If the existence of a debt is disputed, recourse to the IBC is impossible to maintain - the IBC is not a debt recovery forum.

If the existence of a debt is disputed, recourse to the IBC is impossible to maintain - the IBC is not a debt recovery forum.

On several instances, petitions filed under section 9 of the Insolvency and Bankruptcy Code, 2016 (the Code) have been scrutinised by the adjudicating body, which has included the National Company Law Tribunal (NCLT), the National Company Law Appellate Tribunal (NCLAT), and the Supreme Court. The most common issue of contention in such matters is whether or not a disagreement exists under Section 9 of the Code. The Supreme Court deals with such petition under Transmission Corporation of Andhra Pradesh Limited Vs. Equipment Conductors and Cables Limited.

In the instant case titled Transmission Corporation of Andhra Pradesh Limited Vs. Equipment Conductors and Cables Limited the issues raised for clarification before the Supreme Court was:

  1. Whether it is possible for the Respondent to file an appeal regarding the execution of disputed invoice no. 1-57?

With regard to this issue, the Court held that if the operational creditor has filed an application, the adjudicating authority must reject it under Section 9(5) (2) (d) if the operational creditor has received notice of disagreement or if a record of dispute exists. The information that a suit or arbitration process relating to a disagreement is underway between the parties must be brought to the attention of the operational creditor. Under such bills, the Respondent had no genuine claim. There was no award of the Arbitral Council or a decision of any other court in relation to invoices no. 1-57. The Arbitral Council specifically dismissed the Respondent's claim as time-barred.

The insolvency process, as well as operational creditors and other adjudicatory procedures under several statutes, are highlighted in this case.

The Court ruled that a debt can only be classified as an operational debt if there is no disagreement over the amount owed. A debt can only be classified as an operational debt after the final judgement in the case of a disputed amount. 

As per the consequence the Apex court disallowed the appeal and no order as to costs