The court ruled that malicious initiation of insolvency proceedings based on fabricated claims violates the Insolvency and Bankruptcy Code, warranting dismissal and penalties against the operational creditor.

ORDER

PER: MANNI SANKARIAH SHANMUGA SUNDARAM, MEMBER (JUDICIAL) I.A. NO. 2729 OF 2025

1. The present Application is being filed by the Applicant herein, Origin Appliances Pvt. Ltd., under Section 65 (1) of the Insolvency and Bankruptcy Code, 2016 (IBC), seeking the following reliefs:

a. Dismiss the present Company Petition No. (IB) 801/2024 as being fraudulent, malicious, and an abuse of process under Section 65 (1) of the IBC;

b. Impose upon the Respondent/Operational Creditor appropriate penalties as prescribed under Section 65 (1) of the Code for fraudulently initiating the proceedings with malicious intent for purposes other than the resolution of insolvency;

c. Pass any other order(s) as this Hon'ble Tribunal may deem fit and proper in the interest of justice.

2. SUBMISSIONS OF THE APPLICANT:

i. Both the Operational Creditor and the Corporate Debtor were holders of L-7Z retail liquor licenses under zone 2, and the Corporate Debtor was granted a license for Zone 14 and 16 under the Delhi Excise Policy, 2021-22, having been granted L-7Z retail licenses pursuant to their bids under the zonal license system. These licenses strictly prohibit any retail license holder from selling liquor to another L-7Z licensee under Clause 3.5.3 of the Tender Conditions and the Delhi Excise Act, 2009 , and corresponding Rules of 2010. Retail licensees are expressly prohibited from transferring, selling, or purchasing liquor from one another. All procurement by L-7 licensees must be made solely from L-1 (wholesale) licensees.

ii. The Operational Creditor's license expired on 30.06.2022. The Operational Creditor did not apply for extension as it would have to incur a substantial amount in the form of monthly license fees. Failing to apply for extension till 31.08.2022, the Operational Creditor faced imminent destruction of its unsold liquor stock. In order to avoid financial loss, the Operational Creditor approached the Applicant herein and subsequently, with a request letter dated 11.08.2022 addressed to the Excise Department, the Operational Creditor requested the Excise Department to transfer its unsold stock from its premises to the licensed premises of the Corporate Debtor for liquidation. This request was granted by the Excise Department, and Transport Permits were issued by the Excise Department for stock transfer only. The T.P. explicitly records: "Permission is hereby granted to transfer the liquor stock... from the closed L-7V premises of M/s Khao Gali Restaurants Pvt. Ltd... to the L-7V premises of M/s Origin Appliances Pvt. Ltd."

iii. The said request letter dated 11.08.2022 categorically states in the second paragraph, "we have entered into 'discussions and negotiations' with Origin Appliances Pvt. Ltd, which currently holding L-7Z license for Zone 14 & 16, to transfer our certain stock of alcoholic beverages kept in our L-7V vends of Zone 2, to Origin Appliances Pvt. Ltd. L-7V vends of zone 14 and Zone 16. Origin.......". It is stated that the said understanding was that the Corporate Debtor will facilitate the liquidation of the stock of the Operational Creditor, and the proceeds of the liquidation will be transferred to the Operational Creditor. Accordingly, the proceeds amounting to Rs.1,70,26,270/- were duly returned to the Operational Creditor, and as such, the remaining unsold stock, worth ₹47,35,440/-, was subsequently destroyed by the Excise Department.

iv. The Applicant herein extended their cooperation in good faith to the Operational Creditor to use their premises as a platform to liquidate their liquor stock to avoid destruction. The said stock was liquidated by extending the heavy discount to the customers, being the terms of the license were going to expire on 31.08.2022. The liquor stock transferred was of zero value however, the same was taken at W.S.P.