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2020 (4) TMI 509 - Tri - IBCMaintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its debt - existence of debt and dispute or not - HELD THAT - There are several disputed question of facts, which cannot be looked into in a proceedings initiated under the provisions of Code, which is admittedly summary in nature, wherein prima facie debt and default in question should not be in dispute, in an Application/Petition filed under provisions of section 9 of Code. The Adjudicating Authority, even cannot go simply go by debt and default, it should also see the object of Code, before initiating CIRP against the Corporate Debtor, which would have serious civil consequences, and would result in devastating effect on various stakeholders of Corporate Debtor. It is settled position of law that the provisions of Code cannot be invoked for recovery of outstanding alleged amount(s) - The Hon'ble Supreme Court in the case of Mobilox Innovations (P.) Ltd. v. Kirusa Software (P.) Ltd. 2017 (9) TMI 1270 - SUPREME COURT has inter alia, held that IBC, 2016 is not intended to be substitute to a recovery forum. The Petitioner failed to point out the claim in question is un-disputed and it filed with an intention to recover the alleged dues rather to justify to initiate CIRP in respect of Corporate Debtor - Petition dismissed.
Issues Involved:
1. Initiation of Corporate Insolvency Resolution Process (CIRP). 2. Existence of operational debt and default. 3. Pre-existing disputes and contractual breaches. 4. Jurisdiction and contractual obligations. 5. Abuse of process of law. 6. Summary nature of proceedings under Insolvency and Bankruptcy Code (IBC). Issue-wise Detailed Analysis: 1. Initiation of Corporate Insolvency Resolution Process (CIRP): The petitioner, M/s. JCDecaux Advertising India Private Limited, sought to initiate CIRP against M/s. Ithaca Estates Private Limited under Section 9 of the Insolvency and Bankruptcy Code (IBC), 2016, for a default amount of ?24,56,796/-. The petitioner claimed that the respondent failed to make timely payments as per the contract terms, despite rendering services and issuing invoices. 2. Existence of operational debt and default: The petitioner argued that the respondent admitted its liability through email communications and failed to pay the outstanding amount. The respondent, however, disputed the debt, claiming excess payments and deficiencies in the services provided. The respondent also alleged that the petitioner removed their brand display without consent, affecting their campaign. 3. Pre-existing disputes and contractual breaches: The respondent raised several disputes regarding the quality of services and contractual breaches by the petitioner. They contended that the petitioner assured marketing near Kempegowda International Airport but failed to meet the quality standards. The respondent also claimed that the petitioner did not respond to requests for a favorable payment modality and removed the brand display without consent, breaching contractual obligations. 4. Jurisdiction and contractual obligations: The respondent argued that per Clause 20 of the contract, disputes should first be resolved through friendly negotiations and, if unresolved, submitted to the jurisdiction of New Delhi. The petitioner did not follow this procedure, and the respondent emphasized that the IBC should not be used as a means to recover debts without exhausting alternative dispute resolution mechanisms. 5. Abuse of process of law: The respondent alleged that the petition was an abuse of the process of law, as the petitioner was aware of the disputed debt through prior communications and emails. They cited Supreme Court judgments emphasizing that IBC is not a substitute for a recovery forum and should not be invoked when there is a pre-existing dispute. 6. Summary nature of proceedings under Insolvency and Bankruptcy Code (IBC): The tribunal noted that proceedings under the IBC are summary in nature and should not involve disputed questions of fact. The tribunal emphasized that the existence of an undisputed debt is a prerequisite for initiating CIRP. The tribunal found that the petitioner failed to prove that the debt was undisputed and that the intent was to recover alleged dues rather than initiate CIRP. Conclusion: The tribunal dismissed the petition, concluding that the petitioner failed to demonstrate an undisputed debt and that the proceedings were initiated with the intent to recover dues. The tribunal granted liberty to the petitioner to seek other remedies available under the law. The order emphasized the importance of exhausting alternative dispute resolution mechanisms and adhering to contractual obligations before invoking the IBC. Final Order: C.P. (IB) No. 236/BB/2019 was dismissed, allowing the petitioner to pursue other legal remedies. No order as to costs was made.
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