Appeal dismissed in Section 9 Application under Insolvency and Bankruptcy Code

The appeal against the rejection of a Section 9 Application under the Insolvency and Bankruptcy Code, 2016 was dismissed by the Tribunal. The Adjudicating Authority had rejected the application, stating that the settlement amount did not qualify as operational debt under the IBC. The dispute arose over the unpaid balance interest amount, but the Tribunal upheld the Authority's decision, emphasizing that the IBC is not intended for recovery proceedings but for insolvency resolution. As the application solely sought recovery of the interest amount, the Tribunal found no error in the rejection and dismissed the appeal.

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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 amounts

Analysis:
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 The Appellant had filed an earlier application in 2017, which was withdrawn due to a settlement between the parties.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.

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