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2021 (9) TMI 1380 - Tri - Insolvency and BankruptcyMaintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - existence of privity of contract between the Petitioner and the Corporate Debtor as envisaged under the LLP agreement and Supplementary Retirement Deed or not - time limitation - HELD THAT - The Bench is of the considered opinion that there is no privity of contract between Petitioner and Corporate Debtor and the LLP agreement dated 07.05.2012 and the Supplementary Retirement Deed dated 15.08.2016 is not a contract signed by and between the Petitioner and Corporate Debtor herein. The Supplementary Retirement Agreement contemplates certain liability of Tridhaatu wherein Tridhaatu agreed to pay the outstanding sum of Rs. 45,08,08,384/- to the Petitioner and provided certain cheques to be paid by the Corporate Debtor herein being the group company. The Corporate Debtor also confirmed the liability of payment of Rs. 4,03,28,000/- to the Petitioner herein as on 31.03.2018, however, this does not demonstrate any liability towards payment of financial debt. The Petitioner has failed to demonstrate the basic ingredients of financial debt along with interest, if any, which is disbursed against consideration for time value and money and is in existence between the Petitioner and Corporate Debtor. The Petitioner is relying upon a reference being made in Supplementary Retirement Deed and that cheques were presented as security without any basis of contractual terms between the Petitioner and Corporate Debtor - It is an undisputed fact that there is no privity of contract between the parties and a mere reference to certain liability while handing out cheques, confirmation of liability, it cannot be construed that there is a binding agreement of any debt due in terms of Section 5 (8) of the Code and hence, there is no evidence of default for non-payment of money by the Corporate Debtor towards his obligation of payment of monies under any contract is thus not established. Further, the claim is barred by limitation. Unless the liability is crystallised by a regular civil court, the Petition under Section 7 of IBC cannot be admitted. The mere reference of handing over of cheque of Corporate Debtor as security does not fasten any liability to the Corporate Debtor for payment of monies and any debt due under the Supplementary Retirement Deed. The expression Tridhaatu affiliated nominee including sister concern cannot be bound unless it is expressly confirmed that the sister concern is liable to pay in case of default and in the absence of any absolute liability. The claim has to be adjudicated by a regular civil court and hence the petition is liable to be dismissed. Petition dismissed.
Issues Involved:
1. Privity of contract between the Petitioner and the Corporate Debtor. 2. Existence of financial debt and default under Section 7 of the Insolvency and Bankruptcy Code, 2016. 3. Limitation period for filing the petition. 4. Validity of claims based on the Supplementary Retirement Deed. 5. Admissibility of the petition under the Insolvency and Bankruptcy Code, 2016. Detailed Analysis: 1. Privity of Contract between the Petitioner and the Corporate Debtor: The Tribunal examined whether there was privity of contract between the Petitioner and the Corporate Debtor as envisaged under the LLP agreement dated 7th May 2012 and the Supplementary Retirement Deed dated 13th August 2016. The Tribunal found that the Supplementary Retirement Deed was not a contract signed by and between the Petitioner and the Corporate Debtor. The agreement contemplated certain liabilities of Tridhaatu, wherein Tridhaatu agreed to pay the outstanding sum to the Petitioner and provided cheques to be paid by the Corporate Debtor, being the group company. However, this did not demonstrate any liability towards payment of financial debt as per Section 5 (8) of the Code. 2. Existence of Financial Debt and Default: The Tribunal noted that the Petitioner failed to demonstrate the basic ingredients of financial debt along with interest, which is disbursed against consideration for time value and money and is in existence between the Petitioner and the Corporate Debtor. The Petitioner relied upon references in the Supplementary Retirement Deed and cheques presented as security without any basis of contractual terms between the Petitioner and the Corporate Debtor. The Tribunal concluded that there was no evidence of default for non-payment of money by the Corporate Debtor towards any contractual obligation. 3. Limitation Period for Filing the Petition: The Corporate Debtor contended that the claim was barred by limitation. The Tribunal observed that the cause of action or date of start of limitation would be 31st December 2016, and therefore, the limitation period would expire on 31st December 2019 as per the provisions of the Limitation Act, 1963 read with Section 238A of the Code. The Petition was filed after the expiration of this period, making it time-barred. 4. Validity of Claims Based on the Supplementary Retirement Deed: The Tribunal found that the claims made by the Petitioner were based on the Supplementary Retirement Deed, which was not signed by the Corporate Debtor. The Supplementary Retirement Deed captured the repayment of monies to the Petitioner by Tridhaatu and included provisions for post-dated cheques and demand promissory notes. However, the Tribunal concluded that these provisions did not establish any binding agreement of financial debt between the Petitioner and the Corporate Debtor. 5. Admissibility of the Petition under the Insolvency and Bankruptcy Code, 2016: The Tribunal emphasized that the Insolvency and Bankruptcy Code is not a law for recovery but deals with insolvency. The Corporate Debtor was not insolvent, and the claims made in the proceedings were not dues to the Corporate Debtor. The Tribunal noted that unless the liability is crystallized by a regular civil court, the Petition under Section 7 of the IBC cannot be admitted. The mere reference to the handing over of cheques by the Corporate Debtor as security did not fasten any liability to the Corporate Debtor for payment of monies. The Tribunal dismissed the petition, stating that the claim has to be adjudicated by a regular civil court. Conclusion: In light of the above observations, the Tribunal dismissed the Petition filed under Section 7 of the Insolvency and Bankruptcy Code, 2016, on the grounds of lack of privity of contract, absence of financial debt, the claim being barred by limitation, and the necessity for the claim to be adjudicated by a regular civil court.
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