Petition seeking CIRP rejected due to settlement agreement breach not constituting operational debt.

The Tribunal dismissed the petition under section 9 of the Insolvency and Bankruptcy Code, 2016, seeking initiation of corporate insolvency resolution process against the corporate debtor. It held that the default in payment of instalments under the settlement agreement did not constitute operational debt as defined by the IBC. The Tribunal ruled that a breach of a settlement agreement does not qualify as a ground for initiating CIRP, leading to the rejection of the application.

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Issues:
1. Whether the petition under section 9 of the Insolvency and Bankruptcy Code, 2016 is valid for initiation of corporate insolvency resolution process against the respondent/corporate debtor.
2. Whether the terms and conditions of the settlement agreement constitute operational debt as per the definition under the IBC.
3. Whether default in payment of the settlement amount falls under the definition of operational debt for initiating CIRP.

Analysis:
1. The petition was filed by the operational creditor under section 9 of the IBC seeking initiation of the corporate insolvency resolution process against the corporate debtor. The operational creditor had entered into retainership arrangements with the corporate debtor for legal advisory services. Despite various attempts by the operational creditor to settle the outstanding dues, the corporate debtor failed to make payments as per the settlement agreement, leading to the filing of the petition.

2. The Tribunal analyzed whether the terms and conditions of the settlement agreement between the parties could be classified as operational debt as defined under the IBC. The definition of operational debt includes claims related to goods or services provided, and the default in payment of such debt triggers the initiation of CIRP. The Tribunal referred to a previous decision where it was held that unpaid instalments under a settlement agreement do not qualify as operational debt under the IBC.

3. Considering the facts of the case and the legal provisions, the Tribunal concluded that the default in payment of instalments under the settlement agreement did not fall within the scope of operational debt. Citing the previous decision, the Tribunal held that a breach of a settlement agreement cannot be a ground for initiating CIRP against a corporate debtor under the IBC. Therefore, the Tribunal rejected the application, stating that the default of instalments from the settlement agreement did not meet the criteria for operational debt, leading to the dismissal of the applicant's prayer.

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