2022 (6) TMI 105 - Tri - Insolvency and Bankruptcy

Tribunal dismisses insolvency application, emphasizes clean hands principle

The Tribunal rejected the application under Section 9 of the Code for initiation of Corporate Insolvency Resolution proceedings against the Corporate ... Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues/defaulting settlement deed - Operational Creditors - existence of debt and dispute or not - HELD THAT:- On behalf of the Applicant herein the settlement deed dated 20.04.2022 has been placed on record, wherein it is clearly mentioned that an amount of Rs. 5,25,00,000/- to be paid by the Corporate Debtor to the Applicant and out of the settled amount of Rs. 2,01,92,143/- shall be payable against the principal and Rs. 3,23,07,857/- shall be payable towards interest to the Operational Creditor. Further it is agreed that post-dated cheques 069333 to 069345 (Total 13) of different amounts shall be given by the Respondent/Corporate Debtor to the Operational Creditor towards the above-said amount. In the said settlement, it is also mentioned that the payment shall be either made through cheques or RTGS. A copy of demand draft dated 10.05.2020 of an amount of Rs. 45 lacs has also been placed on record, existing in the name of Shobha Cards Private Limited, which further indicates that the respondent has intent to pay the amount as per settlement deed. Thus, the Operational Creditor merely wants to recover that amount and not having a fair intent to trigger CIR proceedings. Had, it would have been there, the Operational Creditor might have not withdrawn the earlier petition. NCLT cannot be permitted to move at the whims and wishes of unscrupulous persons, as the main intent of the legislation was to keep the Corporate Debtor as going concern. The parties, who are coming forward to file the petition under Section 7 or 9 of the code with malicious intent to initiate CIR proceedings are to be curbed at the very outset. NCLT cannot allowed to become 'Recovery Tools' for such like litigants. This Tribunal is of affirm view that the no cause of action has arisen to initiate CIR proceedings and the present applicant has also not come with clean hands to trigger the same - application not maintainable and is dismissed. Issues: Application under Section 9 of the Code for initiation of CIR proceedings against Corporate Debtor for defaulting settlement deed.Analysis:1. The application under Section 9 of the Code was filed by the Operational Creditor against the Corporate Debtor for defaulting on the settlement deed dated 18.04.2022.2. Previously, an application under Section 9 was filed but withdrawn as the matter was settled. However, the Corporate Debtor failed to adhere to the settlement conditions, leading to the current petition after a demand notice was issued.3. The Applicant argued that the present petition is maintainable due to a fresh notice being issued and the Corporate Debtor's failure to make the agreed payment as per the settlement deed.4. The Corporate Debtor contended that the payment method was RTGS, but the account was closed. They argued against the maintainability of the present application, alleging ulterior motives.5. The settlement deed specified the payment terms, including post-dated cheques or RTGS, with detailed amounts allocated for principal and interest.6. Evidence showed an attempt by the Corporate Debtor to make the payment via RTGS, but the account was closed, leading to the returned amount.7. The intention to make payment was evident, with the first installment due on a specific date, showing willingness to adhere to the settlement terms. The Operational Creditor's actions were questioned.8. Additional evidence, like a demand draft, indicated the Corporate Debtor's intent to pay as per the settlement, questioning the Operational Creditor's motives for triggering CIR proceedings.9. The Tribunal concluded that no cause of action existed to initiate CIR proceedings, emphasizing the importance of clean hands in such matters.10. Consequently, the application was rejected as not maintainable, without costs, highlighting the need to prevent misuse of legal processes for recovery purposes and uphold the legislation's intent to maintain Corporate Debtors as going concerns.