2019 (12) TMI 1408 - Tri - Insolvency and Bankruptcy

Application Dismissed: Failure to Serve Demand Notice. Importance of Procedural Compliance.

The Tribunal dismissed the Application due to the non-service of the Demand Notice on the Corporate Debtor, emphasizing the importance of adhering to ... Service of Demand notice to Corporate Debtor - Applicant represents that efforts were made to serve to the registered office of the Corporate Debtor, however, the same has not been delivered - HELD THAT:- Comparing from the names as given in the Company Master Data as directors to the Corporate Debtor with that of the addresses as disclosed with the e-mail, both the names do not correlate with each other, and therefore, we are unable to ascertain as to whether the Demand Notice was served to the whole time director or designated partner or key managerial personnel as contemplated under the Rules namely Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016. It is required to be seen that in relation to the Operational Creditor under the provisions of I&B Code, 2016, in particular, a Notice of Demand is required to be served on the Corporate Debtor in compliance with Rule 5 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016. In the absence of service of Demand Notice upon the Corporate Debtor as required to be served, taking into consideration, the Demand Notice under Section 8 of the I&B Code, 2016 read with attendant Rules, notice of dispute, if any, cannot be issued by the Corporate Debtor as the Corporate Debtor is prevented from being privy to the Demand Notice as raised or to comply with Demand Notice in relation to the Claim within the period mandated of ten days as contemplated under Section 8 of IBC, 2016. Taking into consideration Section 9(5)(ii) of the I&B Code, 2016, as the Notice of Demand is not served upon the Corporate Debtor, we are constrained to dismiss the Application. Issues involved:1. Service of Demand Notice under Section 8 of the I&B Code, 2016 on the Corporate Debtor.2. Compliance with the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016.3. Verification of service modes for the Demand Notice.4. Identification of addressees for service of Demand Notice.5. Filing of Affidavit under Section 9(3)(b) of I&B Code, 2016.6. Impact of non-service of Demand Notice on the Corporate Debtor's ability to dispute the claim.Analysis:1. The Tribunal examined the issue of serving the Demand Notice under Section 8 of the I&B Code, 2016 on the Corporate Debtor. The Applicant's Counsel confirmed efforts were made to serve the notice at the registered office but it was returned undelivered. The Tribunal questioned if other modes of service were exhausted. An email communication was sent to complete the service, but discrepancies were found in the addressees listed, not aligning with the designated personnel as per the Rules.2. The Tribunal considered compliance with the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016. It highlighted the necessity of serving the Demand Notice as per Rule 5, emphasizing that without proper service, the Corporate Debtor cannot dispute the claim within the stipulated period, as mandated by Section 8 of the I&B Code, 2016. Citing the Supreme Court's ruling in Mobilox Innovations Pvt. Ltd. vs. Kirusa Software Pvt. Ltd., it emphasized that the absence of notice of demand deprives the Applicant of a cause of action until the expiration of the ten-day period.3. The Tribunal delved into the verification of service modes for the Demand Notice. It scrutinized the Track Delivery Report showing non-delivery of the notice and the subsequent email communication attempting to serve the notice. However, discrepancies in the addressees raised concerns regarding the adequacy of service as per the Rules.4. The issue of identifying addressees for the service of the Demand Notice was raised. Discrepancies between the names listed in the Company Master Data and the addressees in the email communication led to uncertainty about whether the notice reached the appropriate personnel as required by Rule 5(2)(b) of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016.5. The Tribunal examined the filing of the Affidavit under Section 9(3)(b) of the I&B Code, 2016. The Applicant referred to the Affidavit filed with the Application, but it did not provide clarity on when the notice was issued and served on the Corporate Debtor, creating ambiguity regarding the mode of service used for the Demand Notice.6. Lastly, the Tribunal discussed the impact of non-service of the Demand Notice on the Corporate Debtor's ability to dispute the claim. It highlighted that without proper service, the Corporate Debtor is unable to respond within the specified timeframe, as mandated by the I&B Code, 2016. Consequently, in line with Section 9(5)(ii) of the I&B Code, 2016, the Tribunal dismissed the Application due to the non-service of the Demand Notice, emphasizing the importance of adhering to procedural requirements for initiating insolvency proceedings.