2018 (3) TMI 390 - Tri - Insolvency and Bankruptcy

Importance of Notice Compliance in Corporate Insolvency: Section 8 Requirements Must Be Met

The application for initiation of Corporate Insolvency process under section 9 of the Insolvency and Bankruptcy Code was rejected by the Tribunal due to ... Initiation of Corporate Insolvency process - prior notice under Section 8 of the Code - Held that:- In view of the statutory provisions of the Code and settled precedents a prior notice under Section 8 of the Code is mandatory before filing of an application under Section 9 of the Code. In the present case admittedly after withdrawal of the earlier application no notice under Section 8 has been issued. It is also relevant to note here that non-issuance of Section 8 notice prior to filing of the present application is a non-curable defect, which cannot be cured at this stage. Issuance of notice under Section 8 is an act that should have been done prior to filing of the present application. In the absence of issuance of such notice, the present application is not maintainable. Issues:1. Application filed under section 9 of the Insolvency and Bankruptcy Code, 2016 for initiation of Corporate Insolvency process.2. Failure to issue a notice under Section 8 of the Code before filing the application under Section 9.3. Dismissal of the earlier petition and filing of a fresh application under Section 9 without complying with the mandatory notice requirements.Analysis:1. The application was filed seeking initiation of Corporate Insolvency process against the respondent corporate debtor under section 9 of the Insolvency and Bankruptcy Code, 2016. The applicant alleged non-payment of invoices despite repeated demands and issuance of a winding-up notice. The matter was transferred to the Tribunal from the High Court, and a demand notice under Section 8 of the Code was subsequently issued to the respondent. However, the application faced a procedural hurdle due to non-compliance with the notice requirements under Section 8.2. The Tribunal emphasized the mandatory nature of issuing a notice under Section 8 before filing an application under Section 9 of the Code. It was noted that the earlier demand notice and proceedings did not fulfill the requirements of Section 8 for the present application. The absence of a valid Section 8 notice post-withdrawal of the earlier petition rendered the current application non-maintainable, as per the statutory provisions of the Code and established precedents.3. The Tribunal highlighted that the failure to issue a Section 8 notice after the withdrawal of the earlier petition was a non-curable defect, emphasizing the importance of compliance with procedural requirements. It was concluded that the absence of a Section 8 notice prior to the filing of the present application rendered it unsustainable. Therefore, the application was rejected on the grounds of non-compliance with the mandatory notice provision under the Code, leading to the dismissal of the application for initiation of Corporate Insolvency process.This detailed analysis underscores the significance of procedural compliance, particularly regarding the issuance of statutory notices under the Insolvency and Bankruptcy Code before initiating corporate insolvency proceedings.