2019 (10) TMI 105 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate debtor - default in repayment of amount - HELD THAT - The Petitioner failed to make out any case so as to interfere in the issue by invoking the provisions of the Code and thus it is liable to be dismissed. Petition dismissed.

Issues Involved:
1. Existence of a genuine dispute regarding the services/supplies.
2. Validity and enforceability of the claim under the Insolvency and Bankruptcy Code (IBC).
3. Timeliness of the claim and whether it is barred by limitation.
4. Quality of work and adherence to the terms of the Purchase Order.
5. Applicability of the Arbitration Clause in the Purchase Order.
6. Appropriateness of using the IBC for debt recovery.

Issue-Wise Detailed Analysis:

1. Existence of a Genuine Dispute Regarding the Services/Supplies:
The Respondent contended that there was a real dispute regarding the services provided by the Petitioner, particularly concerning the quality of work and the delay in execution. The Respondent highlighted that the Petitioner failed to complete the work satisfactorily, as evidenced by numerous communications pointing out deficiencies. The Tribunal noted these disputes and acknowledged that the Respondent had raised a plausible dispute about the claimed amount in their reply dated 21.06.2018.

2. Validity and Enforceability of the Claim Under the Insolvency and Bankruptcy Code (IBC):
The Petitioner sought to initiate the Corporate Insolvency Resolution Process (CIRP) against the Respondent under Section 9 of the IBC, 2016. However, the Tribunal found that the Petitioner did not establish the alleged outstanding amount and failed to produce the Purchase Order, which was the basis for the claim. The Tribunal emphasized that the IBC cannot be used as a mechanism for debt recovery, especially when the debt is disputed.

3. Timeliness of the Claim and Whether It Is Barred by Limitation:
The Respondent argued that the claim was barred by time, as the alleged outstanding amount related to the year 2015, and the Petitioner did not take any action to recover it until issuing a legal notice on 25.05.2018. The Tribunal agreed, noting that the claim was barred by laches and limitation, as the Petitioner failed to take timely action and substantiate the claim with necessary documents.

4. Quality of Work and Adherence to the Terms of the Purchase Order:
The Respondent repeatedly communicated concerns about the quality of the work performed by the Petitioner. The Tribunal noted that the Petitioner did not take remedial steps as pointed out by the Respondent in various communications. The Respondent even terminated the Purchase Order on 30.10.2015 due to the Petitioner's failure to execute the work as per the terms of the contract. The Tribunal found that the Petitioner did not establish that it rendered the service as per the Purchase Order.

5. Applicability of the Arbitration Clause in the Purchase Order:
The Respondent argued that any dispute arising out of the Purchase Order should be referred to arbitration under the provisions of the Arbitration and Conciliation Act, 1996. The Tribunal noted that the Petitioner failed to invoke the arbitration clause before issuing the Demand Notice and filing the application under the IBC. This failure further weakened the Petitioner's case.

6. Appropriateness of Using the IBC for Debt Recovery:
The Respondent contended that the Petitioner was misusing the provisions of the IBC for recovery purposes, which is against the intent of the Code. The Tribunal agreed, emphasizing that the main objective of the IBC is to streamline the insolvency process, not to serve as a debt recovery mechanism. The Tribunal found that the Petitioner failed to make out any case to interfere by invoking the provisions of the Code.

Conclusion:
The Tribunal concluded that the Petitioner failed to substantiate the alleged outstanding amount and did not establish a case for invoking the provisions of the IBC. The Petition was dismissed, but the Tribunal noted that this order would not prevent the Petitioner from seeking other remedies available under the law to address its grievances. No order as to costs was made.

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