TaxTMI 
TaxTMI 
2025 (5) TMI 82
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....esolution Process For short, "the CIRP" against the respondent herein. 2. The facts of the case as presented by the appellant, are summarized as under: 2.1. The appellant is the Operational Creditor, engaged in the business of manufacture and sale of Low Ash Metallurgical Coke For short, "the LAM Coke" at its plant at Kalinganagar Industrial Complex, Jaipur Road, Odisha. The respondent is the Corporate Debtor, engaged in the business of minerals and metals. 2.2. On 11.10.2019, the appellant - Operational Creditor (seller) and the respondent - Corporate Debtor (buyer) entered into a contract for sale and purchase of LAM Coke for 12,000 MT +/- 10% at seller's option subject to the terms viz., (a) the respondent agreed to purchase the LAM Coke at the price of INR 18,800 per metric tonne + GST from the appellant; (b) the delivery period was up to 10.11.2019; and (c) 100% advance payment was to be paid by the respondent through RTGS/NEFT or by opening a Letter of Credit For short, "the LoC" prior to dispatch of the material. 2.3. Subsequently, the said contract was amended on many occasions with respect to delivery period and date of lifting under clause 3 of the contrac....
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....red an appeal bearing Comp. App (AT)(Ins) No. 247 of 2023 before the NCLAT under Section 61 of the IBC. Pursuant to the issuance of notice, the respondent entered appearance and filed their reply on 28.05.2023. The appellant also filed their rejoinder on 05.08.2023. 2.10. However, the NCLAT by order dated 03.10.2024, which is impugned herein, dismissed the appeal, observing that no notice has been addressed to the Corporate Debtor through its managing director etc., and therefore, it cannot be termed to have been delivered to the Corporate Debtor and cannot be taken to be a notice issued under section 8 of the IBC. 2.11. Aggrieved by the aforesaid order of the NCLAT, the appellant - Operational Creditor is before us with the present appeal. 3. The primary contention of the learned counsel for the appellant is that Section 8(1) of the IBC requires the operational creditor, i.e., appellant herein, on occurrence of a default, to deliver a demand notice of unpaid operational debt or a copy of the invoice demanding payment. The demand notice is required to be in the form and manner as prescribed, and it is clear that the demand notice is to be delivered on the corporate debtor.....
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....ted to in Section 8(2), is not served on the corporate debtor by the operational creditor. The plain language, object and purpose of the above-referred provision is to bring to the notice (and thus, to make the corporate debtor aware) that an operational debt is due from it which remains unpaid. As long as notice in that behalf is delivered at the registered office of the corporate debtor, the condition precedent would stand fulfilled enabling the operational creditor to trigger a section 9 petition. In this case, the appellant - Operational Creditor has done exactly this. The demand notice would clearly show that it is the Corporate Debtor who has been called upon to pay the amount and not its "KMP". Though both the NCLT and the NCLAT found that the demand notice was delivered at the registered office of the Corporate Debtor seeking payment of unpaid operational debt, they erroneously dismissed the section 9 petition. 3.3. The learned counsel also submitted that no ground was raised by the respondent at the initial stage that they had not received the demand notice under Section 8 of the IBC. During the pendency of the section 9 petition, the respondent approached the appellant....
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.... 4.2. It is submitted that the issue as to the tenability of the subject demand notice has been raised by the respondent before the NCLT, which is the court of first instance, both in oral and written arguments. This has also been traversed by the appellant both in its oral and written arguments. In any case, the question of what constitutes valid service of statutory notice on the Corporate Debtor being a pure question of law, could have been raised at any stage of the proceedings. 4.3. It is further submitted that Rule 5(2)(a) of the Adjudicating Authority Rules, 2016 provides that notice has to be sent to the registered office for which various modes have been provided, namely, by hand, registered post, or speed post with acknowledgement, but the notice has to be sent to the corporate debtor at its registered office. Rule 5(2)(b) provides for delivery of notice by electronic mail to the KMP of the corporate debtor, but it does not apply to the present case because admittedly no electronic mail has been sent. 4.4. It is also submitted that the principles of constructive notice and deemed service are inapplicable to the present case, since the statute itself is clear enough ....
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....- Operational Creditor moved the NCLT by filing a petition under section 9 of the IBC to initiate CIRP against the respondent - Corporate Debtor. However, the said application was rejected by the NCLT on the ground that the alleged demand notice was addressed/ sent to the KMP and no demand notice as required under section 8(1) of the IBC was sent to the Corporate Debtor and therefore, the question of whether service is valid or not, does not arise at all. The said decision was also affirmed by the NCLAT by the order impugned herein. Aggrieved, this civil appeal by the appellant - Operational Creditor before us. 7. The short question that arises for our consideration is, whether the notice dated 31.03.2021 served by the appellant - Operational Creditor upon the KMP of the respondent - Corporate Debtor at their registered office constitutes valid service of the statutory demand notice under Section 8 of the IBC, so as to maintain a section 9 petition for initiation of CIRP against the respondent - Corporate Debtor. 8. It is well settled law that an operational creditor must send a demand notice of unpaid operational debt to the corporate debtor as mandated under section 8 of th....
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.... of the invoice demanding payment or demand notice delivered by the operational creditor to the corporate debtor; (b) an affidavit to the effect 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; if available;] [(d) a copy of any record with information utility confirming that there is no payment of an unpaid operational debt by the corporate debtor, if available; and (e) any other proof confirming that there is no payment of an unpaid operational debt by the corporate debtor or such other information, as may be prescribed.] (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 com....
