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2019 (12) TMI 1382 - 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 - A debt in the first instance, should arise/based on legal enforceable covenant, under the provisions of the Code, the proceedings under the Code are summary in nature. Therefore, the Adjudicating Authority cannot go into roving enquiry about the enforceability of the Agreement in question. As rightly pointed by the Respondent, since the Petitioner claims that the Agreement in question is binding on the parties, he can settle the issue, through Arbitration, instead of invoking provisions of the Code to recover the alleged outstanding amount. It is a settled position of law that aggrieved party, in the instant first instance, has to exhaust alternative remedy, like making representation, issuing notices, invoking arbitration as per Agreement(s) in vogue. And in case, no alternative remedy is available, aggrieved party can knock the doors of justice. And proceedings under the provisions of Code is no exception for the same, in the normal course. Moreover, the facts and circumstances of the case would justify for the Petitioner to invoke Arbitration Clause since several issues to be resolved. Time Limitation - HELD THAT - The impugned claim relates to the period for 2015-16, 2016-17 and 2017-18, totalling for an amount of ₹ 1,75,16,250/-. For all these years, the Petitioner got issued the Statutory Demand Notice in question only on 11.10.2018. The Petitioner has not explained to the satisfaction of Adjudicating Authority as to how he is entitled for the amount, as per Agreement in question, since the Petitioner is entitled for payment in proportion to amount received by the Respondent and for the delay-in initiating recovery proceedings before these proceedings. The Petitioner has failed to make out any case so as to initiate CIRP against the Corporate Debtor and thus the Petition is liable to be dismissed.
Issues Involved:
1. Validity and enforceability of the Agreement. 2. Existence of pre-existing dispute. 3. Applicability of the Limitation Act. 4. Compliance with procedural requirements under the Insolvency and Bankruptcy Code (IBC), 2016. Issue-wise Detailed Analysis: 1. Validity and Enforceability of the Agreement: The Tribunal examined whether the Agreement dated 14th July (year unspecified) is legally valid and enforceable. The Agreement lacked a specific date and year of execution, which is critical for legal enforceability. The Tribunal noted that an enforceable Agreement must be properly executed with clear terms and conditions. The Tribunal concluded that despite the parties acting upon the Agreement, its enforceability is questionable due to the Respondent raising various disputes. The Tribunal suggested that the Petitioner should pursue arbitration as stipulated in the Agreement for resolving such disputes rather than invoking the provisions of the IBC. 2. Existence of Pre-existing Dispute: The Tribunal considered whether there was a pre-existing dispute regarding the claim. The Respondent contended that the Petitioner failed in its duties as an Agent and that the Petitioner actually owed money to the Respondent. The Respondent also argued that the Agreement was for a fixed period (2015-16 and 2016-17) and that payments were made accordingly. The Tribunal noted that the Respondent had issued a detailed reply to the Demand Notice, indicating various disputes, including the Petitioner's failure to achieve sales targets and the dishonor of cheques collected by the Petitioner. The Tribunal concluded that the existence of these disputes precluded the initiation of Corporate Insolvency Resolution Process (CIRP) under the IBC. 3. Applicability of the Limitation Act: The Tribunal addressed the issue of limitation, noting that under Section 238A of the IBC, the provisions of the Limitation Act, 1963 apply to proceedings before the Adjudicating Authority. The Respondent argued that a substantial part of the claim accrued in 2015, and the Petition filed in January 2019 was barred by the three-year limitation period under Article 137 of the Limitation Act. The Tribunal agreed, stating that the Petitioner failed to explain the delay in initiating recovery proceedings and that a substantial part of the claim was indeed barred by limitation. 4. Compliance with Procedural Requirements under the IBC: The Tribunal emphasized that for initiating CIRP, the Petitioner must establish an undisputed debt and default. The Tribunal referred to the judgments of the Hon'ble Supreme Court in Mobilox Innovations Private Limited v. Kirusa Software Private Limited and Transmission Corporation of A.P. Ltd. v. Equipment Conductors and Cables Ltd., which held that the IBC is not a substitute for a recovery forum and that the existence of an undisputed debt is a sine qua non for initiating CIRP. The Tribunal found that the Petitioner failed to establish the debt and default free from dispute and that the Corporate Debtor was a solvent company with significant profits and numerous employees. Conclusion: The Tribunal dismissed the Petition, concluding that the Petitioner failed to make out a case for initiating CIRP against the Corporate Debtor. The Tribunal noted that the Petitioner could pursue other remedies available under the law to address its grievances. The order emphasized that the IBC cannot be invoked for recovery of disputed amounts, especially when there are pre-existing disputes and the debt is not undisputed.
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