Petition dismissed under Insolvency and Bankruptcy Code Section 9 for financially stable debtor

The Tribunal dismissed the petition under Section 9 of the Insolvency and Bankruptcy Code, emphasizing that the IBC is not meant for debt recovery in cases where the debtor is financially stable. It concluded that the petition was filed to recover a disputed debt, not to address insolvency. The Court highlighted that an undisputed debt is necessary for an IBC application and that pursuing such proceedings against a profitable company would go against the IBC's purpose. Consequently, the petition was dismissed, with no costs awarded.

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Issues Involved:
1. Existence of operational debt and default.
2. Dispute regarding the quality of supplied goods.
3. Financial condition of the Corporate Debtor.
4. Appropriateness of using IBC proceedings for debt recovery.

Issue-wise Detailed Analysis:

1. Existence of Operational Debt and Default:
The Petitioner, M/s. Chryso India Pvt. Ltd., filed a petition under Section 9 of the Insolvency and Bankruptcy Code (IBC), 2016, seeking to initiate Corporate Insolvency Resolution Process (CIRP) against M/s. Sri Chowdeshwari Concrete India Pvt. Ltd. for an alleged default of Rs. 70,33,907/-. This amount includes Rs. 24,51,238/- as interest at 24% p.a. on the principal amount of Rs. 45,82,669/-. The Petitioner claimed that the Corporate Debtor had issued 12 Purchase Orders and accepted the products without any disputes regarding their quality or quantity. Only a part payment of Rs. 3,74,910/- was made, leaving Rs. 45,82,669/- unpaid. The Petitioner issued a Demand Notice on 14th March 2019, which was not complied with by the Corporate Debtor.

2. Dispute Regarding the Quality of Supplied Goods:
The Corporate Debtor opposed the petition, arguing that it is a profit-making company with no admitted debt or liability. It contended that it had already paid Rs. 1,43,25,668/- towards undisputed invoices and withheld Rs. 27,13,021/- due to unresolved disputes over the quality of the products supplied. The Corporate Debtor claimed that the Petitioner had supplied sub-standard admixtures, leading to additional costs and withheld payments from its clients. The Corporate Debtor also disputed certain Purchase Orders and claimed that the Petitioner had fabricated them.

3. Financial Condition of the Corporate Debtor:
The Tribunal examined the financial statements of the Corporate Debtor for the years 2017-18, 2018-19, and 2019-20. It found that the Corporate Debtor was in good financial condition, with Reserves and Surplus of Rs. 93,47,251/-, tangible assets of Rs. 7,38,64,654/-, and a net worth of Rs. 98,45,251/- in 2019-20. The company generated Rs. 61,91,22,172/- in revenue and made a profit of Rs. 78,04,144/-. The Tribunal noted that part payments had been made to the Petitioner and that the withholding of payments was due to genuine disputes over the quality of the supplied materials.

4. Appropriateness of Using IBC Proceedings for Debt Recovery:
The Tribunal emphasized that the IBC is not intended to be a substitute for a debt recovery forum and should not be used to jeopardize the financial health of a solvent company. It referred to the Supreme Court's judgments in Mobilox Innovations Private Limited v. Kirusa Software Private Limited and K. Kishan v. Vijay Nirman Company Private Limited, which clarified that the IBC should not be used prematurely or for extraneous considerations. The Tribunal concluded that the petition was filed to recover a disputed debt and not to resolve insolvency, which is not the objective of the IBC.

Conclusion:
The Tribunal dismissed the petition, stating that an undisputed debt is a sine qua non for an application under Section 9 of the IBC. It held that allowing the petition against a profit-making viable unit would defeat the purpose of the IBC. Hence, C.P. (IB) No. 50/BB/2020 was dismissed with no order as to costs.

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