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2020 (2) TMI 909 - Tri - IBCMaintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its debt - existence of debt and dispute or not - 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 - In another latest judgment rendered in Transmission Corporation of A.P.Ltd. v. Equipment Conductors and Cables Ltd. 2018 (10) TMI 1337 - SUPREME COURT , the Hon'ble Supreme Court of India has, inter alia, held that existence of undisputed debt is sine qua non of initiating CIRP. There exists a credible dispute with regards to the payment of the alleged Operational Debt - the present case is not a fit case to admit and thus the Company Petition is hereby rejected - petition dismissed.
Issues Involved:
1. Initiation of Corporate Insolvency Resolution Process (CIRP) under Section 9 of the Insolvency and Bankruptcy Code (IBC), 2016. 2. Determination of 'Operational Debt' under Section 5(21) of IBC. 3. Existence of a dispute regarding the payment of the alleged operational debt. 4. Applicability of limitation period for filing the application. Issue-wise Detailed Analysis: 1. Initiation of Corporate Insolvency Resolution Process (CIRP) under Section 9 of the Insolvency and Bankruptcy Code (IBC), 2016: The petitioner filed C.P.(IB) No. 65/BB/2019 under Section 9 of the IBC, 2016, seeking to initiate CIRP against the respondent on the grounds of default for an outstanding amount of ?33,79,425. The petitioner claimed that the corporate debtor committed a default as of 30.04.2015. 2. Determination of 'Operational Debt' under Section 5(21) of IBC: The respondent contended that the petitioner had no locus standi to file the application under Section 9, as the claim related to cash rewards in lieu of ESOPs does not constitute 'Operational Debt' under Section 5(21) of the IBC. The respondent argued that the petitioner's claim does not pertain to the provision of goods or services, and thus, the application is not maintainable under the IBC. 3. Existence of a dispute regarding the payment of the alleged operational debt: The respondent argued that there was a credible dispute regarding the payment of the alleged operational debt. They stated that the petitioner failed to fulfill his responsibilities as Managing Director, leading to significant financial losses. The respondent highlighted that the petitioner did not collect pending receivables or meet committed revenue targets, resulting in forfeiture of substantial amounts. Consequently, the company forfeited the petitioner's cash reward as per the terms of the cash reward program. The respondent also noted that the petitioner had lodged police complaints and approached the tribunal as a threatening tactic. 4. Applicability of limitation period for filing the application: The respondent pointed out that the petitioner approached the tribunal after four years, which itself is sufficient to reject the application on the grounds of limitation. They emphasized that the petitioner had delayed the filing of the application, which should lead to its dismissal. Judgment: The tribunal, after hearing both parties and examining the material papers, concluded that the provisions of the IBC cannot be invoked for the recovery of outstanding amounts but can be invoked to initiate CIRP for justified reasons as per the Code. The tribunal referred to the Supreme Court's judgment in Mobilox Innovations (P.) Ltd v. Kirusa Software (P.) Ltd., which stated that the existence of undisputed debt is a sine qua non for initiating CIRP. The tribunal noted that there was a credible dispute regarding the payment of the alleged operational debt, as the petitioner had failed to discharge his responsibilities, leading to significant financial losses for the company. Additionally, the tribunal observed that the petitioner had approached the tribunal after a considerable delay, which further weakened his case. Given the above facts and circumstances, the tribunal concluded that the present case was not fit for admission and rejected the Company Petition bearing C.P. (IB) No. 65/BB/2019. However, the tribunal clarified that this order would not prevent the petitioner from seeking remedies under other laws to address his grievances. No order as to cost was made.
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