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IBC can not intended to be a substitute for recovery forum : NCLAT

Wherever there is the existence of a real dispute, the IBC provisions cannot be invoked. The Object of the Code is not recovery of money but to bring out of insolvency and maximization of value of assets of the Corporate Debtor. The judgment passed by the NCLAT New Delhi, in its decision in  Anshul Vashishtha vs. Jayhind Steel Traders and Anr. (Company Appeal (AT) (Insolvency) No. 656 of 2020) by Hon’ble Shri Justice A.I.S Cheema

The facts of the case were such that – Respondent 01/operational creditor and respondent 02/corporate debtor were engaged in an associated business following various transactions. Respondent No.1 used to supply material to respondent No.2 for completing its various projects at various sites and it was a normal business practice to seek delivery of required material at the project site itself.

The appellant in their submission states about the pre-existing disputes that The Operational Creditor vide email dated 05.02.2018 has sent an email to the Corporate Debtor requesting installment of exceptional bills and has indeed, even requested PDC Check for all bills. And the date of default is “imaginary or hypothetical”. They have also alleged that the statutory notice of demand as per section 8 (1) of the Code was defective as they were not accompanying copy of the invoices

Ongoing through the different entries made by the gatherings, a lucidity is arising that there are numerous dates of default, there is a presence of debate on balance levy, the real sum due should be accommodated and reflected. The Operational Creditor is guaranteeing that the Debt due is more than Rs.1 lac. On the off chance that it might likewise be expected for installment as it will be turning into the work of IRP to accommodate and get the contested sum isolated and the case can be checked given the application meets the standards of Section 8 and 9 of the Code.  The object of the Code isn’t recuperation of cash however to deliver once again from indebtedness and expansion of worth of resources of the Corporate Debtor. It is additionally a lot clear that if there is a debate according to significant provisions of the Code, it is occupant on the Adjudicating Authority to dismiss the request/application according to the provisions of Section 9 of the Code. It is likewise a lot clear for this situation that there is a question of the Debt and debate goal component is additionally given in the buy request. Since I&B Code, 2016 debars the application of the Code for recovery of money as well as if there is a dispute then also application requires to be dismissed.

In a case of running account where accounts are yet to be reconciled and settled, an email like 05.02.2018 sent before Section 8 demand notice dated 13.06.2018 asking Operational Creditor to take back the rejected material reflect pre-existing dispute in such case Adjudicating Authority cannot sit down to settle the account and calculate the Debt dues.

At last the order passed by Adjudicating Authority of appointing IRP and the action taken by IRP are declared illegal and set aside, and the Corporate Debtor is delivered from all the meticulousness of law and is allowed to work freely through its Board of Directors from quick impact. The Corporate Debtor will, in the main occurrence, bear CIRP costs so far brought about by IRP/RP and then qualified for recuperating it from Operational Creditor.

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