2021 (5) TMI 23 - AT - Insolvency and Bankruptcy

Tribunal Overturns Order, Restores Petition under I&B Code

SMS Integrated Facility Services Private Limited Versus Expat Educational Institute

The Tribunal set aside the Adjudicating Authority's order in CP (IB) No. 79/BB/2019, allowing the appeal by the Operational Creditor against the ... Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - existence of debt and Default - time limitation - Service of notice - hearing not attended - HELD THAT:- In the instant case, the ‘Appellant’ had come out with a categorical assertion that the notice was served upon the Respondent on 03.02.2020 and later 08.01.2021 and affidavit of service to that effect was filed before th Adjudicating Authority. When that be the fact situation, when the Respondent had failed to appear before the Adjudicating Authority then, it is duty bound to record the absence/ there being no representation of the Respondent, to hold that ‘service was held sufficient’ and to proceed further, as per Rule 49 of the NCLT Rule, 201₹ 6 under the caption ‘Ex parte hearing and disposal’. Time Limitation - HELD THAT:- In the present case the debt fell due on 01.02.2017 being the date of last invoice raised by the ‘Appellant/Operational Creditor. The ‘Application’ was filed before the Adjudicating Authority in the year 2019 which is well within the period of Limitation. In reality, the Adjudicating Authority had committed an error in making an observation that the ‘Application’ suffered from ‘ Delay and Latches’ and the same is clearly unsustainable in the eye of Law, in the considered opinion of this ‘Tribunal’. This ‘Tribunal’ taking note of the fact that the Director of the Respondent through email on 15.11.2017 had assured the ‘Appellant’ that the Respondent would making the payment towards the dues on monthly instalment basis (since the Respondent was passing through financial crisis) and further only partly settled the dues till February, 2018, and keeping in mind of the vital fact that the court notice was served upon the Respondent on 03.02.2020 and subsequently on 08.01.2021 - this Tribunal comes to an inevitable conclusion that the Adjudicating Authority (National Company Law Tribunal, Bengaluru Bench) had committed an error in issuing slew of directions to the ‘Registrar of Companies’, Bengaluru to examine whether the corporate Debtor had complied with the statutory requirement and to take appropriate action etc., and suffice it for this ‘Tribunal’ to make a relevant observation in the present ‘Appeal’ that such directions issued by the Adjudicating Authority cannot be countenanced in the eye of Law. Appeal allowed. Issues involved:- Compliance with statutory requirements under section 9 of the I & B Code, 2016- Adequacy of notice served on the Respondent- Consideration of debt and default without proper notice- Adjudicating Authority's directions to Registrar of CompaniesCompliance with statutory requirements under section 9 of the I & B Code, 2016:The Appellant, an Operational Creditor, filed an appeal dissatisfied with the order of the Adjudicating Authority in CP (IB) No. 79/BB/2019. The Appellant provided housekeeping services to an Educational Institute, and invoices issued from March to December 2017 remained unpaid. The Appellant issued a demand notice in Form 3 on 12.06.2019, claiming a total due amount of &8377; 22,69,778/-. The Appellant contended that it had complied with the mandatory provisions of section 9(3) of the I & B Code, 2016, and the Respondent failed to honor the repayment commitment, leading to the Section 9 Application.Adequacy of notice served on the Respondent:The Adjudicating Authority observed that notices were served on the Respondent on multiple dates, but the Respondent did not appear or file a reply. The Appellant argued that the notices were duly served, and the absence of the Respondent justified proceeding ex parte as per NCLT Rules. The debt fell due on 01.02.2017, and the Application was filed within the limitation period, contrary to the Adjudicating Authority's view that it suffered from delay and laches.Consideration of debt and default without proper notice:The Adjudicating Authority's order raised concerns about considering debt and default without proper notice to the Respondent. The Appellant highlighted that notices were served, and the Respondent's failure to appear justified proceeding ex parte. The Adjudicating Authority's direction to the Registrar of Companies was deemed inappropriate, and the Tribunal set aside the impugned order, allowing the appeal.Adjudicating Authority's directions to Registrar of Companies:The Adjudicating Authority directed the Registrar of Companies to examine the Corporate Debtor's compliance with statutory requirements and take appropriate action, which the Tribunal found erroneous. The Tribunal held that such directions were not legally tenable, leading to the setting aside of the Adjudicating Authority's order. The Tribunal directed the Adjudicating Authority to restore the petition and pass an order of admission under section 9 of the I & B Code, 2016, proceeding in accordance with the law.