Section 9 IBC petitions cannot be used as debt recovery tools when settlement talks are still ongoing.

A section 9 Insolvency and Bankruptcy Code petition was treated as premature where the underlying debt arose from an ongoing commercial relationship, the parties were still in settlement negotiations, and the corporate debtor had shown willingness to pay. The Tribunal applied the principle that the Code is intended for insolvency resolution and not as a recovery mechanism, and considered that initiating CIRP in those circumstances would not serve the object of the Code. The request for admission was therefore rejected, with liberty to pursue the remedy again if a proper case later arose under the Code.

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Issues: Whether the petition under section 9 of the Insolvency and Bankruptcy Code, 2016 was fit for admission or was premature and in substance an attempt to recover an outstanding contractual debt.

Analysis: The petition was filed under section 9 of the Insolvency and Bankruptcy Code, 2016 read with Rule 6 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016. The record showed continued negotiations between the parties, repeated settlement proposals, and the corporate debtor's expressed willingness to pay, with the outstanding amount arising from an ongoing commercial relationship. The petition was viewed against the settled principle that the Code is meant for insolvency resolution and not as a substitute recovery mechanism. The Tribunal also took note of the economic disruption caused by the pandemic and considered that pushing the corporate debtor into CIRP at that stage would not serve the object of the Code.

Conclusion: The petition was held to be premature and not fit for admission, and the request to initiate CIRP was rejected.

Final Conclusion: The corporate insolvency petition was disposed of without admission, leaving the petitioner free to approach again later if a proper case is made out under the Code.

Ratio Decidendi: A petition under section 9 of the Insolvency and Bankruptcy Code, 2016 cannot be admitted where it is effectively being used as a recovery tool and the surrounding circumstances show that the dispute remains within ongoing settlement negotiations.

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