2021 (7) TMI 357 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - corporate debtor has opposed the admission of this petition and prayed for its dismissal on the ground that it is ready and willing to settle this matter with the petitioner - HELD THAT - The principal amount as claimed by the petitioner has been acknowledged by the respondent before us and has shown readiness to pay the same. Regarding the interest as claimed by the petitioner, the respondent has raised objection that there was no clause for interest in the agreement entered into between the parties. It is clear from the facts of the case that in July, 2019 the petitioner has been handed over with a cheque for the principal amount of his claim but the petitioner had rejected the same. Further, he has also refused to accept settlement offered by the respondent. The respondent has time and again acknowledged his liability and is willing to pay the entire principal amount. Hence, it is evident that the petitioner is not interested in resolving the dispute or entering into any form of a settlement agreement in the present scenario. This conduct of the petitioner puts question on the bonafides of this petition. Even though there is a debt and default on the part of the respondent, we believe that it is not the respondent who is responsible for filing or the pendency of this petition. The respondent has time and again stated that he is willing to pay the principal amount only as the amount of interest has not been mentioned in the agreement - Neither the respondent nor this Bench can deny the fact that there has been debt and default on the part of the respondent in making payment to the petitioner, but it is believed that initiating CIRP against a solvent company, as in this case is the respondent, will prejudice the company and the people associated with it and this is clearly not the objective of the Code to put a solvent company under CIRP. It will be prejudiced to the respondent if this matter is admitted and CIRP is initiated against the respondent - this petition stands dismissed.

Summary

Issues:
Initiation of Corporate Insolvency Resolution Process (CIRP) under sections 8 & 9 of the Insolvency and Bankruptcy Code - Dispute regarding outstanding operational debt - Allegations of delayed salary payments and improper termination of Employment Agreement - Attempts at amicable settlement - Refusal of settlement terms by the petitioner - Question of bonafides of the petition - Financial position of the respondent - Repercussions of admitting the respondent into CIRP - Interpretation of the Code's objective - Reference to relevant case laws.

Detailed Analysis:
1. Initiation of CIRP: The Company Petition was filed seeking to initiate CIRP against the corporate debtor for outstanding operational debt. The petitioner, an ex-employee, claimed unpaid salaries and interest, alleging repeated delays and defaults in payments by the respondent.

2. Allegations and Counter-claims: The petitioner contended that the respondent consistently delayed salary payments and improperly terminated the Employment Agreement. The respondent denied these allegations, claiming the petition was an attempt to disrupt their business.

3. Settlement Attempts: Both parties engaged in settlement discussions, with the respondent offering to pay the principal amount. However, the petitioner refused the settlement terms, raising doubts about the petition's bonafides and suggesting a motive of revenge.

4. Judicial Findings: The Tribunal acknowledged the debt and default but emphasized the respondent's willingness to pay the principal amount. Considering the financial stability of the respondent and the absence of insolvency, initiating CIRP was deemed prejudicial and not in line with the Code's objective.

5. Legal Interpretation: The Tribunal highlighted that the Code is not a recovery forum, citing precedents where initiation of insolvency proceedings against solvent companies was discouraged to protect their operations and employees.

6. Dismissal of Petition: Ultimately, the Tribunal dismissed the petition, emphasizing that the matter was not suitable for CIRP as the respondent was solvent. The decision aimed to prevent prejudice to the respondent and uphold the Code's objective of aiding insolvent organizations.

7. Conclusion: The judgment focused on balancing the interests of both parties, emphasizing the importance of considering financial stability and the objective of the Insolvency and Bankruptcy Code in resolving disputes. The dismissal of the petition highlighted the need to avoid initiating CIRP against solvent companies for small claims, in line with legal principles and precedents.