2020 (2) TMI 1496 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - operational creditor had accepted a reduced amount by way of a settlement agreement - whether the corporate debtor was legally and morally duty bound to make the payment strictly as per the said settlement agreement? - HELD THAT - The application of the operational creditor lacks merit and deserve to be dismissed because this is not a forum where the parties can seek implementation of settlement agreements and that too after accepting a major portion of the amount due. If it is allowed it also would amount to unlawful enrichment by the applicant by recovering double the amount legally entitled to be recovered by the applicant. Also, the corporate debtor is continuing payment of instalments by way of electronic transfer because the applicant had stopped receiving instalments alleging default. It is a deliberate unfair attempt on the side of the applicant to invent cause of action to file an application of this nature. If the operational creditor has anything outstanding or if the amount of interest is also been claimed, it should resort to other legal remedies available to it but in no case the present application under section 9 is permissible to be filed or allowed. Application dismissed.

Summary

Issues Involved:
1. Default in payment by the corporate debtor.
2. Waiver and acquiescence by the operational creditor.
3. Applicability of section 55 of the Indian Contract Act, 1872.
4. Malicious intent and misuse of the Insolvency and Bankruptcy Code (IBC).

Detailed Analysis:

1. Default in Payment by the Corporate Debtor:
The operational creditor supplied goods to the corporate debtor and raised invoices amounting to ?8,82,11,723, including interest. An application under section 9 of the IBC was filed due to non-payment. A settlement agreement was reached, reducing the dues to ?3,70,00,000, but the corporate debtor failed to adhere to the payment schedule. The operational creditor issued a demand notice under section 8 of the IBC, but the corporate debtor reiterated its previous stand. The operational creditor claimed a total sum of ?9,21,85,391, including interest, due to non-adherence to the settlement agreement.

2. Waiver and Acquiescence by the Operational Creditor:
The corporate debtor argued that the operational creditor accepted payments despite delays, which constituted a waiver of strict adherence to the settlement terms. The corporate debtor made payments totaling ?2,10,00,000 till September 2019, and the operational creditor did not deposit post-dated cheques, accepting electronic transfers instead. The operational creditor’s acceptance of delayed payments without objection was seen as a waiver of the right to claim default.

3. Applicability of Section 55 of the Indian Contract Act, 1872:
The corporate debtor cited section 55, arguing that the operational creditor’s acceptance of delayed payments constituted a waiver of the right to claim compensation for non-performance at the agreed time. The operational creditor did not give notice of default at the initial stage, which, according to section 55, precludes them from claiming compensation for delayed performance.

4. Malicious Intent and Misuse of the IBC:
The corporate debtor contended that the application was filed with malicious intent to recover money coercively, not for insolvency resolution. The operational creditor’s acceptance of payments despite delays indicated a lack of genuine intent to resolve insolvency, making the application under section 9 of the IBC inappropriate.

Conclusion:
The Tribunal concluded that the operational creditor’s application lacked merit and deserved dismissal. The operational creditor’s acceptance of delayed payments without objection indicated a waiver of strict adherence to the settlement agreement. The Tribunal emphasized that the forum was not meant for enforcing settlement agreements, especially after accepting a significant portion of the dues. The operational creditor was advised to seek other legal remedies for any outstanding amounts, including interest. Consequently, the application in C.P. (IB) No. 1499/KB/2019 was dismissed, with no order as to costs.