TaxTMI 
TaxTMI 
2017 (8) TMI 801
X X X X Extracts X X X X
X X X X Extracts X X X X
....d order dated 1st June 2017, having noticed that the demand notice under Section 8 of 'I & B Code' was issued through an Advocate of Singapore and that the appellant has not enclosed any certificate from a 'Financial Institution' maintaining the accounts of the 'Operation Creditor' in terms of Clause (c) of sub-section (3) of Section 9 of the 'I & B Code' held that the petition preferred by appellant, a foreign company having office at Singapore, under Section 9 was not maintainable 3 Before deciding the issue, it is desirable to notice the relevant facts and the provisions of '18; B Code'. 4. The appellant, a foreign company is not constituted under Companies Act 1956 or/ Companies Act 2013, having account with one 'Macquarie Bank', Australia. The appellant has no office in India, nor any account with any of the Bank or 'Financial Institution' as defined under sub-section (14) of Section 3 of 'I & B Code', which reads as follows:- "Definitions: - 3. In the Code, unless the context otherwise requires: - (14) financial institution" means- (a) a scheduled bank; (b) financial institution as defined in section 45-I of the Reserve Bank ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....fect that there is no notice given by the corporate debtor relating to a dispute of the unpaid operational debt; (c) a copy of the certificate from the financial institutions maintaining accounts of the operational creditor confirming that there is no payment of an unpaid operational debt by the corporate debtor; and (d) such other information as may be specified. (4) An operational creditor initiating a corporate insolvency resolution process under this section, may propose a resolution professional to act as an interim resolution professional. (5) The Adjudicating Authority shall, within fourteen days of the receipt of the application under sub-section (2), by an order- (i) admit. the application and communicate such decision to the operational creditor and the corporate debtor if- (a) the application made under sub-section (2) is complete; (b) there is no repayment of the unpaid operational debt; (c) the invoice or notice for payment to the corporate debtor has been delivered by the operational creditor; (d) no notice of dispute has been received by the operational creditor or there is no record of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ing of an application under Section (1) only in the form and manner and accompanied with such fees as may be prescribed. The Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules 2016 (hereinafter referred to as 'Adjudicating Authority Rules 2016' for short) are also enacted in exercise of the power conferred by Clauses (c), (d), (e), (D of sub-section 239 read with sections 7, 8, 9 and 10 of the 'I & B Code'. The rules provide the procedure required to be followed by filing an application by corporate insolvency resolution process. As per Rule 6 of the 'Adjudicating Authority' Rules 2016, an operational creditor shall make an application for initiating the corporate insolvency process under section 9, in Form 5 accompanied with documents and records required therein. As per sub-rule (2) of Rule 6 it is mandatory again to dispatch a copy of application filed with the adjudicating authority, by registered post or speed post to the registered office of the Corporate Debtor. 13. The provisions of sub-section (3) mandates the operational creditor to furnish copy of invoice demanding payment or demand notice delivered by the operational creditor to the corpora....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ended to be secured. No doubt, all laws are mandatory in the sense they impose the duty to obey on those who come within its purview. But it does not follow that every departure from it shall taint the proceedings with a fatal blemish. The determination of the question whether a provision is mandatory or directory would, in the ultimate analysis, depend upon the intent of the law-maker. And that has to be gathered not only from the phraseology of the provision but also by considering its nature, its design and the consequences which would follow from construing it in one way or the other." 16. Therefore, it is clear that the word 'shall' used in sub-section (3) of section 9 of 'I & B Code' is mandatory, including clause 3 therein." 8. Learned counsel appearing on behalf of appellant, tried to distinguish the judgement in 'Smart Timings Steel Ltd.' on the ground that the said company had not enclosed any other evidence in support of the debt and default of debt. Reliance was placed on Form-5 enclosed with Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules 2016 (hereinafter referred to as "Adjudicating Authority Rules"). As per Rule 6 of 'Adjudicating....
X X X X Extracts X X X X
X X X X Extracts X X X X
....by the said bank cannot be relied upon, to decide default of debt. 11. There is another reason to hold that the application under Section 9 is not maintainable. We find from the record that the so called application under Section 8 is not in accordance with law and is defective. The notice under sub-section (1) of Section 8 of 'I & B Code was not issued by the 'Operational Creditor' but by a Lawyer of Singapore. 12. Section 8 of 'I & B Code' is as follows: - "8. Insolvency resolution by operational creditor: (1) An operational creditor may, on the occurrence of a default, deliver a demand notice of unpaid operational debtor copy of an invoice demanding payment of the amount involved in the default to the corporate debtor in such form and manner as may be prescribed. Persons who may initiate corporate insolvency resolution process. Initiation of corporate insolvency resolution process by financial creditor. Insolvency resolution by operational creditor. (2) The corporate debtor shall, within a period often days of the receipt of the demand notice or copy of the invoice mentioned in sub-section (1) bring to the notice of the operational creditor- ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of an invoice attached with a notice in Form - 4. If the Rule 5 is read with the demand notice Form - 3 or invoice in Form - 4, it is clear that who are persons authorized to give the notice under Section 8 of the 'I & B Code', as apparent from last portion of Form - 3 & Form - 4, as quoted below: - "6. The undersigned request you to unconditionally repay the unpaid operational debt (in default) in full within ten days from the receipt of this letter failing which we shall initiate a corporate insolvency resolution process in respect of [name of corporate debtor]. Yours sincerely, Signature of person authorised to act in behalf of the operational creditor Name in block letters Position with or in relation to the operational creditor Address of person signing 16. From bare perusal of Form-3 and Form-4, read with sub-Rule (1) of Rule 5 and Section 8 of the 'I & B Code, it is clear that the 'Operational Creditor' can apply himself or through a person authorized to act on behalf of the 'Operational Creditor', who hold same position with or in relation to the 'Operational Creditor'. Thereby such person(s) authorized by 'Operational Creditor', holding position ....