Appeal Granted: Improper Notice by Law Firm Renders Insolvency Application Invalid

The Appellate Tribunal allowed the appeal filed by M/s SmartCity (Kochi) Infrastructure Pvt. Ltd. against the order passed under section 9 of the Insolvency and Bankruptcy Code, 2016. The Tribunal found that the notice under section 8 was improperly issued by a Law Firm instead of the Operational Creditor, rendering the application under section 9 not maintainable. Additionally, the Tribunal recognized the existence of a dispute prior to the insolvency proceedings, leading to the impugned order being deemed illegal. The proceedings were closed, the appellant was released from legal constraints, and allowed to operate independently.

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Issues:
Challenge to order under section 9 of the Insolvency and Bankruptcy Code, 2016 based on notice issuance and existence of dispute.

Analysis:
The appeal was filed by M/s SmartCity (Kochi) Infrastructure Pvt. Ltd. against an order passed by the Adjudicating Authority under section 9 of the Insolvency and Bankruptcy Code, 2016. The challenge was mainly on the grounds that the notice under section 8 was not issued by the Operational Creditor but by a Law Firm, which is not in accordance with the law. Additionally, it was argued that there was a dispute in existence, making the application under section 9 not maintainable.

The Adjudicating Authority had entertained the application under section 9, admitted it, appointed an Interim Resolution Professional, and ordered a Moratorium. The appellant contested the validity of the notice issued, highlighting that it was not in the prescribed Form-3 or Form-4 as per the rules. The notice was issued by a Law Firm, not the Operational Creditor, which was deemed improper.

The Appellate Tribunal referred to a previous judgment and emphasized that notices under section 8 must be issued by an authorized person in relation to the Operational Creditor and not by a Lawyer or Law Firm without proper authority. In this case, the notice was issued by a Law Firm without authorization from the Operational Creditor, rendering the application under section 9 not maintainable.

Regarding the existence of a dispute, the Appellant had raised concerns about non-completion and abandonment of work prior to the notice under section 8. This indicated the presence of a dispute before the insolvency proceedings were initiated. Consequently, the impugned order was deemed illegal, and all related actions were set aside.

The Appellate Tribunal directed the closure of the proceedings, released the appellant company from the legal constraints, and allowed it to function independently through its Board of Directors. The fees of the Interim Resolution Professional, if appointed, were to be fixed by the Adjudicating Authority, and the Respondent was directed to pay the fees for the period served. The appeal was allowed with no order as to costs.

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