2021 (1) TMI 936 - Tri - IBC

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Respondent has failed to comply with the order passed by the Hon'ble K-RERA and are in default of financial debt - HELD THAT - It is a settled position of law that the provisions of Code cannot be invoked for recovery of outstanding amount but it can be invoked to initiate CIRP for justified reasons as per the Code. The Hon'ble Supreme Court in the case of Mobilox Innovations Private Limited Vs. Kirusa Software Private Limited 2017 (9) TMI 1270 - SUPREME COURT , has inter alia, held that I B Code, 2016 is not intended to be substitute to a recovery forum. In the instant case, it is seen that the Petitioners have already obtained an order from the relevant forum under the RERA Act and the same can be executed before any relevant forum. This Tribunal cannot be used as a recovery forum when orders of the K-RERA or any other forum are not complied with. Merely because the other courses may be cumbersome, as pleaded, cannot be a ground for taking recourse to the I B Code when no case is even otherwise made out for admission, since the Petitioners do not admittedly meet the minimum threshold of 10% etc. of Financial Creditors of the same class. For this reason, the Ld Counsel for the Petitioner's plea that liberty may be granted to file a fresh petition also cannot be acceded to. The petition is clearly an attempt at forum shopping and deserves to be dismissed. Petition dismissed.

Summary

Issues:
Initiation of Corporate Insolvency Resolution Process under section 7 of the Insolvency and Bankruptcy Code, 2016 for default of financial debt.

Analysis:
The petitioners filed a petition under section 7 of the Insolvency and Bankruptcy Code, 2016 against the respondent, claiming a default of financial debt. The petition detailed agreements entered into between the parties for the purchase of property and the failure of the respondent to hand over possession as per the agreed timelines. The petitioners had obtained a loan from a bank for the purchase, and despite paying a significant sum, the respondent failed to fulfill its obligations. The petitioners also approached the Karnataka Real Estate Regulatory Authority, which passed an order directing the respondent to refund a specific amount with interest and discharge the bank loan. The respondent, however, failed to comply with this order, leading to the initiation of the insolvency resolution process.

The Tribunal noted that the petition did not meet the threshold requirement for filing jointly as financial creditors under the Code. The Tribunal highlighted that the Code cannot be invoked solely for recovery purposes but should be used to initiate Corporate Insolvency Resolution Process for valid reasons. Referring to a Supreme Court case, the Tribunal emphasized that the Code is not a substitute for a recovery forum. Since the petitioners had already obtained an order from the Real Estate Regulatory Authority, the Tribunal ruled that the Code should not be used as a recovery forum when other avenues are available. The Tribunal dismissed the petition, stating that it was an attempt at forum shopping and did not meet the necessary criteria for admission under the Code.

In conclusion, the Tribunal dismissed the petition as it failed to meet the minimum threshold requirements for admission under the Insolvency and Bankruptcy Code. The Tribunal clarified that the dismissal did not prevent the petitioners from seeking remedies under other laws to address their grievances. No costs were awarded in this matter.