2019 (5) TMI 1881 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - applicant was reluctant towards amicable settlement - existence of debt and dispute or not - HELD THAT - The applicant company has supplied goods suo-moto to the corporate debtor and without any purchase order but the same were never ever returned by the corporate debtor. That though the corporate debtor disputed that the goods supplied by the applicant company were not as per terms and were of inferior quality such dispute was never raised by the corporate debtor prior to issuance of demand notice. That there are/were no communication or evidence on record to establish goods supplied by the corporate debtor were of inferior quality. It is evident that the corporate debtor has agreed to clear the principal outstanding amount and has tried to settle the issue amicably but the applicant was reluctant. That it will be open to the applicant to move before a court of competent jurisdiction for realisation/recovery of their dues instead of initiating resolution process which will have adverse effect on a going concern - That keeping in mind the basic objective of the IB Code as also considering the fact that the respondent company is a going company and initiation of insolvency process will adversely affect livelihood of number of employees and their family in the interest of natural justice the Adjudicating Authority cannot admit the application preferred by the appellant company. Application dismissed.

Summary

Issues:
- Application filed under Section 9 of the Insolvency and Bankruptcy Code, 2016 by an operational creditor against a corporate debtor.
- Dispute regarding outstanding operational debt of the corporate debtor.
- Submission of documents supporting the claim by the applicant.
- Affidavit in reply by the respondent acknowledging the outstanding amount and offering to settle amicably.
- Consideration of the objectives of the Insolvency and Bankruptcy Code in resolving the matter.

Analysis:
1. The application was filed under Section 9 of the Insolvency and Bankruptcy Code, 2016 by the operational creditor against the corporate debtor for non-payment of outstanding operational debts. The applicant, a supplier of Lime Powder, alleged that despite repeated requests, only a partial payment was made by the corporate debtor, leading to a significant outstanding amount.

2. The respondent disputed the claim, alleging that the goods supplied were of inferior quality and were sent without purchase orders. However, the dispute was raised after the demand notice was issued, and there was no prior communication or evidence to support the claim of inferior quality. The applicant provided documents supporting the claim, including invoices, ledger statements, and demand notices.

3. The respondent, in an affidavit, acknowledged the outstanding amount and offered to settle amicably by tendering cheques to clear the principal amount. However, the applicant was reluctant to accept the settlement, leading to a stalemate in resolving the issue outside the insolvency process.

4. The Adjudicating Authority considered the objectives of the Insolvency and Bankruptcy Code, emphasizing resolution over liquidation to maximize the value of assets for all stakeholders. The Authority noted that the respondent had shown willingness to clear the outstanding amount and settle amicably, indicating a potential for resolution without initiating insolvency proceedings.

5. Given the circumstances and the potential adverse effects on the going concern status of the respondent company and its employees, the Adjudicating Authority dismissed the application, highlighting the need to prioritize amicable settlements and the adverse impact of insolvency proceedings on a functioning business. The decision aimed to balance the interests of all stakeholders and promote the resolution of disputes outside the insolvency process to protect the livelihoods of employees and their families.