### IBC cannot be used as a recovery mechanism or execution tool against a solvent corporate debtor.

The Respondent (a money lender) advanced two short-term loans to the Appellant in 2010.

Following a default and subsequent dishonored cheques, the Respondent filed a summary suit in the Delhi High Court, which was decreed in his favor on 11.01.2018 for ₹4,38,00,617/- with 24% interest.

This decree attained finality after the Appellant’s appeals were dismissed by the Division Bench and the Supreme Court.

Instead of seeking execution of the decree under the CPC, the Respondent filed a Section 7 petition under the Insolvency and Bankruptcy Code (IBC) in 2021.

The NCLT dismissed the petition, characterizing it as a "recovery mechanism" against a solvent company.

However, the NCLAT reversed this, directing admission of the petition on the grounds that a decree creates a fresh cause of action for a financial debt.

During the pendency of the present appeal, evidence surfaced from Income Tax Appellate Tribunal proceedings where the Respondent had previously admitted a significantly lower outstanding debt (approx. ₹96 lakhs) compared to the decretal amount.

1. Whether the initiation and maintenance of Corporate Insolvency Resolution Process (CIRP) is justified when used as a substitute for the execution of a Civil Court money decree.

2. Whether the NCLAT was correct in admitting a Section 7 petition against a solvent company despite a serious and bona fide dispute regarding the computation and existence of the debt.

The Court applied Section 7 and Section 65 of the IBC, emphasizing that the Code’s primary object is the reorganization and insolvency resolution of corporate persons, not debt recovery.

It relied on Swiss Ribbons (P) Ltd. v. Union of India, which established that the IBC is a beneficial legislation for revival, not a recovery tool.

The Court further applied the principle from GLAS Trust Co. LLC v. BYJU Raveendran, prohibiting the use of IBC as a "tool for coercion" or a "substitute for debt enforcement".

While acknowledging Dena Bank v. C. Shivakumar Reddy and Kotak Mahindra Bank Ltd. v. A. Balakrishnan, which allow a decree holder to initiate Section 7 proceedings, the Court clarified that this rule does not operate in a vacuum and cannot be used to facilitate an abuse of process.

The Court reasoned that while a decree holder may technically qualify to file under Section 7, the adjudicating authority must ensure the process is not being misused as a "backdoor" recovery mechanism.

The Court observed that the Appellant is a solvent, functioning enterprise with significant revenue and employees, and had demonstrated its earnestness by depositing over ₹3.6 crores during the litigation.

The Court highlighted the "serious contest" regarding the debt's existence, noting that the Respondent had provided three wildly inconsistent figures (₹96 lakhs, ₹4.38 crores, and ₹12.5 crores) before various forums.

It held that the NCLT/NCLAT are not appropriate forums to resolve complex execution disputes involving interest computation and credits for past payments, which are properly the subject of Section 151 CPC proceedings already pending before the Delhi High Court.

The Court held that the Respondent’s actions amounted to an "abuse of the process" by using the IBC as a recovery lever against a solvent company.

The Respondent was granted liberty to pursue the execution of the 2018 decree through civil law.

The Court imposed costs of ₹5,00,000/- on the Respondent.