Tribunal dismisses CIRP petition citing pre-existing disputes. Operational Creditor directed to civil court for resolution.

The tribunal rejected the petition to initiate Corporate Insolvency Resolution Process (CIRP) under Section 9 of the Insolvency and Bankruptcy Code (IBC) due to the existence of pre-existing disputes between the parties. It was concluded that the Operational Creditor's intention was to recover a disputed amount, not the purpose of IBC. The tribunal emphasized that such issues required detailed examination by a civil court and could not be resolved summarily through IBC proceedings. The Operational Creditor was allowed to pursue other legal remedies.

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Issues Involved:
1. Initiation of Corporate Insolvency Resolution Process (CIRP) under Section 9 of the Insolvency and Bankruptcy Code (IBC), 2016.
2. Existence of pre-existing disputes between the parties.
3. Validity of the demand notice and the response thereto.
4. Allegations of fraudulent activity and defective services.
5. Jurisdiction and appropriateness of invoking IBC for debt recovery.

Detailed Analysis:

1. Initiation of Corporate Insolvency Resolution Process (CIRP) under Section 9 of the Insolvency and Bankruptcy Code (IBC), 2016:
The petition was filed by the Operational Creditor seeking to initiate CIRP against the Corporate Debtor for defaulting on a payment of Rs. 1,52,51,034/- along with interest at 18% p.a. The Operational Creditor issued a demand notice on 8th October 2018, which was received by the Corporate Debtor on 10th October 2018. The Corporate Debtor responded with a reply dated 15th November 2018, which the Operational Creditor claimed was not within the stipulated period.

2. Existence of Pre-existing Disputes Between the Parties:
The Corporate Debtor argued that there were pre-existing disputes regarding the debt claimed by the Operational Creditor. The disputes included allegations of fraudulent clicks and defective services provided by the Operational Creditor. The Corporate Debtor had communicated these disputes to the Operational Creditor through various correspondences and had also filed a police complaint against the Operational Creditor for fraudulent activities.

3. Validity of the Demand Notice and the Response Thereto:
The Corporate Debtor contended that the demand notice issued by the Operational Creditor did not consider the pre-existing disputes. The Corporate Debtor had responded to the demand notice through letters dated 24th October 2018 and 31st October 2018, which were returned undelivered. The Corporate Debtor then forwarded these replies to the Operational Creditor’s advocate, which were duly received.

4. Allegations of Fraudulent Activity and Defective Services:
The Corporate Debtor alleged that the Operational Creditor had engaged in fraudulent activities by generating fake clicks to inflate the invoices. The Corporate Debtor withheld payments for the months of June and July 2016 based on complaints from its clients about fraudulent clicks. The Corporate Debtor provided evidence of these fraudulent activities and argued that the payments claimed by the Operational Creditor were not due as they were based on fraudulent actions.

5. Jurisdiction and Appropriateness of Invoking IBC for Debt Recovery:
The tribunal emphasized that the IBC is not intended to be a substitute for a recovery forum. The existence of undisputed debt is a sine qua non for initiating CIRP. The tribunal referred to various judgments, including Mobilox Innovations Private Limited Vs. Kirusa Software Private Limited, to highlight that the IBC should not be used for debt recovery when there are pre-existing disputes.

Conclusion:
The tribunal concluded that there were several pre-existing disputes between the parties regarding the alleged claims. The tribunal found that the Operational Creditor had filed the petition with the intention of recovering the disputed amount, which is not the purpose of the IBC. The tribunal held that the issues raised required detailed examination by a competent civil court and could not be resolved through the summary proceedings of the IBC. Consequently, the petition was rejected, but the Operational Creditor was allowed to seek other legal remedies.

Order:
C.P.(IB) No. 277/BB/2019 was rejected. The tribunal clarified that this order would not prevent the Operational Creditor from invoking any other remedy available under the law to address its grievances. No order as to costs was made.

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