Tribunal Upholds Adjudicating Authority's Decision on Section 9 Application

The Tribunal upheld the Adjudicating Authority's decision to admit the Section 9 Application, finding that the Demand Notice was properly served, valid, and the operational debt existed. The default on the Settlement Agreement justified the continuation of proceedings, and the challenge to the Assignment Agreement was dismissed. The Appeal was consequently dismissed, and the amount deposited by the Appellant was ordered to be returned.

---

---

Issues Involved:
1. Service of Demand Notice
2. Validity of Demand Notice
3. Existence of Operational Debt
4. Compliance with Settlement Agreement
5. Assignment of Debt

Summary:

1. Service of Demand Notice:
The Appellant contended that the Demand Notice dated 15.10.2018 was not served on the Corporate Debtor. The Operational Creditor claimed that the notice was sent to the Registered Office and the Delhi Office of the Corporate Debtor via speed post. The Adjudicating Authority found that the notice was delivered to the Registered Office, supported by tracking reports and postal receipts, and thus, the Demand Notice was properly served. The Tribunal upheld this finding, noting the acknowledgement of the Demand Notice in the Settlement Agreement dated 27.09.2021.

2. Validity of Demand Notice:
The Appellant argued that the Demand Notice was defective as it was not accompanied by invoices and was issued in Form-3 instead of Form-4. The Tribunal held that the Operational Creditor is at liberty to submit a Demand Notice either in Form-3 or Form-4 as per Rule 5 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016. Since the Notice was issued in Form-3, there was no requirement to attach invoices. The Tribunal found no defect in the Demand Notice.

3. Existence of Operational Debt:
The Appellant contended that the Section 9 Application was based on an Agreement dated 05.02.2013, which was not entered into with the Corporate Debtor. The Tribunal noted that a subsequent Agreement dated 14.03.2015 was entered into between the Corporate Debtor and the Operational Creditor, and the Corporate Debtor had acknowledged the debt and issued three cheques, which were dishonored. Thus, the Tribunal found that the operational debt was due and unpaid.

4. Compliance with Settlement Agreement:
The Corporate Debtor and Operational Creditor entered into a Settlement Agreement on 27.09.2021, acknowledging the debt of Rs.92,70,000/- and agreeing to a settlement of Rs.60,00,000/-. The Corporate Debtor paid only Rs.25,00,000/- and defaulted on the remaining installments. The Tribunal held that the default on the Settlement Agreement justified the continuation of the Section 9 proceedings. The Appellant's offer to make a partial payment of Rs.20,00,000/- was not sufficient to settle the entire debt.

5. Assignment of Debt:
The Appellant challenged the Assignment Agreement in favor of Respondent No.3 as void and unstamped. The Tribunal noted that the Assignment Deed was not the subject matter of the Section 9 Application and was only relevant for Respondent No.3's impleadment in the Appeal. The Hon'ble Supreme Court had dismissed the challenge to the impleadment order, and thus, the Tribunal did not consider the arguments regarding the Assignment Agreement.

Conclusion:
The Tribunal found no grounds to interfere with the Adjudicating Authority's order admitting the Section 9 Application and dismissed the Appeal. The amount deposited by the Appellant was ordered to be returned.

---