Appeal Dismissed, IBC Not a Recovery Forum. Disputes Should Be Resolved Elsewhere.

The Tribunal dismissed the appeal, affirming the Adjudicating Authority's order dated 30.01.2020, which rejected the initiation of CIRP against the Corporate Debtor due to the existence of a prior dispute. The Tribunal reiterated that the IBC is not intended to be a substitute for a recovery forum and that disputes regarding the retention amount and outstanding liability should be resolved in the appropriate legal forum. The appeal was dismissed with no order as to costs.

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Issues Involved:
1. Whether there was a prior dispute regarding the outstanding payment claimed by the Operational Creditor.
2. Whether the retention amount was rightfully adjusted by the Corporate Debtor.
3. Whether the application for initiation of Corporate Insolvency Resolution Process (CIRP) was maintainable.
4. Whether there was a delay in filing the appeal and if it should be condoned.

Detailed Analysis:

Issue 1: Prior Dispute Regarding Outstanding Payment
The Operational Creditor, M/s Kuntal Construction Pvt. Ltd., claimed an outstanding amount of Rs. 14,89,966 from the Corporate Debtor, M/s Bharat Hotels Ltd., which included a retention amount of Rs. 6,74,247. The Corporate Debtor contended that there was a prior dispute regarding this amount, citing a mutual settlement letter dated 07.10.2015. The Adjudicating Authority observed that there was an existence of a prior dispute, as evidenced by the communication between the parties. The Corporate Debtor had made partial payments post the settlement letter but had stopped further payments, leading to the dispute.

Issue 2: Adjustment of Retention Amount
The Corporate Debtor argued that the retention amount was adjusted against the "defects liability" of the Operational Creditor as per the terms of the Work Order. The Adjudicating Authority noted that the Operational Creditor was aware of this adjustment through email correspondence dated 23.01.2016. The Tribunal held that whether the Corporate Debtor was entitled to adjust the retention amount was a disputed question of fact and law, which could not be decided in a resolution petition but needed to be addressed in an appropriate forum like Arbitration or Civil Court.

Issue 3: Maintainability of CIRP Application
The Tribunal referred to the definition of 'dispute' under Section 5(6) of the Insolvency & Bankruptcy Code (I&B Code), which includes the existence of a debt. The Tribunal emphasized that the Insolvency Resolution Process is not a substitute for a recovery forum. The Hon’ble Supreme Court's judgment in re. Mobilox Innovation Pvt. Ltd. vs. Kirusa Software Pvt. Ltd. was cited, which clarified that if there is a plausible contention of a dispute, the application under Section 9 of the I&B Code must be rejected. The Tribunal concluded that since there was a pre-existing dispute, the CIRP could not be initiated.

Issue 4: Delay in Filing the Appeal
The Operational Creditor claimed that the impugned order dated 30.01.2020 was not communicated to them and was only observed and downloaded from the NCLT's webpage on 02.03.2020, resulting in a delay of 13 days in filing the appeal. The Tribunal noted that it is the duty of the counsel to keep track of the pronouncement of judgments and that mere non-communication is not a valid ground for condonation of delay. However, since the matter was heard in full length, the delay was impliedly condoned in this case.

Conclusion:
The Tribunal dismissed the appeal, affirming the Adjudicating Authority's order dated 30.01.2020, which rejected the initiation of CIRP against the Corporate Debtor due to the existence of a prior dispute. The Tribunal reiterated that the IBC is not intended to be a substitute for a recovery forum and that disputes regarding the retention amount and outstanding liability should be resolved in the appropriate legal forum. The appeal was dismissed with no order as to costs.

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