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2020 (6) TMI 768 - Tri - Insolvency and BankruptcyMaintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - is Tribunal a Recovery Forum? - HELD THAT - It is imperative to bear in mind that an application under section 9 of the Code 2016 cannot be filed to recover the debt amounts. The code has been enacted to bail out Companies that have become insolvent through the insolvency resolution process. In the present case it is seen from a perusal of the Bank Statement annexed by the Respondent that the Petitioner had been receiving the dues from supply of goods and has a running account with the Corporate Debtor and default has occurred against some invoices. The Respondent has not accepted the debt and the amounts claimed but accepts that after reconciliation if any amount is payable it will pay the same. The Petitioner has therefore come before this Tribunal for the recovery of its unpaid invoices which also are disputed by the Respondent. This Tribunal cannot be used for recovery of debt. Further no case has been made out that the Respondent has become insolvent and has lost its substratum such that it is unable to be pay its debts or run its business. Application disposed off.
Issues:
1. Initiation of Corporate Insolvency Resolution Process under Section 9 of IBC, 2016 based on default by the Corporate Debtor. 2. Disputed outstanding amount and liability of the Corporate Debtor to repay the claimed sum. 3. Compliance with procedural requirements under the IBC, 2016 and relevant rules. 4. Application of legal principles regarding the purpose of IBC and prerequisites for filing a petition under Section 9. Issue 1: Initiation of Corporate Insolvency Resolution Process The petition was filed seeking to initiate the Corporate Insolvency Resolution Process against the Corporate Debtor due to default in payment of outstanding amounts. The total outstanding amount, including interest, was specified in the petition. The Petitioner alleged that the Corporate Debtor had defaulted in paying invoice amounts since 2017, leading to a substantial principal amount due. The Petitioner issued a Demand Notice under section 8 of the Code, 2016, demanding payment of the outstanding sum along with interest. The Respondent, in response, acknowledged the outstanding amount but disputed certain payments made to the Petitioner. The Respondent also raised concerns about the quality and pricing of materials supplied by the Petitioner. Issue 2: Disputed Outstanding Amount and Liability Upon examination of the pleadings and evidence presented by both parties, the Tribunal noted discrepancies in the claimed amount. The Respondent had made payments that were not acknowledged by the Petitioner, leading to a reduced outstanding amount. The Respondent categorically denied its liability to repay the claimed sum, emphasizing that the amount was incorrect. The Petitioner's assertion regarding an email where the Respondent allegedly admitted liability was not substantiated with verifiable evidence. The Respondent expressed willingness to pay genuine bills but disputed the overall claim amount. Issue 3: Compliance with Procedural Requirements The Tribunal highlighted the fundamental purpose of the IBC, emphasizing that it is not intended for simple debt recovery but for resolving insolvency issues of companies. Citing relevant legal precedents, the Tribunal clarified that the IBC should not be misused as a substitute for debt enforcement procedures or to jeopardize the financial stability of solvent companies. The Tribunal stressed the necessity of a clear, undisputed debt as a prerequisite for a successful petition under Section 9 of the Code. Issue 4: Application of Legal Principles In analyzing the case, the Tribunal observed that the Petitioner had a running account with the Corporate Debtor, and while defaults had occurred against certain invoices, the overall debt was disputed. The Respondent did not accept the claimed amount but indicated willingness to reconcile and pay any valid dues. The Tribunal concluded that the case did not establish insolvency on the part of the Respondent or a situation where the company was unable to meet its financial obligations or continue its business operations. As such, the Tribunal determined that the petition could not be used for debt recovery purposes and dismissed the application. This detailed analysis of the judgment from the National Company Law Tribunal, Bengaluru Bench, provides insights into the issues surrounding the initiation of the Corporate Insolvency Resolution Process, disputed outstanding amounts, compliance with procedural requirements, and the application of legal principles under the IBC, 2016.
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