2023 (9) TMI 873 - AT - Insolvency and Bankruptcy

Tribunal dismisses appeal challenging rejection of Insolvency Code application. Settlement Agreement deemed invalid.

Mr. Maulik Kirtibhai Shah Proprietor of MK Enterprises Versus United Telecoms Limited

The Tribunal dismissed the appeal challenging the Adjudicating Authority's decision to reject a Section 9 application under the Insolvency and Bankruptcy ... Dismissal of Section 9 Petition on the ground that the ‘Settlement Agreement’ was anti-dated, unstamped and unregistered - Operational creditors - correctness of Petition filed in respect of claims arising under the Settlement Agreement - HELD THAT:- The very document which the ‘Appellant’ is relying upon establishes that the initial amount of Rs.50 lakhs was to be paid prior to 31.03.2018, and that the balance amount of Rs.4 Crores was to be paid in tranches, whereas it is not in dispute that the agreement is dated 01.11.2018 which is subsequent to the amount of Rs.50 lakhs, and to be paid on or before 31.03.2018. Therefore, this document substantiate that the ‘Settlement Agreement’ is anti-dated, apart from being unstamped and unregistered. The amount in Part IV of Form-5 mentioned as ‘Default’ is Rs.8,46,32,553/- as on 31.01.2021 whereas the amount in the ‘Settlement Agreement’ appears to have been reduced to around Rs.4 Crores. Admittedly, criminal cases were filed against the Corporate Debtor prior to the issuance of Section 8 Demand Notice’ under Section 138 read with Section 141 of Negotiable Instruments Act, 1881. The Petition filed in respect of claims arising under the aforementioned Settlement Agreement [even if disputed herein] does not come within the definition of ‘Operational Debt’]. Time and again, the Hon’ble Apex Court in a catena of Judgments held that the IBC is not a ‘recovery mechanism’. Even if the Settlement Agreement is taken into consideration, this ‘Tribunal’ is of the earnest view that the claims arising under the ‘MOU’ lost the character of ‘Operational Debt’ and became a debt simpliciter. In respect of’ in the definition of Operational Debt cannot be interpreted widely so as to include any agreement between the parties which does not specifically pertain to the supply of goods or services. Keeping in view, the spirit of the Code, this ‘Tribunal’ is of the considered view that at best, the claims are contractual claims for which appropriate Civil Proceedings may lie. Appeal dismissed. Issues Involved:1. Dismissal of Section 9 Application under the Insolvency and Bankruptcy Code, 2016 by the Adjudicating Authority.2. Validity and enforceability of the Settlement Agreement dated 01.11.2018.Summary:Issue 1:The Appellant appealed against the Impugned Order of the Adjudicating Authority under Section 9 of the Insolvency and Bankruptcy Code, 2016. The Adjudicating Authority dismissed the Application citing that the petition was filed for the recovery of interest amount, which is not maintainable under Section 9 of the Code. The Adjudicating Authority noted discrepancies in the amounts claimed and the terms of the agreements between the parties. The Appellant contended that the Corporate Debtor had issued cheques that were dishonored, indicating an admission of liability. The Appellant argued that the Operational Creditor was entitled to a commission as per the Memorandum of Understanding for Business Development services provided. The Appellant also highlighted communications and agreements supporting the outstanding amount claimed.Issue 2:The main issue in the Appeal was the validity of the Settlement Agreement dated 01.11.2018. The Appellant relied on this Agreement to establish the debt due and payable. However, the Tribunal found that the Agreement was anti-dated, unstamped, and unregistered. The Tribunal noted discrepancies in the dates mentioned in the Agreement and the actual execution date. The Tribunal emphasized that claims arising from this disputed Agreement did not fall within the definition of Operational Debt under the Code. The Tribunal held that the Insolvency and Bankruptcy Code is not a recovery mechanism and that contractual claims like those arising from the MOU should be pursued through civil proceedings rather than insolvency proceedings.In conclusion, the Appeal was dismissed by the Tribunal due to the lack of merit in the claims presented and the discrepancies found in the agreements and documents provided. The Tribunal emphasized the importance of adhering to legal requirements and definitions under the Code while highlighting the distinction between operational debt and contractual claims.