The National Company Law Appellate Tribunal (NCLAT) held that 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.
In the instant case titled Anshul Vashishtha vs. Jayhind Steel Traders and Anr two issues were raised before the NCLAT
Was the Corporate Insolvency Resolution Process (CIRP) in accordance with the code?
Whether appointing an Interim Resolution Professional valid?
With regard to the first issue, NCLAT held that the Code's goal is to get the Corporate Debtor out of insolvency and maximise the value of its assets, not to reclaim the money. It is also crystal clear that if a dispute arises under the Code's relevant provisions, the Adjudicating Authority must reject the petition/application under Section 9 of the Code's requirements. In this scenario, it is also evident that there is a debt dispute, and a dispute resolution process is included in the purchase order. Since the implementation of the I&B Code in 2016, the Code cannot be used to recover money or if there is a debt.
With regard to the second issue, it was held that the appointment of an "Interim Resolution Professional," the declaration of a moratorium, the freezing of accounts, and any subsequent actions taken by the "Interim Resolution Professional," such as publication in newspapers, the formation of a committee of creditors, and so on, are all declared illegal and set aside by the adjudicating authority.
The court categorically held that:
“ Since Hon’ble Apex Court has clearly laid down the mechanism to be operated by Operational Creditor in terms of Section 8 & 9 of the Code, it is very clear that the undisputed debt is sine qua non of initiating CIRP as also the debt should be due and payable. Since, the order of Adjudicating Authority in the present case, as enumerated above, does not meet the above criteria and hence the appeal needs to be allowed. We are not passing any comment on the merit of the dispute between the parties and the parties are free to approach appropriate forum for recovery or dispute resolution”.
Hence, IBC cannot be intended to be a recovery forum to recover money if there is a debt.