2017 (11) TMI 1829 - HC - Insolvency and Bankruptcy

Court sets aside NCLT order due to lack of proper notice, emphasizes mandatory service.

The Court allowed the Civil Revision Petition, setting aside the National Company Law Tribunal's order for admitting an application without proper notice. ... Service of notice - Sections 8 and 9 of I & B Code - Rules 4,5 and 6 of the Rules - Territorial Jurisdiction - Default for the payment committed by the petitioner / Corporate Debtor - whether operational creditor has admittedly not sent notice to the registered office, but the Tribunal below, without considering the said fact, admitted the application by the order impugned and, therefore, it is liable to be set aside? - HELD THAT:- On perusal of the records filed by the operational creditor, it is seen, that the registered office of the corporate debtor is at Nagercoil, whereas, notices were served at the office at Chennai. When the corresponding rules to Sections 8 and 9 of Code clearly specify that the application can be filed after expiry of ten days from the date of delivery of the notice or invoice demanding payment under sub-section (1) of Section 8, if the operational creditor does not receive any payment from the corporate debtor or notice of the dispute under sub-section (2) of Section 8, the operational creditor may file an application before the Adjudicating Authority. Also, when Sections 8 and 9 of the Code clearly specify the delivery of demand notice on the unpaid operational debtor in such form and manner as may be prescribed, it has to be followed in its true spirit. When it is mandatory to deliver the demand notice prior to filing the application, the same cannot be violated. The Tribunal below has not noticed the non-service of the mandatory notice at the registered office, which is a preliminary requirement for presenting the application for adjudication. Section 8 of the Code clearly mandates that the demand notice shall be delivered in such form and manner, as may be prescribed, and Rules 5 and 6 of the Rules mandate that the notice shall be served at the registered office of the corporate debtor. This is a mandatory requirement and it cannot be violated. Admittedly, the documents clearly show that the notice was served at the branch office, but not at the registered office. In the given situation, this Court can very well interfere with the failure of the Tribunal, in exercising its jurisdiction. It cannot be said that it is a factual dispute. The Tribunal below ought to have exercised its power vigilantly, as, non-exercise of the same in this case has resulted in miscarriage of justice. Hence, on this occasion of failure of justice, this Court has ample power to interfere with the order passed by the Tribunal below. Accordingly, the impugned order [2017 (7) TMI 1299 - NATIONAL COMPANY LAW TRIBUNAL, CHENNAI] passed by the Tribunal is set aside. Civil Revision Petition is allowed. Issues:Violation of mandatory provisions of the Insolvency and Bankruptcy Code, 2016 by the National Company Law Tribunal in admitting an application without proper notice.Analysis:The petitioner, a Corporate Debtor, challenged the order of the National Company Law Tribunal admitting an application without proper notice. The petitioner argued that the operational creditor failed to send notice to the registered office, as required by the Code and Rules. The respondent contended that notice was sent to the city office and that the petitioner was aware of the proceedings. The respondent emphasized the limited supervisory role of Article 227 of the Constitution of India. The petitioner cited various judgments to support their case.The Court observed that the notice was served at the office in Chennai, not the registered office in Nagercoil. The Code and Rules clearly mandate delivery of notice at the registered office before filing an application. Failure to adhere to this requirement was deemed a violation. Citing previous judgments, the Court emphasized the mandatory nature of statutory requirements and the consequences of non-compliance.The Court highlighted the importance of serving notice at the registered office to prevent prejudice to the corporate debtor's rights. It noted that the Tribunal overlooked this mandatory requirement, leading to potential injustice. The Court asserted its power under Article 227 in cases of grave injustice or failure of justice, where jurisdiction is not exercised correctly. The lack of adherence to natural justice principles under the Companies Act further supported the Court's decision to set aside the Tribunal's order.In conclusion, the Court allowed the Civil Revision Petition, setting aside the Tribunal's order. It directed the operational creditor to pursue remedies in compliance with mandatory requirements and granted the corporate debtor the opportunity to contest the case before the Tribunal. No costs were awarded, and the connected application was closed.