2021 (5) TMI 649 - Tri - Insolvency and Bankruptcy

Refundable deposit not an operational debt; Petition dismissed as premature. Seek debt recovery alternatives.

The Tribunal dismissed the petition as premature and not maintainable under the IBC. It held that the refundable security deposit does not qualify as an ... Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - HELD THAT:- The present proceedings relate to a petition filed under the IBC 2016 and, therefore, the findings shall be within and for the purpose of the Code only. All issues and disputes that can be agitated in other forums can be dealt with separately, for which there are sufficient clauses in the various agreements entered into between the parties. The debt claimed by the Petitioner, as arising from the refundable security deposit does not constitute an operational debt u/s. 5(21) of the Code. If the debt is arising from the nonpayment of installments or parting of assets as per the terms of a settlement, as incorporated in various agreements, the same will also not constitute operational debt as the same is not resulting from any operational activity. Also, a petition which is filed for breach of any settlement agreement treats this Tribunal as a recovery forum, which is not permissible. The Petitioner Aayas cannot be termed as the Operational Creditor, when the main creditor is Elbit India, later joined by Koyenco, in view of the peculiar circumstances narrated above, nor can Respondent MDPL be termed as the Operational debtor by itself, leaving out Minerva which acquires a significant role in development and after 22.07.2010 and for investment in the second stage. Lastly, without taking recourse to the detailed inbuilt dispute resolution mechanism and agitating the above complex matters straightaway before this Tribunal and under the Code, makes the Petition clearly premature. Petition dismissed as being premature and not maintainable. Issues Involved:1. Whether the refundable security deposit constitutes an operational debt under the Insolvency and Bankruptcy Code (IBC), 2016.2. Whether the Petitioner is an operational creditor.3. Whether the petition is maintainable under the IBC.4. Whether the non-payment of installments under a settlement agreement can trigger Corporate Insolvency Resolution Process (CIRP).5. Whether the correct parties have been identified as operational creditor and debtor.Issue-wise Detailed Analysis:1. Whether the refundable security deposit constitutes an operational debt under the Insolvency and Bankruptcy Code (IBC), 2016:The Tribunal clarified that for any amount to be claimed as due by an operational creditor, it must fall within the definition of 'claim' under section 3(6) of IBC, be capable of being treated as 'debt' under section 3(11) of IBC, and qualify as 'operational debt' under section 5(21) of IBC. The Tribunal held that a refundable security deposit does not constitute an operational debt as it is not backed by any provision of goods or services. It is merely an assurance or financial support to start implementing the contract and acts as security against losses caused by the other side. Therefore, the refundable security deposit in this case does not qualify as an operational debt.2. Whether the Petitioner is an operational creditor:The Tribunal stated that an operational creditor is defined under section 5(20) of the Code as 'any person to whom an operational debt is owed.' The refundable security deposit was advanced by Elbit India through the Petitioner, Aayas, for acquiring development rights. The Tribunal found that the relationship between the parties was more of a lessor and lessee, and not an operational creditor and debtor. The Petitioner, Aayas, was merely a conduit for making investment in the Respondent for acquiring development rights. Hence, the Petitioner cannot be termed as an operational creditor.3. Whether the petition is maintainable under the IBC:The Tribunal held that the petition is not maintainable as the refundable security deposit does not constitute an operational debt under the IBC. The Tribunal emphasized that the IBC is not a recovery forum and the petition was filed to recover the debt of Elbit India, which is not permissible under the Code. The Tribunal also noted that the correct parties were not identified in the petition, as Elbit India and Koyenco, the main creditors, were not made parties to the petition.4. Whether the non-payment of installments under a settlement agreement can trigger Corporate Insolvency Resolution Process (CIRP):The Tribunal stated that unpaid installments as per a settlement agreement cannot be treated as operational debt under section 5(21) of IBC. The failure or breach of a settlement agreement cannot be a ground to trigger CIRP against the Corporate Debtor under the provisions of IBC 2016. The Tribunal cited previous judgments to support this position and held that the remedy for breach of a settlement agreement lies elsewhere, not before the Adjudicating Authority under the IBC.5. Whether the correct parties have been identified as operational creditor and debtor:The Tribunal found that the main creditor was Elbit India, and not the Petitioner, Aayas. The Tribunal noted that Elbit India was the central and main creditor in all the agreements and arrangements. The Tribunal also observed that Minerva, which had a significant role in the development and investment, was not made a party to the petition. Hence, the Tribunal concluded that the appropriate parties were not included as operational creditor and operational debtor in the petition.Conclusion:The Tribunal dismissed the petition as premature and not maintainable under the IBC. The Tribunal emphasized that the refundable security deposit does not constitute an operational debt, and the Petitioner, Aayas, is not an operational creditor. The Tribunal also noted that the correct parties were not identified in the petition and that the non-payment of installments under a settlement agreement cannot trigger CIRP. However, the Tribunal clarified that the Petitioner is free to seek recovery of its debt and/or resolution of its dispute in any other forum and under any other law.