Appellate Tribunal Overturns CIRP Order, Emphasizes IBC Purpose

The Appellate Tribunal set aside the order initiating Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor, emphasizing that the Insolvency and Bankruptcy Code (IBC) is not meant for debt recovery. The Tribunal highlighted that Section 9 applications should only be admitted in clear cases without real disputes. The Tribunal noted the Adjudicating Authority's error in disregarding pre-existing disputes and relying solely on a specific email. The appeal was allowed, releasing the Corporate Debtor from CIRP, and granting the Operational Creditor the option to pursue other legal remedies for its dues.

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Issues Involved:
1. Pre-existing disputes between the parties.
2. Maintainability and defects in the Section 9 application.
3. Adjudicating Authority's failure to appreciate the existence of disputes.

Summary:

Pre-existing disputes between the parties:
The Appellant contended that the Operational Creditor failed to adhere to project timelines despite several extensions, leading to delays. The Corporate Debtor had to request BHEL to complete the project at their risk and cost. The Corporate Debtor disputed the claims of dues and communicated on 06.07.2019 that no amount was payable to the Operational Creditor after adjustments, including liquidated damages (LD). The Corporate Debtor asserted that the disputes existed before the Section 8 demand notice dated 16.09.2019, as indicated in their reply on 07.11.2019.

Maintainability and defects in the Section 9 application:
The Appellant argued that the Section 9 application was defective as the total debt claimed in the demand notice (Rs. 87,01,843) did not match the amount in the Section 9 application (Rs. 1,84,80,706). The Appellant cited the Supreme Court judgment in M/s S.S. Engineers v. Hindustan Petroleum Corporation Ltd. to support their contention that IBC is not a debt recovery forum.

Adjudicating Authority's failure to appreciate the existence of disputes:
The Respondent No.1 argued that the Operational Creditor had performed its obligations and submitted invoices and Material Receipt Certificates (MRCs). The Corporate Debtor had acknowledged the outstanding dues in emails dated 14.11.2017 and 09.01.2019. The Respondent claimed that the Corporate Debtor's defence of risk and cost action and LD was an afterthought. The Adjudicating Authority admitted the Section 9 application based on an email dated 09.01.2019, without considering the pre-existing disputes evidenced by the correspondences between the parties.

Judgment:
The Appellate Tribunal noted that the Adjudicating Authority erred in overlooking the pre-existing disputes and solely relying on the email dated 09.01.2019. The Tribunal emphasized that the IBC is not a debt recovery mechanism and that Section 9 applications should only be admitted in clear cases where no real dispute exists. The Tribunal set aside the impugned order initiating CIRP against the Corporate Debtor and allowed the appeal, releasing the Corporate Debtor from CIRP. The Tribunal also allowed the Operational Creditor to seek alternative legal remedies for its dues.

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