2019 (4) TMI 736 - Tri - Insolvency and Bankruptcy

Initiation of Corporate Insolvency process - Operational debt - Section 7, 8 or 9 of the Insolvency and Bankruptcy Code, 2016 - Held that - The Hon ble Supreme Court in the case of Mobilox Innovations (P.) Ltd. v. Kirusa Software (P.) Ltd 2017 (9) TMI 1270 - SUPREME COURT OF INDIA , has inter alia held that IBC, 2016 is not intended to the substitute to a recovery forum. The Hon ble Supreme Court in B.K. Educational Services (P.) Ltd. v. Parag Gupta & Associates 2018 (10) TMI 777 - SUPREME COURT , has inter alia, held that provisions of Limitation Act will apply to proceedings or appeals before NCLT/NCLAT. Section 238A of the Code make provisions of Limitation Act would apply to proceedings under the Code. The instant Company petition is not fit case to admit to initiate CIRP, and thus it is only liable to be dismissed.

Issues Involved:
1. Maintainability of the Company Petition under the Insolvency and Bankruptcy Code (IBC), 2016.
2. Compliance with procedural requirements under IBC and related rules.
3. Existence of operational debt and the status of the petitioner as an operational creditor.
4. Alleged contradictions and discrepancies in the petitioner's claims.
5. Timeliness and limitation of the claims.
6. Nature of the proceedings under IBC as distinct from recovery proceedings.

Issue-wise Detailed Analysis:

1. Maintainability of the Company Petition under IBC, 2016:
The respondent contended that the petition was not maintainable as the petitioner did not comply with the provisions of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016, following the transfer from the High Court of Karnataka. The Tribunal agreed, noting that the petitioner failed to provide necessary details and documents as required under the IBC and related rules. The petition was thus liable to be dismissed on this ground alone.

2. Compliance with Procedural Requirements:
The Tribunal observed that the petitioner did not take appropriate steps to comply with the provisions of the IBC after the case was transferred from the High Court. Despite several adjournments, the petitioner failed to rectify defects in the application, such as leaving material columns blank and not providing supporting documents. The Tribunal emphasized that compliance with procedural rules is mandatory for initiating proceedings under the IBC.

3. Existence of Operational Debt and Status of the Petitioner:
The respondent argued that there was no operational debt and that the petitioner was not an operational creditor as defined under the IBC. The Tribunal found that the petitioner did not provide adequate details or documents to establish the existence of an operational debt. The Tribunal cited the Supreme Court's judgment in Mobilox Innovations (P.) Ltd. v. Kirusa Software (P.) Ltd., which held that the IBC is not a substitute for a recovery forum.

4. Alleged Contradictions and Discrepancies:
The Tribunal noted several discrepancies in the petitioner's claims regarding the outstanding amount. Different amounts were claimed in various notices and petitions without consistent supporting documents. The Tribunal found that the petitioner was seeking recovery of alleged outstanding amounts without substantiating them, which is not the purpose of the IBC.

5. Timeliness and Limitation of the Claims:
The respondent contended that the petitioner's claims were time-barred and not supported by a complete statement of accounts. The Tribunal agreed, citing the Supreme Court's judgment in B.K. Educational Services (P.) Ltd. v. Parag Gupta & Associates, which held that the provisions of the Limitation Act apply to proceedings under the IBC. The Tribunal found that the petitioner's claims were not substantiated with necessary documents and were thus not maintainable.

6. Nature of Proceedings under IBC:
The Tribunal reiterated that the IBC is not meant for recovery proceedings but for initiating the Corporate Insolvency Resolution Process (CIRP) when there is a strong prima facie case. The Tribunal found that the petitioner was prosecuting the case in a casual manner without following the law, and the discrepancies in the petitioner's claims indicated a lack of bona fides.

Conclusion:
The Tribunal concluded that the instant Company Petition was not fit for admission to initiate CIRP and dismissed the petition. The Tribunal emphasized that the object of the IBC is to initiate CIRP subject to satisfying the conditions required by law and not for recovery proceedings. The petition was dismissed with no order as to costs.

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