2023 (1) TMI 1273 - AT - Insolvency and Bankruptcy

Appeal dismissed in Section 9 Application under Insolvency and Bankruptcy Code

Permali Wallace Pvt. Ltd Versus Narbada Forest Industries Pvt. Ltd  

The appeal against the rejection of a Section 9 Application under the Insolvency and Bankruptcy Code, 2016 was dismissed by the Tribunal. The Adjudicating ... Rejection of Section 9 application - default in payment of the interest amount - Appellant had filed earlier an Application under Section 9 in the year 2017 which was withdrawn on settlement entered into between the parties - appellant contends that liberty was granted in the consent terms/settlement agreement that in event any breach is committed, the Application be revived - HELD THAT:- The Adjudicating Authority did not commit any error in rejecting Section 9 Application. It has been laid down by the Hon’ble Supreme Court in SWISS RIBBONS PVT. LTD. AND ANR. VERSUS UNION OF INDIA AND ORS. [2019 (1) TMI 1508 - SUPREME COURT], IBC is not a recovery proceeding and the Application which has been filed by the appellant in the present case is only the application for recovery of balance amount of the interest and application was not filed for resolution of any insolvency of the Corporate Debtor. Thus, no error has been committed by the Adjudicating Authority in rejecting Section 9 Application filed by the Appellant. There is no merit in the Appeal, the Appeal is dismissed. Issues:- Appeal against rejection of Section 9 Application under IBC, 2016 by Adjudicating Authority- Interpretation of settlement agreement and its impact on operational debt- Dispute over interest amount and its resolution under IBC- Applicability of IBC for recovery of disputed amountsAnalysis:The case involved an appeal against the rejection of a Section 9 Application under the Insolvency and Bankruptcy Code, 2016 by the Adjudicating Authority. The Appellant had filed an earlier application in 2017, which was withdrawn due to a settlement between the parties. The dispute arose when there was a default in the payment of the interest amount as per the settlement agreement. The Adjudicating Authority rejected the Section 9 Application, stating that the settlement amount cannot be termed as operational debt under Section 5(21) of the IBC, 2016.The Adjudicating Authority noted that the Corporate Debtor had paid the principal operational debt and a portion of the interest amount as per the settlement. However, a dispute arose regarding the remaining interest amount claimed by the Operational Creditor. The Authority observed that using the IBC proceeding for the recovery of disputed amounts is not the objective of the Insolvency and Bankruptcy Code. Additionally, there was a disagreement over the calculation of the interest amount, which the Authority deemed beyond its scope to resolve.The Appellant argued that the Application was filed for the recovery of the unpaid balance interest amount due to breaches in the settlement agreement. However, the Tribunal, after considering the arguments, upheld the decision of the Adjudicating Authority. Citing the Supreme Court's ruling in 'Swiss Ribbon Pvt. Ltd. Vs. Union of India,' the Tribunal emphasized that the IBC is not meant for recovery proceedings but for the resolution of insolvency issues. As the Section 9 Application was solely for the recovery of the interest amount and not for insolvency resolution, the Tribunal found no error in the rejection by the Adjudicating Authority and dismissed the Appeal for lack of merit.