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2019 (11) TMI 772 - Tri - Insolvency and BankruptcyMaintainability of application - initiation of CIRP - Corporate Debtor has committed default for a total outstanding amount - Existence of dispute or not - HELD THAT - The Petitioner failed to substantiate the alleged outstanding amount by producing relevant documents to prove that the materials in question were supplied in required standard - Therefore, we are of the considered opinion that the Petitioner failed to establish its claim with regard to Principal amount and interest as claimed in the Petition and it is filed only to recover the alleged outstanding amount. Therefore, it is not a fit case for admission and is liable to be dismissed. Application dismissed.
Issues Involved:
1. Maintainability of the petition under Section 9 of the IBC, 2016. 2. Existence of operational debt and its default. 3. Quality of materials supplied by the Petitioner. 4. Compliance with the terms and conditions of the purchase order. 5. Appointment of Interim Resolution Professional (IRP). 6. Purpose of the IBC as a recovery mechanism. Issue-wise Detailed Analysis: 1. Maintainability of the Petition: The Respondent contended that the petition is not maintainable either in law or on facts, alleging that the Petitioner suppressed material facts and approached the court with unclean hands. The Respondent argued that the Petitioner used the petition to harass and mislead the court, aiming to recover a disputed debt rather than initiate a genuine Corporate Insolvency Resolution Process (CIRP). 2. Existence of Operational Debt and its Default: The Petitioner claimed an outstanding amount of ?28,69,533 plus 18% interest per annum for the supply of TMT Bars. The Respondent disputed the claim, arguing that the amount is not tenable under the Code and that the Code's intention is not for debt recovery but for the revival of insolvent companies. The Tribunal noted that the Petitioner failed to provide sufficient evidence to prove the debt and default beyond doubt, as required under the IBC. 3. Quality of Materials Supplied by the Petitioner: The Respondent alleged that the Petitioner supplied substandard construction materials, which led to disputes and requests for replacement. The Respondent argued that the Petitioner had promised to replace the defective materials but failed to do so, causing delays and additional costs for the Respondent. The Tribunal found that the Petitioner failed to substantiate the quality of the materials supplied and did not provide certification from the Respondent's engineers. 4. Compliance with the Terms and Conditions of the Purchase Order: The Tribunal examined the terms and conditions of the purchase order, which included provisions for advance payment, payment deadlines, and the right to reject inferior quality materials. The Petitioner failed to comply with these terms, particularly regarding the certification of material quality and timely legal action to recover the outstanding amount. The Tribunal emphasized that compliance with these terms is essential for establishing a legally enforceable debt. 5. Appointment of Interim Resolution Professional (IRP): The Petitioner did not propose an IRP or request the Adjudicating Authority to appoint one, as required under Section 9(3) and 9(4) of the IBC. The Tribunal noted that CIRP cannot be conducted without an IRP, and the Petitioner's failure to address this requirement further weakened their case. 6. Purpose of the IBC as a Recovery Mechanism: The Tribunal reiterated that the IBC is not intended to be a substitute for a recovery forum but to initiate CIRP for justified reasons. The Tribunal cited the Supreme Court's judgments in Transmission Corporation of A.P. Ltd. v. Equipment Conductors and Cables Ltd. and Mobilox Innovations (P.) Ltd. v. Kirusa Software (P.) Ltd., which emphasized that the existence of undisputed debt is a sine qua non for initiating CIRP and that the IBC should not be used for debt recovery. Conclusion: The Tribunal concluded that the Petitioner failed to establish the alleged outstanding amount and the quality of materials supplied. The Petition was filed to recover the alleged debt without sufficient evidence and compliance with the purchase order's terms. The Tribunal dismissed the petition, allowing the Petitioner to replace the defective materials and make a valid claim thereafter. No costs were ordered.
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