2021 (12) TMI 961 - AT - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational creditors - existence of debt and dispute or not - HELD THAT - The Respondent has given a lot of stress on not providing minimum cargo belly space to the Respondent for loading cargo and as a result of which the Appellant was supposed to accept the debit notes termination of the agreement by the Appellant was nothing but a coercion to the Respondent being a petty business unit and thereby wriggle out of the liability which the Appellant was supposed to bear in respect of various elements of expenditure. Repeated internal circular dated 13.02.2017 and 15.02.2017 by the Appellant on the issue of cargo load to its employees itself reflect that they were violating the terms of the agreement for minimum belly space to the Respondent. Different emails and meetings between the parties cited by the Respondent to prove that the Appellant s claim is false or frivolous. The financial condition of the Corporate Debtor is not healthy. CIRP was already initiated against it and the same has been closed by the Adjudicating Authority on 23rd September, 2021 after settlement with the Union Bank of India who has entered into OTS Agreement for release of payments in different instalments till 31.03.2023 and the Corporate Debtor has already paid two instalments in terms of the Settlement Agreement. The Resolution Professional (RP) associated with the CIRP also confirmed that the Original Applicant- Operational Creditor under the Code also recommended for withdrawal of Application - The Adjudicating Authority has drawn the inference of pre-existence of dispute which cannot be ruled out. It is also very much clear that the Appellant is chasing for payments which is also not the purpose of the Code. There are no infirmity in the impugned order - appeal dismissed.

Summary

Issues involved:
Appeal against dismissal of Corporate Insolvency Resolution Process petition under Section 9 of the Insolvency and Bankruptcy Code, 2016.

Analysis:
1. The appeal was filed by the Appellant, Go Airlines (India) Limited, against the order of the Adjudicating Authority dismissing the petition for initiating Corporate Insolvency Resolution Process (CIRP) against Sovika Aviation Services Pvt. Ltd. The Adjudicating Authority found the liability in question to be contentious and disputed, not a clean and clear liability, leading to the dismissal of the petition under Section 9 of the Code. The Code is not meant for resolving contentious disputes but for restructuring finances of debt-ridden debtors. The Adjudicating Authority emphasized the need for thorough investigation and examination of evidence before deciding on liabilities.

2. The Appellant, a passenger airline operator, had a Cargo Agreement with the Respondent, specifying various payment obligations. Disputes arose regarding payments and cargo space availability, leading to strained relations between the parties. The Respondent raised issues of loss of revenue, unlawful loading of cargo, and non-compliance with the agreement terms by the Appellant. The Respondent highlighted operational issues faced, resulting in financial losses and disputes over debit notes.

3. Despite attempts to settle outstanding amounts, termination notices were issued by the Appellant due to non-clearance of dues. A Demand Notice was served for unpaid operational debt, and the Respondent responded by raising concerns about cargo space availability, loss of revenue, and disputes over commercial terms. The Respondent emphasized the existence of a genuine and serious dispute, alleging coercion by the Appellant to avoid liabilities.

4. The Adjudicating Authority noted the financial condition of the Corporate Debtor, indicating a previous initiation of CIRP and subsequent settlement with creditors. The Authority highlighted the absence of the Appellant's claim in the settled list of creditors and the encashment of a bank guarantee towards dues. The Authority concluded that the Appellant's pursuit of payments did not align with the purpose of the Code and emphasized the Supreme Court's stance that IBC should not substitute a recovery forum in cases of real disputes.

5. Considering the pre-existence of a dispute and the Appellant's pursuit of payments, the Adjudicating Authority upheld the dismissal of the petition. The appeal was subsequently dismissed, with no order as to costs, and any pending applications or interim orders were disposed of accordingly.