Invalid Demand Notice Renders Insolvency Process Void; Company Resumes Operations

The Appellate Tribunal held that the demand notice issued by an advocate without proper authorization or adherence to prescribed forms rendered the initiation of the resolution process invalid. The order appointing an Interim Resolution Professional and declaring moratorium was set aside, and the application under Section 9 of the Insolvency and Bankruptcy Code was dismissed. The appellant company was allowed to resume independent functioning through its Board of Directors, with the Adjudicating Authority tasked to determine the Interim Resolution Professional's fee to be paid by the Respondents. No costs were ordered in this case.

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Issues:
1. Maintainability of Section 9 application under the Insolvency and Bankruptcy Code, 2016.
2. Validity of demand notice under sub-section (1) of Section 8 of the I&B Code.

Issue 1 - Maintainability of Section 9 Application:
The case involved an application under Section 9 of the Insolvency and Bankruptcy Code, 2016, filed by Valia & Company as the Operational Creditor against Jord Engineers India Ltd., the Corporate Debtor, for defaulting on payment for goods supplied. The National Company Law Tribunal admitted the application, ordered moratorium, and sought names for an Interim Resolution Professional. The appellant challenged this order on the grounds that the Section 9 application was incomplete and lacked a proper demand notice under Section 8(1) of the I&B Code.

Issue 2 - Validity of Demand Notice:
The appellant argued that the demand notice issued by an advocate did not meet the requirements of Form 3 or Form 4 as stipulated under Rule 5 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016. The advocate had been given a letter of retainership for various legal matters, including proceedings under the I&B Code, but there was no evidence to show the advocate's position with or relation to Valia & Company. Citing a previous judgment, it was established that only a person authorized to act on behalf of the Operational Creditor, holding a position with or in relation to the creditor, could issue a valid notice under Section 8 of the I&B Code.

The Appellate Tribunal, following the precedent set in a similar case, held that the demand notice issued by the advocate, without proper authorization or adherence to the prescribed forms, rendered the initiation of the resolution process invalid. Consequently, the impugned order appointing an Interim Resolution Professional, declaring moratorium, and other related actions were deemed illegal and set aside. The application under Section 9 of the I&B Code was dismissed, allowing the appellant company to resume independent functioning through its Board of Directors. The Tribunal directed the Adjudicating Authority to determine the fee of the Interim Resolution Professional, if appointed, to be paid by the Respondents for the period of service, with no order as to costs in the circumstances of the case.

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