2017 (7) TMI 1080 - AT - Companies Law

Corporate insolvency procedures - affidavit filed and the bank certificate (CD) is not as per the provisions of the IBC, 2016 - no mention of the fact that the Corporate Debtor has not raised the dispute and the bank certificate is not authenticated - Held that - It is on record that the Operational Creditor has filed the suit before the Hon'ble High Court of Madras for recovery of the amount which the Corporate Debtor failed to make the payment. Counsel for Respondent citing the judgment of NCLAT given in M/s. MCL Global Steel Pvt. Ltd another vs M/s. Essar Projects India Ltd. others 2017 (5) TMI 1774 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI submitted that the matter is sub judice and the same falls within the term dispute to which the Counsel for Petitioner submitted that suit has been filed in order to overcome the period of limitation and the object of filing the petitioner under section 9 is to trigger the process of corporate Insolvency against the Corporate Debtor and declaration of the moratorium. Counsel for Petitioner further submitted that the suit has been filed by the operational Creditor and the Corporate Debtor did not raise any dispute on its own and submit that there is no provision in the IBC 2016, which bars the Petitioner to file the petition under section 9, even if, a suit for recovery of the outstanding debt is pending. However, the petitioner can achieve has goal and get his money back through recovery suit. Therefore Petitioner cannot be allowed to forum shop. Hence, the Petitioner is dismissed in view of the pendency of the civil suit

Summary

Issues: Compliance with provisions of I&B Code, 2016; Dispute resolution under IBC, 2016; Bar on filing petition under section 9 if recovery suit is pending.

Compliance with provisions of I&B Code, 2016:
The judgment dealt with the issue of compliance with the provisions of section 9(3)(b) and (c) of the Insolvency and Bankruptcy Code, 2016 (I&B Code). The Counsel for the Petitioner claimed compliance, while the Counsel for the Respondent objected, stating that the affidavit and bank certificate submitted were not in accordance with the IBC, 2016. The Respondent argued that the documents did not mention that the Corporate Debtor had not raised a dispute and that the bank certificate was not authenticated. This raised a question regarding the adequacy of the submission made by the Petitioner to trigger the process of corporate insolvency under the I&B Code.

Dispute resolution under IBC, 2016:
The discussion also revolved around the concept of "dispute" as per the I&B Code, 2016. The Respondent referred to a judgment by the NCLAT in a similar case, emphasizing that the matter was sub judice and fell within the ambit of a dispute. The Petitioner, on the other hand, argued that the suit was filed to avoid the limitation period and initiate insolvency proceedings against the Corporate Debtor. It was highlighted that the Corporate Debtor did not raise any dispute independently, and the purpose of the petition under section 9 was to declare a moratorium. The Petitioner contended that there was no provision in the IBC 2016 barring the filing of a petition under section 9, even if a recovery suit was pending. This raised a critical question regarding the interpretation of the term "dispute" and its implications on insolvency proceedings.

Bar on filing petition under section 9 if recovery suit is pending:
Another significant issue addressed in the judgment was whether the pendency of a civil suit for recovery of outstanding debt barred the Petitioner from filing a petition under section 9 of the I&B Code. The Petitioner argued that the objective of the insolvency petition was distinct from the recovery suit, and the former aimed to trigger the corporate insolvency process and moratorium declaration. The Petitioner asserted that the suit by the Operational Creditor did not preclude them from seeking relief under the IBC 2016. However, the court considered the possibility of forum shopping and dismissed the petition due to the pending civil suit, emphasizing that the Petitioner could pursue recovery through the suit without resorting to insolvency proceedings.

In conclusion, the judgment delved into the nuances of compliance with I&B Code provisions, the interpretation of disputes under the Code, and the implications of a pending recovery suit on the filing of an insolvency petition. The decision highlighted the importance of procedural adherence, the definition of disputes, and the limitations on seeking insolvency relief in the presence of parallel civil actions.