2019 (7) TMI 339 - Tri - IBC

Admissibility of petition - Initiation of Corporate Insolvency Resolution Process (CIRP) - Corporate Debtor committed a default of repayment - HELD THAT - It is a settled position of law that the provisions of Code cannot be invoked for recovery of outstanding amount but it can be invoked to initiate CIRP for justified reasons as per the Code. The Hon ble Supreme Court in the case of Mobilox Innovations (P.) Ltd. v. Kirusa Software (P.) Ltd. 2017 (9) TMI 1270 - SUPREME COURT has inter alia, held that IBC, 2016 is not intended to be substitute to a recovery forum. The Instant Company Petition is filed that intention to recover the alleged dues, on the alleged e-mail dated 20.05.2016, and sent by the Respondent. However, the alleged amount itself is in dispute even prior to the issue of Demand Notice dated 25th September, 2017 under the Code - the amount in question is in dispute even prior to the issue of demand notice and, it is filed for with sole intension to recover it. Therefore, it is not fit case to admit to initiate CIRP etc. and thus it is liable to be dismissed. Appeal dismissed.

Summary

Issues Involved:
1. Initiation of Corporate Insolvency Resolution Process (CIRP).
2. Existence of operational debt and default.
3. Validity of oral agreements and email communications as evidence.
4. Existence of a pre-existing dispute.

Detailed Analysis:

1. Initiation of Corporate Insolvency Resolution Process (CIRP):
The petitioner, Ms. Rohita, filed C.P.(IB)No.143/BB/2017 under Section 9 of the Insolvency and Bankruptcy Code (IBC), 2016, seeking to initiate CIRP against the respondent, M/s. All That Hype Media Private Limited, for a default amount of ?7,95,403. The petitioner claimed entitlement based on her contributions to the company and an alleged agreement for profit-sharing and equity stake.

2. Existence of Operational Debt and Default:
The petitioner alleged that she was promised 50% of the company's profits and a 25% equity stake, but the respondent failed to honor these commitments. The respondent, however, denied the existence of any formal agreement and contended that the petitioner was only a part-time employee with a remuneration of ?25,000. The respondent also highlighted that the petitioner’s contributions did not meet expectations, leading to financial losses for the company.

3. Validity of Oral Agreements and Email Communications as Evidence:
The tribunal noted that there was no formal documentation of the alleged agreements between the petitioner and the respondent. The petitioner relied on an email dated May 20, 2016, to substantiate her claims. However, the tribunal emphasized that emails alone, without corroborating evidence, have limited evidentiary value, especially in financial matters. The tribunal found no formal contract or agreement to support the petitioner’s claims.

4. Existence of a Pre-existing Dispute:
The respondent raised substantial disputes regarding the petitioner’s claims even before the issuance of the demand notice. The tribunal referred to the Supreme Court's judgment in Mobilox Innovations Private Limited v. Kirusa Software Private Ltd., which mandates that an application under Section 9 must be rejected if there is a genuine dispute. The tribunal found that the respondent had disputed the petitioner’s claims through a reply dated March 24, 2017, which the petitioner failed to produce. The tribunal concluded that the existence of a pre-existing dispute was evident, and the petition was filed with the intention to recover alleged dues rather than to initiate CIRP.

Conclusion:
The tribunal dismissed the petition, stating that the case was not fit for initiating CIRP due to the lack of a valid enforceable agreement and the existence of a pre-existing dispute. The tribunal reiterated that IBC is not a substitute for a recovery forum and emphasized the necessity of an undisputed debt for initiating CIRP. The order does not preclude the petitioner from seeking other legal remedies for her grievances.