2026 (4) TMI 11 - AT - IBC

Demand notice service under insolvency law must be fairly tested before rejecting a section 9 application.

Service of a section 8 demand notice under the Insolvency and Bankruptcy Code was treated as sufficient when sent to the corporate debtor's registered ... Rejection of the section 9 application for alleged non-service of the demand notice - Effective Service of Notice - Electronic service on MCA-recorded email address - Opportunity to establish compliance under Section 9(5)(ii)(c) - Whether the delivery of demand notice as required under Section 9 (5)(ii)(c) of the Code, which is a condition precedent for the purposes of initiation of proceedings under Section 9, stood satisfied at the behest of the Appellant by delivering the same as per the manner prescribed under Section 8 of the Code, in order to enable the Ld. Tribunal to pass an order of admitting the application under Section 9 of the Code, and if not. Service of demand notice - Electronic service - Opportunity of hearing - HELD THAT: - The Appellate Tribunal held that the object of service of demand notice under Section 8 read with Section 9 is to make the corporate debtor aware of the default and of the initiation of insolvency proceedings. That requirement stood satisfied when the appellant had sent the demand notice to the respondent's email address as notified on the Ministry of Corporate Affairs portal, which was treated as an effective mode of service. Independently of that, the Tribunal found that, if the Adjudicating Authority had any doubt regarding proof of service, it ought to have afforded the appellant an opportunity to place material and explain compliance. Rejection of the application on a ground taken up by the Tribunal on its own, without calling upon the appellant to meet that ground and when the respondent had remained ex parte, was held to be perverse. [Paras 15, 16, 18] The impugned order was quashed and the matter was remitted for fresh decision on merits after giving the appellant an opportunity to place and substantiate its case regarding service of the demand notice. Final Conclusion: The appeal was allowed. The order rejecting the Section 9 application was set aside, and the matter was remitted to the Adjudicating Authority for fresh consideration after affording the appellant an opportunity to establish compliance with the requirement of service of demand notice. Issues: Whether the rejection of the section 9 application for alleged non-service of the demand notice was sustainable when the operational creditor claimed service by registered post and email, and whether the creditor ought to have been afforded an opportunity to meet the objection before dismissal.Analysis: The demand notice under section 8 of the Insolvency and Bankruptcy Code, 2016 serves to put the corporate debtor on notice of the default and the proposed insolvency action. Service sent to the email address reflected in the Ministry of Corporate Affairs master data was treated as sufficient for the purpose of notice. The dismissal of the section 9 application was found unsustainable because the objection regarding proof of service was acted upon without giving the operational creditor an opportunity to substantiate service, particularly when the respondent had remained ex parte.Conclusion: The rejection order was set aside, and the matter was remitted for fresh decision after granting the appellant an opportunity to establish service of the demand notice.Ratio Decidendi: A section 9 application cannot be rejected on an untested objection as to service of demand notice when the operational creditor was not given a fair opportunity to establish compliance with section 8 and the notice was sent to the official email address reflected in the corporate records.