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2022 (5) TMI 807 - Tri - Insolvency and BankruptcyMaintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - existence of debt and dispute or not - HELD THAT - The transaction in between the parties was a sub contract in between the Applicant and the Corporate Debtor. The Corporate Debtor though receives some bill amount from IOCL did not part with the Applicant its due share. Hence the dispute arose and it was settled by meeting dated 16.03.2018. As per minutes of meeting dated 16.03.2018 the Corporate Debtor agreed to pay some amount to the Applicant but very nature of transaction under which the amount was agreed to pay was the amount payable toward services provided by the Applicant to the Corporate Debtor by way of sub contract. Such amount does not fall in category of the financial debt - There are no opinion whether the amount claim could be the operational debt or not or it was a joint venture in between both the parties it is held that the amount as claimed herein cannot be a financial debt and hence this application filed under Section 7 of IBC for initiation of CIRP of the Corporate Debtor is not maintainable and the same stands rejected. Application is not maintainable and stands rejected.
Issues Involved:
1. Initiation of Corporate Insolvency Resolution Process (CIRP) under Section 7 of IBC, 2016 based on default in payment of financial debt. 2. Dispute regarding the nature of the debt claimed by the Applicant as financial debt under Section 5(8) of IBC. 3. Determination of whether the amount payable by the Corporate Debtor to the Applicant constitutes financial debt or operational debt. Analysis: Issue 1: Initiation of CIRP under Section 7 of IBC The main application CP(IB) No. 611 of 2019 was filed to initiate CIRP of the Corporate Debtor under Section 7 of IBC, alleging default in paying a financial debt of Rs. 1.85 crore. The Applicant claimed the debt based on a sub-contract agreement and a settlement agreement. The Corporate Debtor disputed the claim, stating the amount was in dispute in a commercial suit and arbitration proceeding, and therefore not a financial debt under IBC. Issue 2: Dispute over Nature of Debt The dispute centered around whether the amount claimed by the Applicant as financial debt fell within the definition of Section 5(8) of IBC. The Corporate Debtor argued that the disputed amount did not qualify as a financial debt and hence the application under Section 7 was not maintainable. The Tribunal analyzed the original transaction between the parties to determine the nature of the debt claimed. Issue 3: Classification of Debt as Financial or Operational Upon review of the evidence and materials, the Tribunal found that the amount payable by the Corporate Debtor to the Applicant, arising from a sub-contract for construction work, did not constitute a financial debt. The Tribunal highlighted that the transaction was more in the nature of operational debt rather than financial debt, as per the terms of the sub-contract and settlement agreement. The Tribunal emphasized that the amount payable was for services provided under the sub-contract and did not meet the criteria for financial debt under IBC. Conclusion The Tribunal rejected the application for initiation of CIRP under Section 7 of IBC, as the claimed amount was deemed operational debt and not financial debt. The Tribunal's decision was based on the analysis of the original transaction, the terms of the sub-contract, and the settlement agreement between the parties. The Tribunal clarified that the disputed amount did not meet the requirements to be classified as financial debt under the Insolvency and Bankruptcy Code. This detailed analysis of the judgment provides a comprehensive overview of the issues involved and the Tribunal's reasoning behind rejecting the application for initiation of CIRP based on the nature of the debt claimed by the Applicant.
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