THE IBC IS NOT A SUBSTITUTE FOR A RECOVERY FORUM: NCLAT

The National Company Law Appellate Tribunal (NCLAT) in this case reiterated what the Supreme Court has observed, “IBC is not intended to be substitute for a recovery forum and whenever there is existence of real dispute, the IBC provisions cannot be invoked.”

In this case, the Petitioner (Operational Creditor) and the Respondent (Corporate Debtor) had a dispute over nonpayment of the amount for civil works. The respondent availed the services of the appellant but failed to pay the outstanding amount. The appellant subsequently filed a petition for initiation of the Corporate Insolvency Resolution Process (CIRP) against the respondent with the National Company Law Tribunal (NCLT).

The NCLT observed that there was an existing dispute between both the parties which the Petitioner withheld. The NCLT observed, “The Insolvency Resolution Process is not a civil recovery forum and if any alleged amount is payable to the Appellant, the same needs to be tried in Arbitration/Civil Court as per the clauses of Work Order/Contract subject to limitation.”