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of <h1>Case Dismissed: Dispute over operational debt leads to rejection under Insolvency and Bankruptcy Code</h1> The tribunal concluded that the case was not suitable for admission under Section 9 of the Insolvency and Bankruptcy Code, 2016, due to a credible dispute ... Maintainability of application - initiation of CIRP - Corporate Debtor committed a default for total outstanding amount - Existence of debt and dispute or not - 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 VERSUS KIRUSA SOFTWARE PRIVATE LIMITED [2017 (9) TMI 1270 - SUPREME COURT], has inter alia, held that IBC, 2016 is not intended to be substitute to a recovery forum. We have perused the reply dated 24.11.2018 to the Demand Notice of the Petitioner, the legal notice dated 18.03.2016 issued by the Petitioner on the same grounds raised herein and a response to the same by the Respondent dated 27.04.2016. Further, we have also noted the contention of the Respondent that the non-payment of the alleged cash reward for ESOPs was on account of the Petitioner not discharging his responsibility and the fact that the Petitioner herein has lodged police complaints alleging the amount due from the Respondent. There exists a credible dispute with regards to the payment of the alleged Operational Debt - the present case is not a fit case to admit - Application admitted - moratorium declared. Issues Involved:1. Initiation of Corporate Insolvency Resolution Process (CIRP) under Section 9 of the Insolvency and Bankruptcy Code, 2016.2. Determination of whether the claim qualifies as an 'operational debt'.3. Existence of a dispute regarding the claimed debt.4. Timeliness and maintainability of the application.5. Credibility of the dispute raised by the Respondent.Issue-wise Detailed Analysis:1. Initiation of CIRP under Section 9 of the Insolvency and Bankruptcy Code, 2016:The petitioner filed C.P.(IB) No.65/BB/2019 under Section 9 of the IBC, 2016, seeking to initiate CIRP against the corporate debtor, M/s. One Bill Software India Private Limited, for an outstanding amount of Rs. 33,79,425 as on 30.04.2015. The petitioner argued that the corporate debtor defaulted on the payment schedule for cash rewards in lieu of ESOPs.2. Determination of whether the claim qualifies as an 'operational debt':The respondent contended that the petitioner's claim does not qualify as an 'operational debt' under Section 5(21) of the IBC, 2016, as it pertains to cash rewards in lieu of ESOPs, not for goods or services provided. The respondent argued that the claim falls outside the scope of operational debt, which is a prerequisite for filing under Section 9.3. Existence of a dispute regarding the claimed debt:The respondent asserted that there exists a credible dispute regarding the payment of the alleged operational debt. They argued that the non-payment of the cash reward was due to the petitioner's failure to meet certain performance targets and collect receivables, which led to significant financial losses for the company. Additionally, the respondent highlighted that the petitioner had lodged police complaints and pursued other legal remedies, indicating the existence of a dispute.4. Timeliness and maintainability of the application:The respondent questioned the timeliness of the petition, noting that the petitioner approached the tribunal after a delay of four years, which should render the application inadmissible on the grounds of limitation. The respondent emphasized that the petitioner's delay in filing the application undermines its credibility and maintainability.5. Credibility of the dispute raised by the Respondent:The tribunal examined the material evidence, including the reply to the demand notice, legal notices exchanged between the parties, and the respondent's objections. The tribunal referred to the Supreme Court's judgments in Mobilox Innovations Private Limited Vs. Kirusa Software Private Limited and Transmission Corporation of A.P. Ltd. Vs. Equipment Conductors and Cables Ltd., which established that the existence of an undisputed debt is essential for initiating CIRP. The tribunal concluded that there was a credible dispute regarding the payment of the alleged operational debt.Conclusion:The tribunal concluded that the present case is not fit for admission under Section 9 of the IBC, 2016, due to the existence of a credible dispute regarding the payment of the alleged operational debt. Consequently, the company petition bearing C.P. (IB) No. 65/BB/2019 was rejected. The tribunal clarified that this order does not preclude the petitioner from seeking other legal remedies to address their grievances. No order as to cost was made.
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