The NCLAT, New Delhi Bench enunciated that Section 9 proceedings under the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as “IBC”) cannot be commenced for disputed operational debt. Further, it was held that the IBC provisions cannot be turned into debt recovery proceedings. The Corporate Insolvency Resolution Process (“CIRP”) can only be initiated when there are no real disputes existing between the parties.

Brief Facts:

The present appeal has been preferred against the order of NCLT vide which the petition under Section 9 of the IBC was admitted and CIRP was initiated against the Corporate Debtor. 

Brief Background:

The Appellant is the erstwhile director of the Corporate Debtor (Respondent No. 2). Respondent No.2 is carrying its business on the premise which has been given on a rental basis by the Operational Creditor (Respondent No. 1). A Leave and License Agreements (“LLA”) was entered into by both the Respondents enabling the Respondent No.2 to take physical possession of the licensed premises. Later, a Service Agreement (“SA”) was also entered into by which Respondent No.2 agreed to certain service and maintenance facilities concerning the premises.