2022 (6) TMI 781 - Tri - Insolvency and Bankruptcy

Maintainability 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 - Admittedly, the Memorandum of Undertaking was executed between M/s. ABW Infrastructure Limited and the present Application and the respondent was in no way connected to the MOU. There is no evidence on record to show that the money in question was in fact paid to present respondent out of the said agreement. Further, the provision in Section 4 of the Haryana Protection of Interest of Depositors in Financial Establishment Act, 2013 clearly stipulates that the District Magistrate is empowered to pass only an order of attachment and he cannot pass any order for recovery of the money. On perusal of orders passed by the District Magistrate which clearly shows that an order of attachment has been passed in terms of Section 4 of the Haryana Act. The Applicant has failed to make out a case under Section 7 of IBC, 2016 - Application dismissed as not maintainable.

Issues:
1. Maintainability of the application under Section 7 of the Insolvency & Bankruptcy Code, 2016 based on a recovery certificate.
2. Interpretation of the order passed by the District Magistrate under the Haryana Protection of Interest of Depositors in Financial Establishment Act, 2013.
3. Determining the liability of the Corporate Debtor in a financial transaction dispute.

Issue 1: Maintainability of the application under Section 7 of the Insolvency & Bankruptcy Code, 2016 based on a recovery certificate:
The application was filed by the Financial Creditors seeking initiation of Corporate Insolvency Resolution Process against the Corporate Debtor based on a recovery certificate issued by the District Magistrate. The Applicant argued that the certificate of recovery constituted a fresh cause of action under Section 7 of IBC, 2016, relying on a Supreme Court judgment. The Respondent opposed the application, contending that the Applicant was not a Financial Creditor and the Respondent was not a party to the transaction in question. The Tribunal analyzed the arguments and held that the Applicant failed to establish a case under Section 7 of IBC, 2016, leading to the dismissal of the application.

Issue 2: Interpretation of the order passed by the District Magistrate under the Haryana Protection of Interest of Depositors in Financial Establishment Act, 2013:
The Respondent argued that the order passed by the District Magistrate was an order of attachment, not a judgment or decree for money, as per the provisions of the Haryana Act. The District Magistrate's power was limited to issuing an order of attachment, not for recovery of money. The Tribunal examined the relevant sections of the Act and concluded that the District Magistrate's order was indeed an order of attachment, confirming that it did not constitute a basis for initiating insolvency proceedings under Section 7 of IBC, 2016.

Issue 3: Determining the liability of the Corporate Debtor in a financial transaction dispute:
The dispute arose from a transaction where the Corporate Debtor failed to pay the assured monthly investment return to the Financial Creditors. The Financial Creditors sought to recover the amount based on the order passed by the District Magistrate. However, the Tribunal found no evidence connecting the Respondent to the transaction or showing that the money was paid to the Respondent. The Tribunal emphasized that the Memorandum of Understanding did not involve the Respondent, leading to the conclusion that the Applicant failed to establish the liability of the Corporate Debtor in the financial dispute.

In conclusion, the Tribunal dismissed the application under Section 7 of IBC, 2016 as not maintainable due to the lack of evidence establishing the case against the Corporate Debtor and the interpretation of the order passed by the District Magistrate as an order of attachment, not a judgment or decree for money.

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