2019 (11) TMI 1431 - AT - Insolvency and Bankruptcy

Maintainability of petition - initiation of CIRP - Corporate Debtor failed to make repayment of its debt - existence of debt and dispute or not - HELD THAT - Any person initiates the Insolvency Resolution Process or Liquidation Proceedings fraudulently or with malicious intent for any purpose other than for the resolution of insolvency, or liquidation, such application is fit to be rejected. In the present case, the Respondent- Corporate Debtor is not insolvent and viable and feasible to pay the claim amount. Only for recovery of the interest, the Appellant is pursuing the Insolvency Resolution Process which, according to us, is malicious intent for any purpose other than for the resolution of insolvency, or liquidation. There are no relief to the Appellant. However, if the Appellant agrees to settle the matter on receipt of principal amount of ₹ 7,50,000/- towards full and final payment, it will be open to the Appellant to request the Corporate Debtor to renew the draft already lapsed - appeal disposed off.

Summary

Issues:
- Application under Section 9 of the Insolvency and Bankruptcy Code, 2016 for initiation of Corporate Insolvency Resolution Process.
- Rejection of the application by the Adjudicating Authority.
- Dispute over the payment of interest and legal charges.
- Interpretation of Section 65 regarding fraudulent and malicious initiation of proceedings.
- Determination of insolvency and feasibility of payment by the Corporate Debtor.
- Decision on granting relief to the Appellant.

Analysis:
The Appellant, an Operational Creditor, filed an application under Section 9 of the Insolvency and Bankruptcy Code, 2016 against the Corporate Debtor for a default amount of ?10,47,500, comprising principal, interest, and legal charges. The Adjudicating Authority rejected the application considering the objective of the I&B Code and previous efforts by the Respondent to settle the matter, which the Operational Creditor declined. The Respondent had offered a Demand Draft of ?7,50,000 for full payment, but the Appellant did not accept it. The Appellant claimed the right to interest on the principal amount, which was not accepted by the Tribunal.

The Tribunal referred to Section 65 of the I&B Code concerning fraudulent and malicious initiation of proceedings. It highlighted that initiating insolvency proceedings with malicious intent for reasons other than resolving insolvency could lead to penalties. In this case, the Tribunal found the Corporate Debtor to be solvent and capable of paying the claim amount. The pursuit of insolvency resolution solely for interest recovery was deemed to be malicious and not in line with the purpose of insolvency resolution or liquidation.

Consequently, the Tribunal declined to grant any relief to the Appellant. However, it suggested that if the Appellant agreed to settle for the principal amount of ?7,50,000, the Corporate Debtor could renew the lapsed Demand Draft. The appeal was disposed of with these observations, and no costs were awarded in the matter.