2020 (9) TMI 842 - Tri - Insolvency and Bankruptcy

Tribunal dismisses CIRP petition under IBC, emphasizes arbitration over IBC

G.R. Constructions Versus GRC Infra Private Limited

The Tribunal dismissed the petition to initiate Corporate Insolvency Resolution Process (CIRP) under Section 9 of the IBC, 2016, as not maintainable. It ... Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Debt or not - existence of debt and dispute or not - HELD THAT:- The issue do not fall under the provisions of Code. Moreover, there is substantial dispute raised by the Respondent by various legal notices and correspondence exchanged between the Parties as enclosed to the Company Petition. It is also relevant to point out here, as stated supra, there is an arbitration clause available both in MOU and Settlement Deed, to invoke arbitration clause, in case, any dispute arise between the Parties out of implementation of terms and conditions contained in the Deeds in question, so as to settle those issues. However, the Petitioner failed to invoke arbitration clause, if it feels aggrieved by the action of Respondent. It can also invoke appropriate provisions of Companies Act, 2013 if the affairs of Corporate Debtor are oppressive in nature and mismanaging its affairs, failure to implement duly approved deeds etc. Therefore, the instant Petition is filed on misconceived facts and law. The instant Application is filed with an intention to recover the alleged disputed outstanding amount, arise out of MOU dated 31.03.2018 and Settlement Deed dated 05.04.2018 - the instant Company Petition is liable to be dismissed as not maintainable. Issues Involved:1. Initiation of Corporate Insolvency Resolution Process (CIRP) under Section 9 of the IBC, 2016.2. Existence of debt and default under the provisions of the IBC.3. Substantial dispute raised by the Respondent.4. Applicability of Arbitration Clause in the MOU and Settlement Deed.5. Misuse of IBC as a recovery forum.Issue-wise Detailed Analysis:1. Initiation of Corporate Insolvency Resolution Process (CIRP) under Section 9 of the IBC, 2016:The petition was filed by M/s. G.R. Constructions seeking to initiate CIRP against M/s. GRC Infra Private Limited for defaulting on a payment of Rs. 8 Crores. The petition cited Section 9 of the IBC, 2016, and Rule 6 of the I&B (Application to Adjudicating Authority) Rules, 2016.2. Existence of debt and default under the provisions of the IBC:The petitioner claimed that the debt arose from a Settlement Deed dated 05.04.2018, which required the Respondent to pay Rs. 13,88,71,351/- to M/s. G.R. Constructions. The Corporate Debtor had initially issued cheques to cover the debt but later requested a 'Stop Payment' on these cheques, resulting in a remaining balance of Rs. 8 Crores. The petitioner issued a Statutory Demand Notice on 16.10.2019, which the Respondent contested, stating that the debt was disputed and not acknowledged.3. Substantial dispute raised by the Respondent:The Respondent raised a substantial dispute, contending that the company was not a party to the Settlement Deed and had not received any goods or services to warrant the application of the IBC provisions. The Respondent argued that the matter was delayed due to non-cooperation by Mr. R.M. Eshwar Naidu and that the provisions of the IBC were being misused for debt recovery.4. Applicability of Arbitration Clause in the MOU and Settlement Deed:The MOU and Settlement Deed included arbitration clauses for resolving disputes. The Tribunal noted that the Petitioner failed to invoke the arbitration clause despite the availability of this remedy. The Tribunal emphasized that the issues raised were civil in nature and should be resolved through arbitration as stipulated in the agreements.5. Misuse of IBC as a recovery forum:The Tribunal reiterated the Supreme Court's stance that the IBC is not a substitute for a debt recovery forum. Citing the Mobilox Innovations Private Limited vs. Kirusa Software Private Limited case, the Tribunal underscored that the existence of an undisputed debt is a prerequisite for initiating CIRP under the IBC. The Tribunal found that the substantial dispute raised by the Respondent disqualified the petition under the IBC provisions.Conclusion:The Tribunal concluded that the issues raised did not fall under the provisions of the IBC and were civil in nature. The substantial dispute and the arbitration clause in the agreements further supported this conclusion. The Tribunal dismissed the petition as not maintainable, allowing the Petitioner to pursue other legal remedies if necessary.Order:The petition, C.P. (IB) No. 120/BB/2020, was dismissed as not maintainable. The Tribunal noted that this order would not prevent the Petitioner from seeking other legal remedies to enforce the terms of the MOU and Settlement Deed. No order as to costs was made.