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2019 (7) TMI 1627 - Tri - Insolvency and BankruptcyMaintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - existence of debt and dispute or not - time limitation - HELD THAT - The requisite conditions to initiate in an application/petition filed u/s 9 of the Code are debt and default and no dispute. In the instant case, the alleged outstanding amount itself is not established, as it consists of alleged principal and interest for invoices issued in the year 2012. Therefore, the amount itself is disputed. The Petitioner failed to substantiate the debt which are based on the invoices relates to the year 2012. Moreover, the Petitioner failed to take any legal action on the alleged outstanding amount till filing of the present case. It is also settled position of law that the provisions of the Code cannot be invoked to recover the alleged outstanding amount and the Adjudicating Authority cannot enter into roving enquiry in summary proceedings initiated under the Code and the law of limitation applies for the provisions of Code - We are not convinced with the reasons cited by the Petitioner that the case is within limitation. It is a settled position of law that the provisions of Code cannot be invoked for recovery of outstanding amount but it can be invoked to initiate CIRP for justified, reasons as per the Code - The Hon'ble Supreme Court in the case of MOBILOX INNOVATIONS PRIVATE LIMITED VERSUS KIRUSA SOFTWARE PRIVATE LIMITED 2017 (9) TMI 1270 - SUPREME COURT , has inter alia, held that IBC, 2016 is not intended to be substitute to a recovery forum. The alleged debt is also not established as contended by the Petitioner and it is also barred by laches and limitation. Therefore, it is liable to be dismissed.
Issues Involved:
1. Initiation of Corporate Insolvency Resolution Process (CIRP) 2. Validity of debt and default 3. Limitation and laches 4. Discrepancy in invoices 5. Role of intermediary (third party involvement) Issue-wise Detailed Analysis: 1. Initiation of Corporate Insolvency Resolution Process (CIRP): The petitioner, M/s. KEC International Limited, sought to initiate CIRP against M/s. Delton Electric Switchgears Private Limited under Section 9 of the IBC, 2016, for an outstanding amount of ?68,95,846/-. The petitioner claimed the respondent defaulted on payments for LT cables supplied as per purchase orders dated 31.03.2012. Despite repeated reminders and part payments, the respondent failed to clear the dues, leading to the filing of the petition. 2. Validity of Debt and Default: The petitioner supplied LT cables and raised six invoices, which the respondent was liable to pay within thirty days. The respondent made part payments totaling ?33,85,557/- but failed to pay the remaining ?28,81,283/-. The petitioner also claimed interest of ?40,14,563/- at 18% p.a., totaling ?68,95,846/- as of 06.12.2017. The respondent acknowledged the liability twice, on 20.11.2014 and 21.09.2015, which the petitioner argued reset the limitation period under Section 18 of the Limitation Act. 3. Limitation and Laches: The respondent contended the petition was barred by laches and limitation, as the transactions occurred in March-April 2012, and the petition was filed in 2018. The tribunal noted the petitioner failed to take timely legal action and only issued a winding-up notice on 15.03.2017 and a statutory demand notice on 06.12.2017. The tribunal emphasized that the provisions of the IBC cannot be used as a recovery forum and that the law of limitation applies to proceedings under the Code. 4. Discrepancy in Invoices: The respondent argued the petitioner only annexed three invoices to the demand notice but claimed payments for six invoices in the petition, creating a mismatch. The tribunal found the alleged outstanding amount was not substantiated, as it included interest not covered by the purchase orders. The tribunal held that the petitioner failed to establish the debt and default as required under the IBC. 5. Role of Intermediary (Third Party Involvement): The respondent claimed it acted as an intermediary between the petitioner and M/s. Shiraguppi Sugar Works Limited (SSWL), with SSWL responsible for payments. The tribunal dismissed this argument, stating the purchase order was solely between the petitioner and the respondent, with no third party involved. Conclusion: The tribunal dismissed the petition, concluding the alleged debt was not established, and the claim was barred by laches and limitation. The tribunal reiterated that the IBC is not a substitute for a recovery forum and emphasized the need for undisputed debt to initiate CIRP. The petitioner was advised to seek other remedies under applicable laws.
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