2021 (2) TMI 204 - AT - Insolvency and Bankruptcy

Tribunal Upholds Dismissal of Petition Due to Non-Compliance with Demand Notice Rules

The Tribunal upheld the NCLT's decision to dismiss the petition as the Appellant failed to comply with the mandatory provisions for delivering the demand ... Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - existence of debt and dispute or not - service of notice - whether the Learned Adjudicating Authority was justified in dismissing the Company Petition, on the ground that the Appellant has not complied with the provisions of Section 8 of the Code read with Rule 5 of the Insolvency and Bankruptcy Rules, 2016? - HELD THAT:- There is no documentary evidence on record to establish that the email was sent as per the provisions mandated under Rule 5 of the Insolvency and Bankruptcy Rules, 2016. Hence, we concur with the findings given by the Learned Adjudicating Authority with respect to the fact that the Appellant herein had nowhere mentioned in the Application to whom the email was addressed to as it is clearly stipulated in Rule 5(1) of the Insolvency and Bankruptcy Rules 2016, that the notice shall be delivered by electronic mail service to a whole time Director or Designated Partner or Key Managerial Personnel, if any, of the Corporate Debtor. Thus, this Tribunal is of the opinion that the Learned Adjudicating Authority has rightly dismissed the Application by giving a liberty to file fresh case in accordance with the provisions of law after delivery of Demand Notice upon the Corporate Debtor as per Rule 5 of the Insolvency and Bankruptcy Rules 2016. However, having regard to the fact that this Application was dismissed way back on 18.06.2020, we request, that on issuing fresh notice to the Corporate Debtor and on filing of a fresh Application under Section 9 of the Code, the Learned Adjudicating Authority shall decide the admissibility or otherwise of the Application as expeditiously as practicable. It is to be noted that we have not expressed any view on the merits of the case. Appeal dismissed. Issues Involved:1. Compliance with Section 8 of the Insolvency and Bankruptcy Code (IBC) 2016 and Rule 5 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016.2. Validity of service of demand notice by the operational creditor.3. Applicability of Section 27 of the General Clauses Act and Section 20 of the Companies Act, 2013.4. Justification of the National Company Law Tribunal’s (NCLT) decision to dismiss the petition.Issue-wise Detailed Analysis:1. Compliance with Section 8 of the Insolvency and Bankruptcy Code (IBC) 2016 and Rule 5 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016:The Appellant/Operational Creditor filed an appeal under Section 61(1) of the IBC against the NCLT's order dismissing their petition. The NCLT dismissed the petition on the grounds that the Appellant failed to comply with Section 8 of the IBC and Rule 5 of the Insolvency and Bankruptcy Rules, 2016. Specifically, the demand notice was not delivered according to the prescribed methods, as it was returned undelivered and the email was not sent to the appropriate personnel.2. Validity of Service of Demand Notice by the Operational Creditor:The NCLT observed that the demand notice was sent to an incorrect address and returned with the endorsement 'Addressee left without instructions.' The Appellant also sent the notice via email but failed to prove that it was sent to the email ID of a whole-time director, designated partner, or key managerial personnel of the corporate debtor. The Tribunal emphasized that proper delivery of the demand notice is a mandatory requirement under Section 8 of the IBC and Rule 5 of the Insolvency and Bankruptcy Rules, 2016.3. Applicability of Section 27 of the General Clauses Act and Section 20 of the Companies Act, 2013:The Appellant argued that the service of the demand notice should be deemed sufficient under Section 27 of the General Clauses Act and Section 20 of the Companies Act, 2013. However, the NCLT found this argument untenable because the postal endorsement indicated that the addressee had left without instructions, not that the notice was refused or unclaimed. The Tribunal also noted that the Appellant was aware of the corporate debtor's registered address but chose to send the notice to a different address without substantial reasons.4. Justification of the National Company Law Tribunal’s (NCLT) Decision to Dismiss the Petition:The Tribunal upheld the NCLT's decision, stating that the Appellant did not comply with the mandatory provisions for delivering the demand notice. The Tribunal referenced previous cases where the failure to serve a demand notice as required under the IBC was deemed a non-curable defect. The Tribunal concluded that the NCLT was justified in dismissing the petition but granted the Appellant the liberty to file a fresh case after properly delivering the demand notice.Conclusion:The Tribunal dismissed the appeal, affirming the NCLT's decision. The Appellant failed to comply with the mandatory requirements for delivering the demand notice under Section 8 of the IBC and Rule 5 of the Insolvency and Bankruptcy Rules, 2016. The Tribunal emphasized the importance of proper service of the demand notice and provided the Appellant the opportunity to file a fresh application after complying with the legal provisions.