2022 (8) TMI 546 - Tri - 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 - service of demand notice - HELD THAT - The Operational Creditor issued a demand notice in Form 3 under section 8 of the Code on 11 January 2020. Further, the Operational Creditor has submitted an affidavit under section 9(3)(b) of the Code, affirming that the Corporate Debtor has not raised any dispute regarding the unpaid operational debt. The Operational Creditor has further produced affidavit affirming that it has not received any payment from the Corporate Debtor after the issuance of the demand notice in Form 3. The purpose of the Code is to resolve the insolvency of the Corporate Debtor and not recovery of debt. On perusal of the said documents, it is opined that the Corporate Debtor in the instant case is not insolvent and very much capable of repaying the due amount to the Operational Creditor. The admission on the part of the Corporate Debtor further suggests to the possibility of collusion between the parties. As such, this Adjudicating Authority is not fully satisfied that the instant petition should be admitted and the Corporate Debtor should be brought under CIRP - petition dismissed.

Summary

Issues:
Company petition under section 9 of the Insolvency and Bankruptcy Code, 2016.

Detailed Analysis:

1. Operational Creditor's Submission:
The Operational Creditor filed a petition seeking Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor due to non-payment of dues for a Detailed Project Report (DPR) prepared as per the work order. The debt fell due in June 2019, amounting to Rs. 5,50,000/- with interest at 18% per annum. The Operational Creditor submitted various documents to support its claim.

2. Corporate Debtor's Defense:
The Corporate Debtor acknowledged the work order and invoice but stated inability to pay due to project delays. Despite attempts to settle the debt, no agreement was reached.

3. Additional Submissions:
The Operational Creditor highlighted the Corporate Debtor's admission of outstanding debts and lack of dispute raised by the Corporate Debtor. Financial information and balance sheets were also submitted by both parties.

4. Analysis and Findings:
The Tribunal noted the Operational Creditor's compliance with the Code in issuing a demand notice and the Corporate Debtor's admission of the debt. However, upon reviewing the Corporate Debtor's financial data, it was found to be financially stable with substantial reserves and no long-term borrowings. The Tribunal emphasized that the Code aims to resolve insolvency, not debt recovery.

5. Legal Precedent and Decision:
Citing a previous judgment, the Tribunal cautioned against admitting petitions without genuine insolvency concerns to prevent misuse of the process. Due to doubts about collusion and the Corporate Debtor's financial capacity, the Tribunal dismissed the Company Petition. The Operational Creditor was advised to seek remedies under other laws. The order was to be communicated to all parties promptly.

6. Conclusion:
The Tribunal's decision was based on the Corporate Debtor's financial stability and lack of genuine insolvency concerns, leading to the dismissal of the Company Petition. The Operational Creditor was granted the option to pursue alternative legal remedies.