;

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(d) no notice of dispute has been received by the operational creditor or there is no record of dispute in the information utility; and

(e) there is no disciplinary proceeding pending against any resolution professional proposed under sub-section (4), if any.

(ii)  reject  the  application  and  communicate  such decision  to  the  operational  creditor  and  the corporate debtor, if-

(a) the application made under sub-section (2) is incomplete;

(b) there has been repayment of the unpaid operational debt;

(c) the creditor has not delivered the invoice or notice for payment to the corporate debtor;

(d) notice of dispute has been received by the operational  creditor  or  there  is  a  record  of dispute in the information utility; or

(e)  any  disciplinary  proceeding  is  pending against any proposed resolution professional:

Provided  that  Adjudicating  Authority,  shall  before rejecting  an  application  under  sub-clause  (a)  of clause (ii) give a notice to the applicant to rectify the defect  in  his  application within  seven days of  the date of receipt of such notice from the adjudicating Authority.”

A reading of Section 9(5)(ii)(d) would show that an application

under Section 8 must be rejected if notice of a dispute has been

received by the operational creditor.  In the present case, it is

clear on facts that the entire basis for the notice under Section

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8 of the Code is the fact that an Arbitral Award was passed on

21.07.2017 against the Appellant.  As has been pointed out by

us, this clearly appears from the gist of the case that was filed

along with the insolvency petition.  The fact that the reply of

16.02.2017 to the notice given under Section 8 was within 10

days,  and raised the existence of  a dispute,  also cannot  be

doubted.

6) However,  learned  counsel  appearing  on  behalf  of  the

Respondent  strongly  relied  on  the  fact  that  this  is  not  an

ordinary case inasmuch as the amount of Rs.1.71 Crores which

was awarded was admitted by Mr. Banerji’s client in the arbitral

proceedings to be a debt due, and that this being so, there can

be no dispute regarding the same.  We are afraid that we are

unable to agree.  As was correctly pointed out by Mr. Banerji,

counter claims for amounts far exceeding this were rejected by

the learned Arbitral Tribunal, which rejection is also the subject-

matter of challenge in a petition under Section 34 of the Act.  It

is  important  to  note  that  unlike  counter  claim Nos.  1 and 2,

which were rejected by the Arbitral Tribunal for lack of evidence,

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counter claim No.3 which amounts to         Rs.19,88,20,475/-

was  rejected  on  the  basis  of  a  price  adjustment  clause  on

merits.   Therefore,  it  is  difficult  to  say  at  this  stage  of  the

proceedings, that no dispute would exist between the parties.

7) Our  recent  judgment  in  Mobilox  Innovations  (supra)

throws considerable light on the issue at hand.  While referring

to the legislative history of the Code, this Court referred to the

Legislative  Guide  on  Insolvency  Law  of  the  United  Nations

Commission on International Trade Law.  One of the things the

Legislative Guide spoke about was whether the debt is subject

to  a  legitimate  dispute  or  set-off,  in  an  amount  equal  to  or

greater than the amount of the debt.  Another thing spoken of

was that improper use of the insolvency process would occur in

cases  where  a  creditor  uses  insolvency  as  an  inappropriate

substitute for debt enforcement procedures, even though they

may not be well developed. (see para 13 of the judgment)

8) The  Notes  on  Clauses  annexed  to  the  Bill  of  the

Insolvency Code were also referred to by this Court in para 27

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of the judgment.   The important  sentence in these Notes on

Clauses needs to be reproduced, which is done herein below:-

“This ensures that operational creditors, whose debt claims are usually smaller, are not able to put the corporate  debtor  into  the  insolvency  resolution process  prematurely  or  initiate  the  process  for extraneous considerations.”

9) This  Court  also  noticed  that  the  original  Bill  which

ultimately  became  the  Code  had  the  expression  “bona  fide

dispute” contained in an inclusive definition.  It is significant to

note that  by the time the Code was enacted the expression

“bona fide” was dropped.  (See para 32 of the judgment)

10) After referring to Section 8, the judgment went on to hold

that what is important is that the existence of the dispute and/or

a suit or arbitration proceeding must be pre-existing i.e. it must

exist before the receipt of the demand notice or invoice, as the

case may be.   

