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2020 (9) TMI 1084 - Tri - Insolvency and BankruptcyMaintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - existence of debt and dispute or not - HELD THAT - The facts and circumstances of the case as detailed, has clearly established that the Petitioner is using the provisions of Code with main object to recover the alleged due rather than to seek to initiate CIRP on justified grounds. It is also relevant to point out here that role of Operational Creditor, who filed case U/s. 9 of the Code, will be nominal during the process of CIRP, and it is dominated by Financial Creditors. Therefore, the settled principle of law that provisions of Code cannot be invoked to recover alleged/disputed due, would be more applicable to the Operational Creditors rather than Financial Creditors, who filed cases U/s. 7 of Code. Therefore, it is to be held that the Petitioner has invoked the provisions of Code with an intention to recover alleged due rather than to justify its case to initiate CIRP in terms of object of the Code. Principles of Double Jeopardy - HELD THAT - It is also relevant to point out here that legal principle of double jeopardy would also applicant to the instant case, as the Petitioner has admittedly invoked provisions of N.I Act for dishonour of cheques issued by the Respondent, which is sub-judice. The Adjudicating Authority cannot enter into above disputed issues, in summary proceedings as contemplated under provisions of Code. The instant Company Petition is filed with an intention to recover the alleged outstanding amount rather than to seek initiation of CIRP in respect of the Corporate Debtor, which is against the object of the Code. The Petitioner cannot be permitted to bargain for settlement of alleged dues, in a case filed under Section 9 of Code and it is for the Parties to settle those issues between them. Therefore, the instant Petition is not maintainable under the provisions of Code. Petition dismissed as not maintainable.
Issues Involved:
1. Initiation of Corporate Insolvency Resolution Process (CIRP). 2. Existence and acknowledgment of debt. 3. Dispute over the amount due. 4. Use of Insolvency and Bankruptcy Code (IBC) for debt recovery. 5. Legal principle of double jeopardy. 6. Financial impact due to COVID-19. Detailed Analysis: 1. Initiation of Corporate Insolvency Resolution Process (CIRP): The petitioner, M/s. Digital Waves International Pvt Ltd, filed C.P (IB) No. 399/BB/2019 under Section 9 of the IBC, 2016, seeking to initiate CIRP against M/s. Aria Brew and Dine Private Limited for a default amount of ?1,98,19,710.49. The petitioner claimed that the respondent had committed a default by not paying the outstanding amount despite several High Sea Sale Agreements and multiple invoices amounting to ?4,27,09,336/-. 2. Existence and acknowledgment of debt: The petitioner asserted that the respondent acknowledged the debt of ?2,16,11,111/- via a letter dated 11.01.2019 and issued post-dated cheques, which were dishonored. The petitioner further sent a Demand Notice on 13.05.2019, which the respondent did not reply to, nor did they deny the services rendered by the petitioner. 3. Dispute over the amount due: The respondent contended that the amount claimed by the petitioner was exorbitant and lacked substance. They argued that they had already paid ?1.18 Crores and that the remaining balance was only about ?97 lakhs. The respondent also highlighted that the petitioner had withdrawn cases filed under Section 138 of the Negotiable Instruments Act, 1881, upon the issuance of cheques/Demand Drafts. 4. Use of Insolvency and Bankruptcy Code (IBC) for debt recovery: The tribunal noted that the petitioner was using the provisions of the IBC with the main objective of recovering the alleged dues rather than seeking to initiate CIRP on justified grounds. The tribunal emphasized that the role of an Operational Creditor in CIRP is nominal and dominated by Financial Creditors. The tribunal cited the Supreme Court's judgment in Mobilox Innovations Private Limited Vs. Kirusa Software Private Limited, which held that IBC is not intended to be a substitute for a recovery forum. 5. Legal principle of double jeopardy: The tribunal pointed out that the petitioner had already invoked the provisions of the Negotiable Instruments Act for dishonored cheques, which were sub-judice. The tribunal held that the principle of double jeopardy would apply in this case, as the petitioner was attempting to recover the same amount through multiple proceedings. 6. Financial impact due to COVID-19: The respondent also argued that the current economic situation due to the COVID-19 pandemic had adversely affected their financial status. The tribunal took note of the Government of India's mitigating steps, including increasing the threshold for initiating CIRP proceedings to ?1 crore and temporarily suspending Sections 7, 9, and 10 of the IBC. Conclusion: The tribunal concluded that the petitioner had invoked the provisions of the IBC with an intention to recover the alleged outstanding amount rather than to seek initiation of CIRP, which is against the object of the Code. The tribunal held that the petition was not maintainable under the provisions of the IBC and dismissed C.P.(IB) No. 399/BB/2019. However, the tribunal clarified that this order would not prevent the parties from settling their disputes or the petitioner from invoking any other remedy available under any other law, including prosecuting the case already filed under the Negotiable Instruments Act. No order as to costs was made.
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