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....emanding payment served under this rule by an operational creditor shall also be filed with an information utility, if any." 8.1. Thus, it is manifest that a section 9 petition can be filed only against the corporate debtor after giving prior notice under section 8 of the IBC to the corporate debtor; and the key requirements for filing the same are (i) demand notice under section 8 must be served on the corporate debtor; (ii) after 10 days, if the payment is not made or if there is no valid dispute, the application can be filed; (iii) application must be filed in Form 5 as prescribed by the Adjudicating Authority Rules, 2016; and (iv) supporting evidence such as invoices, bank statements, or written contracts must be attached. Further, a conjoint reading of section 8 of the IBC r/w Rule 5(2)(a) and (b) of the Adjudicating Authority Rules, 2016 would reveal that a demand notice under section 8 can be addressed and delivered to the corporate debtor through its KMP. 9. Additionally, it is to be noted that the operational creditor is required to send the demand notice in Form 3, which is the prescribed format used to comply with Section 8(1) of the IBC. For better appreciation, t....
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....py of the record of electronic transfer of the unpaid amount from the bank account of the corporate debtor; or b. an attested copy of any record that [name of the operational creditor] has received the payment. 5. The undersigned, hereby, attaches a certificate from an information utility confirming that no record of a dispute raised in relation to the relevant operational debt has been filed by any person at any information utility. (if applicable) 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 authorized to act on behalf of the operational creditor Name in block letters Position with or in relation to the operational creditor Address of person signing Instructions 1. Please serve a copy of this form on the corporate debtor, ten days in advance of filing an application under section 9 of the Code. 2. Please append a copy of such served notice to the applic....
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....operational debt due from MESCO Kalinga Steel Limited (Mesco) under the Insolvency and Bankruptcy Code, 2016 (Code) Dear Sirs, 1. This letter is a Demand Notice/invoice demanding payment in respect of unpaid operational debt due from MESCO Kalinga Steel Limited under the Code. 2. Please find the particulars of the unpaid operational debt below: ........." 10.1. On a perusal of Form 3 notice dated 31.03.2021 issued by the appellant, it is revealed that the same was addressed to the names of the KMP and delivered to the registered office of the respondent - Corporate Debtor viz., MESCO Kalinga Steel Limited. Even the 'subject' and paragraph 1 of the notice clearly demonstrate that as per the IBC, demand notice / invoice demanding payment in respect of unpaid operational debt due from the corporate debtor was issued and thereby, the appellant called upon the Corporate Debtor to pay the operational debt within a period of ten days from the date of receipt of the notice, failing which, CIRP be initiated in respect of the Corporate Debtor. Notably, the said notice dated 31.03.2021 was served on the KMP in their official capacities at the registered ....
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....thin 15 days, so that it will not be necessary for the payee to proceed against in any criminal action, even though the bank dishonoured the cheques. It is Amit Bhalla, who had signed the cheques as the Director of M/s Bhalla Techtran Industries Ltd. When the notice was issued to said Shri Amit Bhalla, Director of M/s Bhalla Techtran Industries Ltd., it was incumbent upon Shri Bhalla to see that the payments are made within the stipulated period of 15 days. It is not disputed that Shri Bhalla has not signed the cheques, nor is it disputed that Shri Bhalla was not the Director of the company. Bearing in mind the object of issuance of such notice, it must be held that the notices cannot be construed in a narrow technical way without examining the substance of the matter. We really fail to understand as to why the judgment of this court in Bilakchand Gyanchand Co.,1999(5) SCC 693, will have no application. In that case also criminal proceedings had been initiated against A. Chinnaswami, who was the Managing Director of the company and the cheques in question had been signed by him. In the aforesaid premises, we have no hesitation to come to the conclusion that the High Court committed....
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....has been dismissed. ........ On perusal of the record, it is apparent that the Application filed under Section 9 of I & B Code, 2016 has been rejected by the Adjudicating Authority on the ground that the service of demand notice under Section 8 of I & B Code, 2016 is not established. The contention of the Operational Creditor, that the demand notice sent to the Director of the Company at his residence, is not returned. Thus it should be deemed to be served/delivered, given the General Clauses Act, 1897 and Section 114 of Indian Evidence Act, 1872. ....... The Appellant has given sufficient evidence to show the delivery of demand notice. There is no specific denial of service of demand notice. The corporate debtor has itself stated that in reply to the demand notice, he had raised the dispute of unpaid operational debt. But no document is placed before us to show the existence of dispute before issuance of demand notice. Copy of invoices, demand notice, bank statement all other documents are placed before us which clearly shows that the corporate debtor failed to pay off the operational debt of more than Rs One Lac, despite service of demand notic....
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....e KMP of the corporate debtor at the registered office address in the capacity of their official position, explicitly demonstrates that the same was issued to the corporate debtor demanding the operational debt due and payable by them. However, it is not the case of the respondent that no notice was sent by the appellant calling upon the respondent - Corporate Debtor to pay the operational debt. Further, it is pertinent to point out that during the pendency of the section 9 petition, the Corporate Debtor approached the Operational Creditor for settlement, which was not fructified. 14.1. This Court in Sardar Amarjit Singh Kalra (Dead) by LRs & Others v. Pramod Gupta (Dead) by LRs & Others (2003) 3 SCC 272, a five Judge bench, SCC pp. 300-01, para 26, categorically observed that 'laws of procedure are meant to regulate effectively, assist and aid the object of doing substantial and real justice and not to foreclose even an adjudication on merits of substantial rights of citizen under personal, property and other laws. Procedure has always been viewed as the handmaid of justice and not meant to hamper the cause of justice or sanctify miscarriage of justice'. It is also a trite law ....