NCLT Dismisses Petition: IBC Not Meant For Recovery Claims

NCLT Dismisses Petition: IBC Not Meant For Recovery Claims

Introduction

The National Company Law Tribunal (NCLT) Amaravati Bench has dismissed a petition filed by TATA Projects Ltd., seeking admission of the Corporate Debtor, Andhra Pradesh Township Infrastructure Development Corporation, into the Corporate Insolvency Resolution Process (CIRP).

Factual Background

The Operational Creditor (OC) filed a petition seeking initiation of CIRP against the Corporate Debtor due to outstanding payments. During the hearing, the Counsel for the OC submitted that certain amounts had been paid by the Corporate Debtor, and an understanding had been reached to allow the balance amount to be paid after one month.

Procedural Background

The Tribunal considered the request for adjournment made by the OC's Counsel, seeking to await payment by the Corporate Debtor. However, the Tribunal held that such a request was not in accordance with the provisions of the Insolvency and Bankruptcy Code (IBC).

Issues Involved

1. Purpose of IBC: Whether the IBC is intended for recovery of amounts pending or for resolution of insolvency.

2. Adjournment Request: Whether the Tribunal can grant an adjournment to await payment by the Corporate Debtor.

Contentions of the Parties

Operational Creditor's Contentions: The OC's Counsel requested an adjournment, citing an understanding between the parties to allow the balance amount to be paid after one month.

Tribunal's Observations: The Tribunal observed that the IBC provides a mechanism for resolution and not for recovery of claims.

Reasoning and Analysis

The Tribunal analyzed the provisions of the IBC and held that:

• IBC is for Resolution: The IBC is designed to provide a mechanism for resolution of insolvency, not for recovery of claims.
• No Adjournment: Granting an adjournment to await payment would not be in accordance with the provisions of the IBC.

Final Decision

A bench of Justice Kishore Vemulapalli and Technical Member Shri Umesh Kumar Shukla dismissed the petition, holding that the IBC is not intended for recovery of amounts pending or to await full payment by the Corporate Debtor.

Implications

This decision depicts the importance of understanding the purpose and scope of the IBC, which is designed to provide a mechanism for resolution of insolvency, rather than recovery of claims.

In this case the operational creditor was represented by Mr. Suheal Button and Ms. Surbhi Kapoor, Advocates.