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TMI Blog2017 (3) TMI 1616X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 8 of I & B Code, we are of the view that the facts of the case do not warrant to invoke section 9 to declare moratorium and consequential directions. Company petition dismissed. X X X X Extracts X X X X X X X X Extracts X X X X ..... B Code, but subsequent to completion of 10 days reply period, the debtor gave three replies on 14.2.2017, 15.2.2017 and on 16.2.2017 stating that for the creditor failed to perform the contract as agreed between the creditor and the debtor, the debtor is under no obligation to repay the same saying that the debtor indeed has suffered loss by non-performance of the Contract as agreed between them. 4. Today, the debtor Counsel, without prejudice to the contentions raised by the debtor, submits that even if the claim raised by the creditor is assumed as true and correct, the Creditor, basing on this claim, cannot initiate the insolvency proceedings labelling this Company as unable to pay this money to the creditor. The debtor Counsel submits that there is an Arbitration Clause in the work order between them, therefore there being Arbitration clause, the creditor ought to have initiated Arbitration proceedings against this claim instead of initiating this Insolvency Resolution process against this Company that has net worth of ₹ 24,000 crore approximately with a Paid up Capital of ₹ 263 crore. The debtor Counsel also submits that it has liability of ₹ 29,000 crore a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n plan, two, if the resolution plan failed, then to initiate liquidation so as to liquidate the assets of the company and distribute the same among the creditors. By reading this Code, it makes it clear it is not meant for recovery. 7. To defeat this argument, the creditor counsel has placed a citation Ashoka Industries v. Tobu Enterprises Ltd. (2003 (65) DRJ 281) to say that when debt is admitted, Court should not countenance a defence articulated for dismissal of winding-up petition. When the Debtor Company admitted its debt and requested for further supplies, the defence taken is to be considered as sham and dishonest. The Creditor Counsel submits that the debtor in the case supra despite having put up similar defence stating that supply of goods is not in accordance with the arrangement the court has not considered it. Therefore, this Bench, considering the ground of refusal as mala fide, may admit this Application u/s. 9 of I & B Code. 8. The Hon'ble Delhi High Court mentioned in para 5 of it as follows: "i) If there is a bona fide dispute and the defense is a substantial one, the Court will not wind-up the company. (ii) Where the debt is undisputed, the Court wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g-up proceedings cannot be equated to the cases falling within I & B Code because the insolvency proceedings could be initiated only on two grounds mentioned above. 10. It is not out of context to mention what is meant by insolvency and how many kinds of insolvencies are there. 11. Insolvency means inability to make payment of owed money on time by a person or a company. In companies, there are two forms of insolvencies -- one is cash flow insolvency and another is Balance Sheet insolvency. 12. Cash Flow insolvency is when a person or a company has enough assets to pay what is owed, but does not have the appropriate form of payment. For example, a person may own a large house and valuable car, but not have enough liquid assets to pay a debt when it falls due. The better off in this situation is it can usually be resolved by negotiation. 13. Balance Sheet insolvency is when a person or company does not have enough assets to pay all of its debts, and then such company might enter into bankruptcy directly. It need not be said separately that refusal to pay amounts to deemed insolvency; the logic behind it is inability to repay as well as refusal to repay leads to non-payment to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (e) of Sub-section (1) of Section 433 alone will fall u/s. 7, 9, and 10 of the I & B Code and no other case. The common right under I & B Code is that there must be either insolvency or bankruptcy. If it is a company, there shall be insolvency situation, if it is individual person there shall be bankruptcy situation. So the sections of law governed by I & B Code could not be taken out of context to apply to initiate insolvency process unless the company is unable to pay or refused to pay, because initiating this process is held out to the public at large with moratorium on its head and management is given to Insolvency Resolution Professional suspending the powers of Board of Directors. Moreover, no debt of this company has become NPA. 17. It goes without saying refusal of remedy under this Code, will not make the creditor remediless, it is always open to it to proceed before Civil Court for realization of its debt, on the top of it, this Operational Creditor has another advantage to initiate Arbitration proceeding that has not been availed. 18. The objective and the reliefs envisaged in this Code are for different purposes, not for recovery of claims. Of course, ultimate object ..... X X X X Extracts X X X X X X X X Extracts X X X X
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