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2020 (4) TMI 679 - Tri - Insolvency and BankruptcyMaintainability of application - initiation of CIRP - Recovery of debt - Corporate Debtor failed to make repayment of its debt - existence of debt and dispute or not - HELD THAT - The Respondent has paid the principal amount of all three Agreements in question in two instalments viz ₹ 3,00,00,000/- on 1-1-2019 and ₹ 1,13,34,068/- on 20-6-2019. Admittedly, there is no interest mentioned in the Agreements in question. However, the Petitioners added interest too unilaterally. Another material blunder committed in making claim in the instant Petition is that though buy back price mentioned in the Agreement for Residential Apartment bearing 6 D was mentioned as ₹ 1,62,36,928/, it was wrongly claimed ₹ 4,81,92,000/which is the price fixed for second option. There is no mention of interest either in the Agreements or Agreement to sale and Development Agreement - There is no rationale in fixing buy back price and it appears to be fixed in lump sum and therefore, it can be offered to the Respondent in lump sum. In the absence of any document produced in support of first Option, the claim in question justified so as to take it as legally liable to pay. Therefore, the Petitioners failed to prove that they are entitled to recover Debt in question, in terms of Agreements in question. Whether the instant Petition is filed with an intention to recover alleged outstanding amount after receiving principle amount in question in full or to initiate CIRP on justified grounds? - whether the Respondent is insolvent/solvent Company; whether the Petitioners approached the Tribunal with clean hands with bona fide intention? - HELD THAT - The Petitioners have admittedly received Principle amount in full with no element of interest mentioned in the Agreements in question. And the instant Petition is filed under the guise of provisions of Code, with an intention to recover the difference between principle amount and buy back payments as referred to in Agreements in question and also unilaterally imposing condition of interest for failure to pay difference of amount. It is settled position of law that provisions of Code cannot be invoked as a substitute for debt enforcement or recovery-proceedings. The Proceedings contemplated under the provisions of Code are summary in nature and disputed questions of facts and law cannot be gone into those proceedings as several disputed questions of facts and law. Wherein even Debt in question is not established. Therefore, other remedies available to the Petitioners as per Agreements in question and also as per law like initiating suit for specific performance or to file suit to get decree for recovery of alleged outstanding amount by adducing appropriate evidence and documents etc. The Petitioners has failed to establish the claim as made in the Company Petition, so as to constitute default to initiate CIRP in respect of the Respondent and thus it is liable to be rejected by reserving liberty to the Petitioners to invoke appropriate civil remedy - Petition dismissed.
Issues Involved:
1. Initiation of Corporate Insolvency Resolution Process (CIRP) under Section 7 of the IBC, 2016 2. Determination of Financial Creditor Status 3. Existence of Debt and Default 4. Maintainability of the Petition under the IBC Amendment Ordinance, 2019 5. Solvency of the Respondent Company 6. Jurisdiction of the Tribunal 7. Appropriate Forum for Dispute Resolution Detailed Analysis: 1. Initiation of Corporate Insolvency Resolution Process (CIRP) under Section 7 of the IBC, 2016 The Petitioners filed CP (IB) No. 331/BB/2019 under Section 7 of the Insolvency and Bankruptcy Code (IBC), 2016, seeking to initiate CIRP against the Respondent for an outstanding amount of ?8,25,37,700. The Petitioners argued that they had invested in the Respondent’s project with buy-back promises and arrangements, and upon exercising their buy-back option, the Respondent failed to pay the agreed amount. 2. Determination of Financial Creditor Status The Petitioners contended that they are Financial Creditors as defined under Section 5(8)(f) of the IBC, 2016, as the transaction had the commercial effect of a borrowing. They argued that since they exercised the buy-back option, they should be considered as having extended a loan rather than purchasing flats, thus qualifying them as Financial Creditors. 3. Existence of Debt and Default The Respondent opposed the petition, arguing that the Petitioners had already received the principal amount of ?4,13,34,068 and that there was no provision for interest in the agreements. The Tribunal noted that the Petitioners had unilaterally added interest and that the claimed buy-back price for one apartment was incorrectly stated. The Tribunal found that the Petitioners failed to prove the existence of debt and default as per the agreements. 4. Maintainability of the Petition under the IBC Amendment Ordinance, 2019 The Respondent argued that the petition was not maintainable under the IBC Amendment Ordinance, 2019, which came into force on December 28, 2019. The Tribunal noted that the Petitioners failed to satisfy the conditions mentioned in the amendment, thus questioning the maintainability of the petition. 5. Solvency of the Respondent Company The Respondent provided evidence of its solvency, including its revenue and profit over the last three years, worth over ?300 crore in projects, and assets worth over ?90 crore. The Tribunal acknowledged the Respondent's solvency and its successful completion of several projects, noting that the initiation of CIRP would adversely affect numerous stakeholders and public interest. 6. Jurisdiction of the Tribunal The Tribunal emphasized that the proceedings under the IBC are summary in nature and that disputed questions of fact and law cannot be adjudicated in such proceedings. It was noted that the Petitioners should seek remedies available under civil law, such as filing a suit for specific performance or recovery of the alleged outstanding amount. 7. Appropriate Forum for Dispute Resolution The Tribunal pointed out that the agreements contained an arbitration clause, which the Petitioners should have invoked to resolve the disputes. The Tribunal stressed that the IBC is not a substitute for debt enforcement or recovery proceedings, as established by the Supreme Court in various judgments. Conclusion: The Tribunal concluded that the Petitioners failed to establish their claim and the existence of debt and default necessary to initiate CIRP. The petition was rejected, and the Petitioners were advised to seek appropriate civil remedies. The Tribunal emphasized the importance of adhering to the terms of the agreements and the appropriate forum for dispute resolution.
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