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2020 (4) TMI 772 - Tri - Insolvency and BankruptcyMaintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its debt - existence of debt and dispute or not - HELD THAT - In the instant case, there was no final, clear or crystallised debt or demand till the time of the notice and the same was disputed and subject to reconciliation/adjustment, as per the Agreement itself - In the instant case the Respondent has not only opposed the Demand Notice but raised a bona fide dispute which arises from the Agreement between the two parties and which requires to be adjudicated, which is in progress in an Italian Court, and for which this Tribunal is not the forum, apart from the fact that the amounts in question themselves remain to be reconciled. Hence, since an undisputed clear debt at the time of sending the Demand Notice under the Code or alleging a default by the Petitioner is a sine qua non for initiating proceedings under section 9 of the Code, and whereas there was also a pre-existing dispute over the final amount payable, and also with part payment being made, which makes this a mere recovery proceeding, the Petition is liable to be dismissed on all these scores as well. Petition dismissed.
Issues Involved:
1. Jurisdiction of the Tribunal. 2. Existence of Debt and Default. 3. Reconciliation of Accounts and Pre-existing Dispute. 4. Use of IBC as a Recovery Mechanism. Issue-wise Analysis: 1. Jurisdiction of the Tribunal: The Respondent contended that the matter falls outside the purview of the Tribunal's jurisdiction as per the provisions of the IBC. The agreements between the parties explicitly stated that disputes would be governed by the Italian Civil Code and adjudicated by the courts in Italy. The Tribunal agreed, noting that the Respondent had already initiated legal proceedings before the Tribunal of Vicenza, Italy, which enjoys exclusive jurisdiction over disputes arising under the Agreement. Consequently, the Tribunal concluded that it lacked jurisdiction to adjudicate the matter, rendering the Petition not maintainable and liable to be dismissed. 2. Existence of Debt and Default: The Petitioner sought to initiate Corporate Insolvency Resolution Process (CIRP) against the Respondent for an alleged default amounting to ?5,73,16,772/-. The Tribunal observed that the debt could not be considered clear or undisputed due to the requirement for reconciliation and adjustments of accounts as agreed upon in the Trade Agreement. The Respondent had consistently communicated the need for reconciliation, and a part payment of EUR 87,107 was made on 20th May 2019. The Tribunal found that the debt was not crystallized or undisputed at the time of sending the Demand Notice, and thus, the Petition did not meet the criteria for initiating proceedings under section 9 of the Code. 3. Reconciliation of Accounts and Pre-existing Dispute: The Respondent argued that the invoices were subject to reconciliation of accounts, and there was a pre-existing dispute over the amounts claimed by the Petitioner. The Tribunal noted that the Respondent had raised a bona fide dispute and had initiated legal proceedings in Italy for reconciliation and adjudication of the financial dispute. The Hon'ble Supreme Court's interpretation in Mobilox Innovations (P.) Ltd. v. Kirusa Software (P.) Ltd. was referenced, emphasizing that the existence of a dispute requires adjudication and that the debt must be clear and undisputed. The Tribunal concluded that the pre-existing dispute and the need for reconciliation rendered the Petition unfit for initiating CIRP. 4. Use of IBC as a Recovery Mechanism: The Tribunal highlighted that the IBC cannot be used as a recovery mechanism to jeopardize the financial health of an otherwise solvent company. The Hon'ble Supreme Court in K. Kishan v. Vijay Nirman Company (P.) Ltd. clarified that IBC should not be used prematurely or for extraneous considerations. The Tribunal found that the Petition was essentially a recovery suit disguised as insolvency proceedings, which is not the intended purpose of the IBC. The part payment made by the Respondent further indicated that the matter was more suited for recovery proceedings rather than insolvency. Conclusion: The Tribunal dismissed the Company Petition in C.P. (IB) No. 294/BB/2019 filed under section 9 of the Code, citing lack of jurisdiction, the existence of a pre-existing dispute, the need for reconciliation, and the misuse of IBC as a recovery mechanism. The order would not preclude any other proceedings to settle the dispute regarding payments due, if any. No order as to costs was made.
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