11) The Adjudicating Authority, therefore, when examining an

application under Section 9 of the Act, will have to determine

the following:-

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(i) Whether  there  is  an  “operational  debt”  as defined exceeding Rs 1 lakh? (See Section 4 of the Act)

(ii) Whether the documentary evidence furnished with the application shows that the aforesaid debt is due and payable and has not yet been paid?  

and

(iii) Whether  there  is  existence  of  a  dispute between the parties or the record of the pendency of a suit  or  arbitration proceeding filed before the receipt  of  the  demand  notice  of  the  unpaid operational debt in relation to such dispute?

If any one of the aforesaid conditions is lacking, the application

would  have  to  be  rejected.   Apart  from  the  above,  the

adjudicating authority must follow the mandate of Section 9, as

outlined above, and in particular the mandate of Section 9(5)

of the Act, and admit or reject the application, as the case may

be, depending upon the factors mentioned in Section 9(5) of

the Act. (Para 34).

12) In para 38, this Court cautioned:

“We have also seen that one of the objects of the Code  qua  operational  debts  is  to  ensure  that  the amount of such debts, which is usually smaller than that of financial debts, does not enable operational creditors  to  put  the  corporate  debtor  into  the

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insolvency resolution process prematurely or initiate the process for extraneous considerations.  It is for this  reason that  it  is  enough that  a  dispute  exists between the parties.

Finally, the law was summed up as follows:-

“51. It is clear, therefore, that once the operational creditor has filed an application, which is otherwise complete, the adjudicating authority must reject the application  under  Section  9  (5)(2)(d)  if  notice  of dispute  has  been  received  by  the  operational creditor  or  there  is  a  record  of  dispute  in  the information utility.  It is clear that such notice must bring  to  the  notice  of  the  operational  creditor  the “existence”  of  a  dispute  or  the  fact  that  a  suit  or arbitration  proceeding  relating  to  a  dispute  is pending between the parties.  Therefore, all that the adjudicating  authority  is  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 separate  the  grain  from the  chaff  and  to  reject  a spurious defence which is mere bluster. However, in doing so, the Court does not need to be satisfied that the defence is likely to succeed.  The Court does not at  this  stage  examine  the  merits  of  the  dispute except to the extent indicated above.  So long as a dispute  truly  exists  in  fact  and  is  not  spurious, hypothetical or illusory, the adjudicating authority has to reject the application.”

13) Following this judgment, it becomes clear that operational

creditors cannot use the Insolvency Code either prematurely or

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for  extraneous  considerations  or  as  a  substitute  for  debt

enforcement procedures.  The alarming result of an operational

debt contained in an arbitral award for a small amount of say,

two lakhs of rupees, cannot possibly jeopardize an otherwise

solvent  company  worth  several  crores  of  rupees.   Such  a

company  would  be  well  within  its  rights  to  state  that  it  is

challenging the Arbitral Award passed against it, and the mere

factum of challenge would be sufficient to state that it disputes

the Award.  Such a case would clearly come within para 38 of

Mobilox Innovations (supra),  being a case of a pre-existing

ongoing dispute  between  the  parties.   The  Code  cannot  be

used in terrorem to extract this sum of money of Rs. two lakhs

even  though  it  may  not  be  finally  payable  as  adjudication

proceedings in respect thereto are still pending.  We repeat that

the object of the Code, at least insofar as operational creditors

are  concerned,  is  to  put  the  insolvency  process  against  a

corporate  debtor  only  in  clear  cases  where  a  real  dispute

between the parties as to the debt owed does not exist.

