TMI Blog2022 (8) TMI 420X X X X Extracts X X X X X X X X Extracts X X X X ..... word Recovery . The Parliament has made a conscious effort to ensure that there is a significant difference between Resolution and Recovery . The Hon ble Supreme Court has time and again observed that the fundamental intent of IBC is maximising the value of assets in the process of Resolution . If IBC is purely used for the purpose of Debt Recovery, particularly when the amounts due are small, and the Company is a solvent entity and is a going concern, the question of Reorganising or Resolution of the Company does not arise. The Hon ble Supreme court in Vidarbha Industries Power Ltd. vs. Axis Bank Ltd. [ 2022 (7) TMI 581 - SUPREME COURT ] has observed that even if there is a debt and default , the Adjudicating Authority should use its discretion in admitting/ rejecting an Application. In the instant case, the Adjudicating Authority has rightly rejected the Application on this ground too. Appeal dismissed. - Company Appeal (AT) (Ins) No. 968 of 2020 - - - Dated:- 5-8-2022 - [ Justice Anant Bijay Singh ] Member ( Judicial ) And [ Ms. Shreesha Merla ] Member ( Technical ) For the Appellant : Ms. Shweta Busar , Advocate For the Respondents : Mr. Shi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jeopardise the financial health of a solvent company by pushing it into insolvency Initiating. 11. Notwithstanding above, it is found that the petitioner has not produced on record documents like copy of the purchase order and delivery challan to substantiate its claim. Moreover, the applicant has not produced on record a copy of bank statement showing that no payment is received from the corporate debtor towards the invoices against which the claim has been raised. 12. Under the facts and circumstances discussed above, the Adjudicating Authority has no other option but to dismiss the petition as it is bad in the eye of law and not maintainable on the very reason that the demand notice is issued without any authority. 13. In the result, company Petition No. CP (IB) 824 of 2019 stands dismissed and disposed of. However, this will not stand in the way of the Petitioner approaching the appropriate forum seeking to enforce its claim against the Respondent, as this petition has been dismissed on the issue of maintainability taking into consideration the provisions of IB Code, 2016 . 2. Submissions of the Ld. Counsel appearing on behalf of the Appellant. Ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nnari Amman Spinning Mills Ltd. vs. M/s. My Choice Knit Apparels Pvt. Ltd., 2019 SCC NCLAT 1121 (Para.3, Pg. No. 220, Appeal). International Road Dynamics vs. Reliance Infrastructure, CA (AT) (Ins) No. 72 of 2017) Sagufa Ahmed Ors vs. Upper Assam Plywood Products Pvt. Ltd. Ors. Civil Appeal Nos. 3007-3008 of 2020. 4. Submissions of the Ld. Counsel appearing on behalf of the Respondent: The Ld. Counsel for the Respondent/Corporate Debtor vehemently argued that the present Appeal is not maintainable, as the Appellant has not placed on record any purchase order/ delivery challan/bank statements in support of their Application before the Adjudicating Authority. There can be no sale or supply of goods without a purchase order. The operational creditor is only attempting to recover their claims through these CIRP proceedings. It is submitted that the demand notices issued by the Operational Creditor were never served on the Corporate Debtor and the same was pointed out by the Corporate Debtor in their Affidavit in Reply filed before the Adjudicating Authority. The Corporate Debtor is a going concern and an MSME with a sales turnover of Rs. 1,61,7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... practice one s profession. Therefore, a conjoint reading of Section 30 of the Advocates Act and Sections 8 and 9 of the Code together with the Adjudicating Authority Rules and Forms thereunder would yield the result that a notice sent on behalf of an operational creditor by a lawyer would be in order . Therefore, we are of the earnest view that the observation by the Adjudicating Authority in para -9 be set aside. 10. However, the Application was not dismissed on this ground alone. A perusal of the impugned order shows that the Adjudicating Authority has dismissed the Application even on merits, the grounds being that the Corporate Debtor is an MSME and a going concern and a viable entity . 11. It is also observed by the Adjudicating Authority that the Operational Creditor had filed the Petition as a tool of recovery and that the Code is not intended to be a substitute to a Recovery Forum. Further, the Adjudicating Authority has also noted that the Appellant/Applicant has not produced on record any bank statements to show that payments were received from the Corporate Debtor against the invoices based on which the claims have been raised. 12. The Contention of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be specified. (4) An operational creditor initiating a corporate insolvency resolution process under this section may propose a resolution professional to act as an interim resolution professional. (5) The adjudicating authority shall, within fourteen days of the receipt of the application under sub-section (2), by an order- (i) admit the application and communicate such decision to the operational creditor and the corporate debtor, if- (a) the application made under sub-section (2) is complete; (b) there is no repayment of the unpaid operational debt; (c) the invoice or notice for payment to the corporate debtor has been delivered by the operational creditor; (d) no notice of dispute has been received by the operational creditor or there is no record of dispute in the information utility; and (e) there is no disciplinary proceeding pending against any resolution professional proposed under subsection (4), if any. (ii) reject the application and communicate such decision to the operational creditor and the corporate debtor, if- (a) the application made under sub-section (2) is incomplete; (b) there has been repayment of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nnouncement] From, [Name and address of the operational creditor] Subject.