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2018 (11) TMI 1662 - Tri - Insolvency and BankruptcyAdmissibility of petition - initiation of Corporate Insolvency Resolution Process - default in repayment of amount - Section 9 of the Insolvency and Bankruptcy Code, 2016 - HELD THAT - The petition has been filed on wrong facts to start CIRP by giving false information. There is no such case of the Petitioner that it has advanced ₹9,19,40,000 as principal amount to the Corporate Debtor. By advance of ₹4,40,000/-, the Petitioner has filed this petition, showing the principal amount of ₹9,19,40,000/- and has further filed the Affidavit certifying the contents of the Petition. This clearly shows that Petitioner has filed this Petition for initiation of CIRP fraudulently or with malicious intent for any purpose other than for the resolution of insolvency, which comes under the purview of Section 65 of the IBC. Actual amount advanced was ₹4,40,000/-, but the Petitioner has falsely claimed ₹9,19,40,000/- as the principal amount, which is 209 times of the actual advance amount. Since the Petitioner filed this petition with false information alleging the principal amount as ₹9,19,40,000/- instead of ₹4,40,000/- without going into the merits, we are of the considered view that the Petition has been filed with ulterior motive to get insolvency petition admitted which comes under purview of Section 65 of the IBC. Petition is dismissed with costs of ₹10,00,000/- which is to be paid by the Operational Creditor within 30 days from today.
Issues Involved:
1. Maintainability of the Petition under Section 9 of the Insolvency and Bankruptcy Code, 2016. 2. Definition and scope of "Operational Debt" under the Insolvency and Bankruptcy Code, 2016. 3. Validity of the claim for compensation and damages by the Operational Creditor. 4. Existence of a dispute between the parties. 5. Allegation of fraudulent or malicious intent in filing the Petition. Issue-wise Detailed Analysis: 1. Maintainability of the Petition under Section 9 of the Insolvency and Bankruptcy Code, 2016: The Petitioner, TATA Chemicals Limited, filed a petition under Section 9 of the Insolvency and Bankruptcy Code, 2016 (IBC), seeking the initiation of Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor, Raj Process Equipments and Systems Private Limited. The petition was based on the alleged default of ?4,40,000, which was an advance payment for the supply of a Double Effect Evaporator. Additionally, the Petitioner claimed ?9,15,00,000 as financial damages due to the non-delivery of the equipment. 2. Definition and scope of "Operational Debt" under the Insolvency and Bankruptcy Code, 2016: The Tribunal examined whether the claim falls under the definition of "Operational Debt" as per Section 5(21) of the IBC, which includes a claim in respect of the provision of goods or services. The Tribunal noted that the refund of advance money is not in connection with the provision of goods or services, and therefore, does not constitute an "Operational Debt." The Tribunal emphasized that the Petitioner’s claim for compensation and damages is not related to the provision of goods or services but rather to the non-payment of the advance money and alleged financial loss. 3. Validity of the claim for compensation and damages by the Operational Creditor: The Tribunal highlighted that the claim for ?9,15,00,000 as financial damages was not adjudicated by any competent authority and thus cannot be considered as an "Operational Debt." The Tribunal referred to Section 73 of the Indian Contract Act, which states that compensation for breach of contract must naturally arise from the breach and must be adjudicated. The Tribunal cited precedents, including the case of "Union of India vs Raman Iron Foundry," which held that a claim for unliquidated damages does not give rise to a debt until adjudicated upon. 4. Existence of a dispute between the parties: The Tribunal noted that there was a clear dispute between the parties regarding the delay in the delivery of the evaporator. The Corporate Debtor argued that the delay was due to frequent changes and modifications requested by the Petitioner. The correspondence between the parties indicated ongoing disputes, including the Petitioner’s reluctance to inspect the material and the Corporate Debtor’s readiness to deliver the equipment. 5. Allegation of fraudulent or malicious intent in filing the Petition: The Tribunal observed that the Petitioner had filed the petition with false information, alleging the principal amount due as ?9,19,40,000 instead of ?4,40,000. The Tribunal found that the Petitioner’s claim of ?9,15,00,000 as financial damages was without any adjudication and was exaggerated. The Tribunal concluded that the petition was filed with an ulterior motive to get the insolvency petition admitted, which falls under the purview of Section 65 of the IBC, concerning fraudulent or malicious initiation of proceedings. Conclusion: The Tribunal dismissed the petition, stating that the Petitioner’s claims do not fall within the definition of "Operational Debt." The Tribunal imposed a cost of ?10,00,000 on the Operational Creditor to be paid within 30 days to the "Prime Minister National Relief Fund." The Tribunal emphasized that the petition was filed with false information and malicious intent, thus warranting dismissal and imposition of costs.
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