Jul 01, 2017

Scope of the term ‘dispute’ under Section 5 (6) of the IBC

In Kirusa Software Private Limited v. Mobilox Innovations Private Limited,[1] the National Company Law Appellate Tribunal (‘NCLAT’) held that the term ‘dispute’ has to be given a wide meaning, for the purpose of Sections 8 and 9 of the IBC, which deal with applications made by an operational creditor. In the instant case, NCLAT held that the term ‘dispute’ has to be given an inclusive meaning and not an exhaustive one, provided it is relatable to the existence of the amount of the debt, quality of good or service or breach of a representation or warranty as provided under Section 5(6) of the IBC. The term should thus cover all disputes on debt, default etc. without being limited to only two ways of disputing a demand made by an operational creditor, i.e. a pending suit or an arbitration.

The NCLAT however also cautioned against an illusory dispute being raised for the first time while replying to the notice under Section 8 of the IBC as a tool to reject an application under Section 9 of the IBC.

[1]     Company Appeal (AT) (Insolvency) 6 of 2017.

 

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