2019 (9) TMI 1056 - Tri - Insolvency and Bankruptcy

Maintainability of petition - initiation of CIRP - Corporate Debtor has committed a default for an outstanding amount - existence of debt or not - Section 9 of the IBC, 2016, R/w Rule 6 of the I B (Application to Adjudicating Authority) Rules, 2016 - HELD THAT - It is settled position of law that the provisions of Code cannot be invoked for recovery of outstanding alleged amount - 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 case is not a fit case to admit and it is liable to be dismissed - application dismissed.

Issues Involved:
1. Initiation of Corporate Insolvency Resolution Process (CIRP) under Section 9 of the IBC, 2016 based on default.
2. Dispute regarding outstanding amount and interest between Operational Creditor and Corporate Debtor.
3. Consideration of evidence and legal precedents in determining the admissibility of the case.

Issue 1: Initiation of CIRP based on default:
The case involved a petition filed by an Operational Creditor seeking to initiate the Corporate Insolvency Resolution Process (CIRP) against a Corporate Debtor for an outstanding amount of ?8,12,791 along with interest. The Operational Creditor alleged default by the Corporate Debtor in payment for construction work done. The Operational Creditor provided details of the work done, invoices raised, advance payment received, and subsequent demands for the balance amount. The Corporate Debtor acknowledged the debt but disputed the amount due, citing the ill health of its Managing Director and the appointment of a CEO to handle affairs. The Tribunal considered the evidence presented by both parties and the provisions of the Insolvency and Bankruptcy Code (IBC) in deciding the admissibility of the case.

Issue 2: Dispute regarding outstanding amount and interest:
The Operational Creditor claimed that the debt was acknowledged by the Corporate Debtor in a letter, making it a fit case for admission to initiate CIRP. However, upon examination of the documents, it was found that the principal amount claimed by the Petitioner was inconsistent. The Tribunal noted that while the interest amount can change over time, the principal amount should remain the same. The lack of supporting documents for the claim raised doubts about the credibility of the petition. The Tribunal referenced legal precedents, including the Supreme Court judgments in Mobilox Innovations (P.) Ltd. v. Kirusa Software (P.) Ltd. and Transmission Corpn. of A. P. Ltd. v. Equipment Conductors & Cables Ltd., to emphasize that the IBC is not meant for mere recovery of outstanding amounts and that the existence of an undisputed debt is essential for initiating CIRP.

Issue 3: Consideration of evidence and legal precedents:
The Tribunal carefully analyzed the pleadings of both parties, the provisions of the IBC, and relevant legal precedents to determine the admissibility of the case. It highlighted the importance of establishing an operational debt exceeding a certain threshold, the due and payable status of the debt, and the absence of disputes or pending legal proceedings related to the debt. The Tribunal concluded that the case did not meet the necessary criteria for admission under the IBC and dismissed the petition. The order allowed the Petitioner to seek other remedies available under different laws for redressal. No costs were awarded in the judgment.

This detailed analysis of the judgment highlights the key issues involved, the arguments presented by both parties, the Tribunal's assessment of the evidence, and the application of legal principles in deciding the outcome of the case.

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