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14) Mr. Banerji referred us to certain judgments of the English

and Singapore  Courts.  In  Re A Company -  Victory  House

General Partner Ltd. vs. RGB P & C Ltd. [2018] EWHC 1143

(Ch),  the Chancery Division of  the High Court,  in a situation

where a debt has to be “bona fide” disputed in order to attract

the winding up jurisdiction of the Courts in the UK, made it clear

that  even  in  a  case  where  a  judgment  debt  is  no  longer  a

disputed debt,  as it  has been finally adjudicated upon, yet  if

there  be  a  cross-claim  which  is  being  adjudicated  upon,  or

which may not even have reached the adjudicatory process at

all,  would  be  sufficient  to  stave off  a  winding up order.  The

learned Judge referred to the judgment in Re Bayoil SA [1999]

1 WLR 147 as follows, and concluded:-

“27. This, of course, is not a case of a disputed debt.   There  is  a  judgment  debt  and  it  can  be enforced immediately. However, Mr. Chivers draws attention to Re Bayoil SA [1999] 1 WLR 147, which deals with a case not involving a disputed debt but involving a cross-claim by the company, the subject of the petition or the intended petition, where the amount  of  the  cross-claim  exceeds  the  petition debt.  The  headnote  to  Re  Bayoil recites  the essential  facts.  The petitioner  claimed for  freight. The established law is there is no defence of set-off available in relation to a claim to freight. The claim

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went  to  arbitration  and  the  arbitrators  made  an award  in  favour  of  the  petitioner.  The  petitioner then presented a petition on the basis of the sum determined by the arbitration award.  The company applied for the petition to be dismissed or stayed on the ground that  it  had a genuine and serious counterclaim  in  an  amount  which  exceeded  the petition debt.  It was a matter of detail in that case, which  the  company  put  forward  to  advance  its case,  that  it  had  not  been  able  to  litigate  that counterclaim.   Later  cases  discussing  Re Bayoil make it clear that the ability, or inability, to litigate the  counterclaim  is  not  of  the  essence  of  the principle in this case. So I put that on one side……”

“32. I therefore have to ask whether the nascent cross-claim,  the  claim  in  restitution  which MrChivers  has  explained  to  me,  is  a  bona  fide cross-claim  on  substantial  grounds.   I  have  no doubt it is a bona fide claim.  I have also no doubt it is on substantial grounds.  At the moment it seems to me that it  is a claim that would succeed but I need not go that far……”

“34. Nothing which I have said detracts in any way from the binding character of the judgment which has been made.  It may appear to be a strong thing to say that the employer, having failed to comply with  a  judgment  against  it,  should  nonetheless escape the consequences involved in a winding up, but it seems to me that that is the very thing which was  considered  to  be  appropriate  in  the  Bayoil case and, on the facts of this case, I also consider it  is  a  more  just  result  that  the  alternative contended for by the petitioner.”

15) A recent judgment of the Singapore High Court, contained

in Lim PohYeoh (alias Lim Aster) and TS Ong Construction 18

Pte Ltd. [2016] SGHC 179, was also referred to by Mr. Banerji.

Again, in a situation which demands a far higher threshold that

has to be crossed before the Insolvency Law can be said not to

apply, the Singapore High Court referred to Rule 98(2)(a) of the

Rules made under the Bankruptcy Act.  The said Rule states

that where a debtor  appears to have a valid counter claim or

cross-demand which is equivalent to or exceeds the amount of

debt, the insolvency process will not be put against such debtor.

It also referred to the Supreme Court Practice Directions to the

same effect. (see paras 43 & 45 of the said judgment)

16) We now come to some of the judgments referred to by

learned counsel for the respondent.  It is important to note that

both the Practice Directions referred to in the U.K. judgment

and the Singapore High Court  judgment,  referred to in  LKM

Investment Holdings Pte Ltd. vs.  Cathay Theatres Pte Ltd.

[2000] SGHC 13, are in situations where the debt needs to be

bona fide disputed, which is not the situation under our Code.

For this reason, it is not possible to agree with learned counsel

for the Respondent that a pending proceeding challenging an

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award or decree of a tribunal or Court would not make the debt

contained therein a debt that is disputed.  

17) The Australian High Court judgment also relied upon by

the respondent in Ramsay Health Care Australia Pty Ltd vs.

