2018 (9) TMI 1807 - Tri - Insolvency and Bankruptcy

Proper Service of Demand Notice Key in Insolvency Cases: Tribunal Dismisses Application

The Tribunal dismissed the application under Section 9 of the Insolvency and Bankruptcy Code, 2016 due to the lack of proper service of the demand notice ... Corporate Insolvency Resolution Process - No demand notice under Section 8 of the Code served at the registered office of the Respondent - deemed service of the notice in light of Section 27 of the General Clauses Act, 1897 - HELD THAT:- The mode of service has been prescribed by a Rule, namely Rule 5 of the 'AAA ' Rules which as already seen prescribe the form and manner in which notice, being a notice of demand is required to be served and the notice is to be delivered at the registered office Of the Corporate Debtor or alternatively upon the whole time director or key management personnel of the corporate debtor by email. Operational Creditor has not been able to discharge, despite repeated time being granted in this regard. There has been no deemed service of the demand notice on Respondent. Thus, the application stands dismissed. Issues: Application under Section 9 of the Insolvency and Bankruptcy Code, 2016 for initiation of Corporate Insolvency Resolution Process based on non-payment of dues. Service of demand notice under Section 8 of the Code and its legal implications.Analysis:1. Issue of Application under Section 9: The Applicant, a proprietorship firm, filed an application under Section 9 of the Insolvency and Bankruptcy Code, 2016 against the Respondent, a private limited company, for initiation of Corporate Insolvency Resolution Process due to outstanding dues. The Applicant claimed an amount of Rs. 7,67,675/- from the Respondent, who had initially cleared dues promptly but later started delaying payments, leading to the application being filed.2. Service of Demand Notice: The Respondent contended that the demand notice under Section 8 of the Code was not served at the registered office but at the corporate office, arguing that it should be considered as deemed service under Section 27 of the General Clauses Act, 1897. However, the Tribunal referred to a previous order where it was held that proper service of notice is crucial for initiating insolvency proceedings. The Tribunal emphasized that the notice must be delivered at the registered office of the Corporate Debtor or to the whole-time director or key management personnel by email, as prescribed by Rule 5 of the 'AAA' Rules.3. Legal Precedents: The Tribunal cited the case of Eastern Travels Pvt. Ltd. vs. Swash Convergence Technologies Limited, where it was established that mere marking of notice to the corporate office does not fulfill the requirement of service as per the rules. The Tribunal also referred to the case of Mobilox Innovations Pvt. Ltd. Vs. Kirusa Software (P) Limited, highlighting the mandatory nature of issuing and delivering the Section 8 notice for an Operational Creditor to approach the tribunal.4. Decision: In line with the precedents and the rules governing the service of demand notices, the Tribunal held that there was no deemed service of the demand notice on the Respondent. Consequently, the application was dismissed with no costs, emphasizing the importance of proper service of notices for initiating insolvency proceedings under the Code.By meticulously analyzing the issues of the application under Section 9 and the service of demand notice under Section 8, the Tribunal's decision underscores the significance of strict adherence to legal procedures and requirements in insolvency matters, ensuring fair treatment and due process for all parties involved.