The Definition of “Dispute “under Insolvency & Bankruptcy Code 2016 by NCLAIT

The Definition of “Dispute “under Insolvency & Bankruptcy Code 2016 by NCLAT

Kirusa Software Private Limited

Vs

Mobilox Innovations Private Ltd.

FACTS

Kirusa Software Private Ltd, the creditor in this case invoked the IBC against Mobilox Innovations privating Ltd.

The Procedure for invoking the IBC provision

Creditor needs to send notice	To the debtor by claiming their dues
The Debtor has to respond within 10 days	Debtor has to dispute the claim by submitting proof of payment or claiming that the creditors’ claims are disputed.

In this case, Mobilox filed a dispute claim on the grounds that Kirusa violated a non-disclosure agreement.

DECISION

 NCLT upheld this dispute claim and dismissed the bankruptcy proceedings, prompting Kirusa to appeal.

The NCLAT upheld Kirusa’s appeal. ruling that the debt was not connected to the non-disclosure agreement.

NCLAT ‘s BROAD MEANING OF DISPUTE

In its order, NCLAT said that a dispute would include any proceedings already initiated or pending or even those which are proposed to be initiated before a consumer court, tribunal, labour court etc.

Earlier, disputes that had been considered were limited to arbitration proceedings or suits. This wide definition is a source of concern, say experts.

“A ‘proposed’ dispute broadens the scope of dispute and could also lead to frivolous disputes and the creditor would need to prove that it is frivolous.

The above NCLAT order which widens the ambit of dispute which will lead to the extension of the 14-day timeline (for declining or conceding a case) not just in extraordinary cases but in many just cases”