Adrian  John  Compton  [2017]  HCA 28  was  relied  upon  to

show,  in  para  111  thereof,  that  where  a  judgment  debt  has

been obtained after testing of the merits in adversarial litigation,

then in the absence of some evidence of fraud, collusion, or

miscarriage of justice, a court exercising bankruptcy jurisdiction

will rarely have substantial reasons to investigate whether the

debt  which  emerged in  the  judgment  was truly  owed.   With

respect to the High Court of Australia, we may only state that

following  Mobilox  Innovations  (supra),  it  would  be  very

difficult to incorporate the Australian law into our law.  This is for

the reason that our judgment in  Mobilox Innovations (supra)

has made it  clear  that  the insolvency process,  particularly in

relation to operational creditors, cannot be used to bypass the

adjudicatory and enforcement process of a debt contained in

other statutes.  We are, therefore, of the view that the higher

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threshold of fraud, collusion, or miscarriage of justice laid down

by  the  Australian  High  Court  will  have  no  application  to  the

situation under our Code.   

18) We repeat with emphasis that under our Code, insofar as

an operational  debt  is  concerned,  all  that  has to be seen is

whether the said debt can be said to be disputed, and we have

no doubt in stating that the filing of a Section 34 petition against

an  Arbitral  Award  shows  that  a  pre-existing  dispute  which

culminates at the first  stage of the proceedings in an Award,

continues even after the Award, at least till the final adjudicatory

process under Sections 34 & 37 has taken place.

19) We may hasten to add that there may be cases where a

Section 34 petition challenging an Arbitral Award may clearly

and  unequivocally  be  barred  by  limitation,  in  that  it  can  be

demonstrated to the Court that the period of 90 days plus the

discretionary period of 30 days has clearly expired, after which

either no petition under Section 34 has been filed or a belated

petition under Section 34 has been filed.  It is only in such clear

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cases  that  the  insolvency  process  may  then  be  put  into

operation.   

20) We may hasten to add that there may also be other cases

where a Section 34 petition may have been instituted in  the

wrong court, as a result of which the petitioner may claim the

application of Section 14 of the Limitation Act to get over the

bar of limitation laid down in Section 34(3) of the Arbitration Act.

In such cases also, it  is obvious that  the insolvency process

cannot  be  put  into  operation  without  an  adjudication  on  the

applicability of Section 14 of the Limitation Act.

21) With regard to the submission of learned counsel for the

respondent, that the amount of Rs.1.71 Crores stood admitted

by Mr. Banerji’s client, as was recorded in the Arbitral Award,

suffice  it  to  say  that  cross-claims  of  sums much  above  this

amount has been turned down by the Arbitral Tribunal, which

are pending in a Section 34 petition challenging the said Award.

The very fact that there is a possibility that Mr. Banerji’s client

may succeed on these cross-claims is sufficient to state that the

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operational debt, in the present case, cannot be said to be an

undisputed debt.   

22) We  also  accept  Mr.  Banerji’s  submission  that  the

Appellate Tribunal was in error in referring to Section 238 of the

Code.  Section 238 of the Code would apply in case there is an

inconsistency between the Code and the Arbitration Act in the

present case.  We see no such inconsistency.  On the contrary,

the Award passed under the Arbitration Act  together with the

steps taken for its challenge would only make it clear that the

operational debt, in the present case, happens to be a disputed

one.   

23) We are also of the view that the Appellate Tribunal, when

it relied upon Form V Part 5 of the 2016 Rules to state that the

operational debt would, therefore, be said to have been proved,

missed  the  vital  sub-clause  (iii)  in  para  34  of  Mobilox

Innovations (supra).  Even if it be clear that there be a record

of an operational debt, it is important that the said debt be not

disputed.   If  disputed  within  the  parameters  laid  down  in

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Mobilox Innovations (supra), an insolvency petition cannot be

proceeded with further.   

24) For  all  these  reasons,  we  are  of  the  view  that  the

judgment of the Appellate Tribunal needs to be set aside and is

therefore reversed.

25) The  appeals  are,  accordingly,  allowed  in  the  aforesaid

terms.

26) Consequently,  the  bank  guarantees  that  have  been

furnished,  pursuant  to  our  order  dated  15.12.2017,  stand

discharged.

…………………………......J. (R.F. Nariman)

…………………………......J. (Indu Malhotra)

New Delhi; August 14, 2018.

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