Dismissal of Insolvency Petition: Lack of Privity, Time-barred Claim, No Financial Debt

The Tribunal dismissed the Petition under Section 7 of the Insolvency and Bankruptcy Code, 2016, due to lack of privity of contract, absence of financial debt, the claim being time-barred, and the requirement for adjudication by a regular civil court. The claims based on the Supplementary Retirement Deed were found insufficient to establish a binding agreement of financial debt between the Petitioner and the Corporate Debtor. The Tribunal emphasized that the IBC does not address recovery but insolvency, and since the Corporate Debtor was not insolvent, the petition was not admissible.

---

---

Issues Involved:
1. Privity of contract between the Petitioner and the Corporate Debtor.
2. Existence of financial debt and default under Section 7 of the Insolvency and Bankruptcy Code, 2016.
3. Limitation period for filing the petition.
4. Validity of claims based on the Supplementary Retirement Deed.
5. Admissibility of the petition under the Insolvency and Bankruptcy Code, 2016.

Detailed Analysis:

1. Privity of Contract between the Petitioner and the Corporate Debtor:
The Tribunal examined whether there was privity of contract between the Petitioner and the Corporate Debtor as envisaged under the LLP agreement dated 7th May 2012 and the Supplementary Retirement Deed dated 13th August 2016. The Tribunal found that the Supplementary Retirement Deed was not a contract signed by and between the Petitioner and the Corporate Debtor. The agreement contemplated certain liabilities of Tridhaatu, wherein Tridhaatu agreed to pay the outstanding sum to the Petitioner and provided cheques to be paid by the Corporate Debtor, being the group company. However, this did not demonstrate any liability towards payment of financial debt as per Section 5 (8) of the Code.

2. Existence of Financial Debt and Default:
The Tribunal noted that the Petitioner failed to demonstrate the basic ingredients of financial debt along with interest, which is disbursed against consideration for time value and money and is in existence between the Petitioner and the Corporate Debtor. The Petitioner relied upon references in the Supplementary Retirement Deed and cheques presented as security without any basis of contractual terms between the Petitioner and the Corporate Debtor. The Tribunal concluded that there was no evidence of default for non-payment of money by the Corporate Debtor towards any contractual obligation.

3. Limitation Period for Filing the Petition:
The Corporate Debtor contended that the claim was barred by limitation. The Tribunal observed that the cause of action or date of start of limitation would be 31st December 2016, and therefore, the limitation period would expire on 31st December 2019 as per the provisions of the Limitation Act, 1963 read with Section 238A of the Code. The Petition was filed after the expiration of this period, making it time-barred.

4. Validity of Claims Based on the Supplementary Retirement Deed:
The Tribunal found that the claims made by the Petitioner were based on the Supplementary Retirement Deed, which was not signed by the Corporate Debtor. The Supplementary Retirement Deed captured the repayment of monies to the Petitioner by Tridhaatu and included provisions for post-dated cheques and demand promissory notes. However, the Tribunal concluded that these provisions did not establish any binding agreement of financial debt between the Petitioner and the Corporate Debtor.

5. Admissibility of the Petition under the Insolvency and Bankruptcy Code, 2016:
The Tribunal emphasized that the Insolvency and Bankruptcy Code is not a law for recovery but deals with insolvency. The Corporate Debtor was not insolvent, and the claims made in the proceedings were not dues to the Corporate Debtor. The Tribunal noted that unless the liability is crystallized by a regular civil court, the Petition under Section 7 of the IBC cannot be admitted. The mere reference to the handing over of cheques by the Corporate Debtor as security did not fasten any liability to the Corporate Debtor for payment of monies. The Tribunal dismissed the petition, stating that the claim has to be adjudicated by a regular civil court.

Conclusion:
In light of the above observations, the Tribunal dismissed the Petition filed under Section 7 of the Insolvency and Bankruptcy Code, 2016, on the grounds of lack of privity of contract, absence of financial debt, the claim being barred by limitation, and the necessity for the claim to be adjudicated by a regular civil court.

---