-Submission of proof of claim. Madam/Sir, [Name of the operational creditor], hereby submits this proof of claim in respect of the corporate insolvency resolution process in the case of [name of corporate debtor]. The details for the same are set out below: PARTICULARS 1. Name of operational creditor 2. Identification number of operational creditor (if an incorporated body provide identification number and proof of incorporation. If a partnership or individual provide identification records [PAN number, passport, AADHAAR Card or the identity card issued by the Election Commission of India] of all the partners or the individual) 3. Address and email address of operational creditor for correspondence 4. Total amount of claim (including any interest as at the insolvency commencement date) 5. Details of documents by reference to which the debt can be substantiated 6. Details of any dispute as well as the record of pendency or order of suit or arbitration proceedings 7. Details of how and when debt incurred 8. Details of any mutual credit, mutua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he adjudicating authority, by registered post or speed post to the registered office of the corporate debtor. *** FORM 3 [See clause (a) of sub-rule (1) of Rule 5] FORM OF DEMAND NOTICE/INVOICE DEMANDING PAYMENT UNDER THE INSOLVENCY AND BANKRUPTCY CODE, 2016 [Under Rule 5 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016] 2. [Date] To, [Name and address of the registered office of the corporate debtor] From, [Name and address of the registered office of the operational creditor] Subject.-Demand notice/invoice demanding payment in respect of unpaid operational debt due from [corporate debtor] under the Code. Madam/Sir, 1. This letter is a demand notice/invoice demanding payment of an unpaid operational debt due from [name of corporate debtor]. 2. Please find particulars of the unpaid operational debt below: PARTICULARS OF OPERATIONAL DEBT 1. Total amount of debt, details of transactions on account of which debt fell due, and the date from which such debt fell due 2. Amount claimed to be in default and the date on which the default occurred (attach the workings ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made by the operational creditor to the adjudicating authority. FORM 4 [clause (b) of sub-rule (1) of Rule 5] FORM OF NOTICE WITH WHICH INVOICE DEMANDING PAYMENT IS TO BE ATTACHED [Under Rule 5 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016] [Date] To, [Name and address of registered office of the corporate debtor] From, [Name and address of the operational creditor] Subject.-Notice attached to invoice demanding payment Madam/Sir, [Name of operational creditor], hereby provides notice for repayment of the unpaid amount of INR [insert amount] that is in default as reflected in the invoice attached to this notice. In the event you do not repay the debt due to us within ten days of receipt of this notice, we may file an application before the adjudicating authority for initiating a corporate insolvency resolution process under Section 9 of the Code. Yours sincerely, Signature of person authorised to act on behalf of the operational creditor Name in block letters Position with or in relation to the operational creditor Address of person signing FORM 5 [su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rticulars of security held, if any, the date of its creation, its estimated value as per the creditor. Attach a copy of a certificate of registration of charge issued by the registrar of companies (if the corporate debtor is a company) 2. Details of reservation/retention of title arrangements (if any) in respect of goods to which the operational debt refers 3. Particulars of an order of a court, tribunal or arbitral panel adjudicating on the default, if any (attach a copy of the order) 4. Record of default with the information utility, if any (attach a copy of such record) 5. Details of succession certificate, or probate of a will, or letter of administration, or court decree (as may be applicable), under the Indian Succession Act, 1925 (10 of 1925) (attach a copy) 6. Provision of law, contract or other document under which operational debt has become due 7. A statement of bank account where deposits are made or credits received normally by the operational creditor in respect of the debt of the corporate debtor (attach a copy) 8. List of other documents attached to this application in order to prove the existence of operational debt and the amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Corporate Debtor is a going concern and an MSME, the Adjudicating Authority ought not to have rejected the Application on this ground also. 16. The Preamble of IBC is carefully worded to describe the spirit and objective of the Code to be Reorganisation and Insolvency Resolution , specifically omitting the word Recovery . The Parliament has made a conscious effort to ensure that there is a significant difference between Resolution and Recovery . The Hon ble Supreme Court has time and again observed that the fundamental intent of IBC is maximising the value of assets in the process of Resolution . In Mobilox Innovations Private Limited Vs. Kirusa Software Private Limited , (2018) 1 SCC 353, the Hon ble Apex Court has examined in detail the United Nations Legislative Guide on Insolvency, in which the IBC finds its roots. Any Application to commence CIRP can be denied when the Creditor is using Insolvency as an inappropriate substitute for Debt Recovery Procedures. If IBC is purely used for the purpose of Debt Recovery, particularly when the amounts due are small, and the Company is a solvent entity and is a going concern, the question of Reorganising or Resoluti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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