TaxTMI 
TaxTMI 
2026 (5) TMI 276
X X X X Extracts X X X X
X X X X Extracts X X X X
....ent appeal has been preferred by the Appellant. 2. Put briefly, the relevant facts which are required to be noticed for consideration of this case is that the Operational Creditor -Rama Traders was a proprietorship concern which was engaged in business transaction with the Corporate Debtor - Rocket Engineering Corporation Pvt. Ltd. Claiming that payments were outstanding from the Corporate Debtor, the Operational Creditor issued a legal notice to them on 19.01.2018 seeking payment of Rs. 3,45,55824/-. On not receiving any reply thereto or any payment from the Corporate Debtor, the Appellant-Operational Creditor issued Section 8 demand notice in Form-3 on 22.06.2018 which was followed up by another notice dated 26.06.2018 seeking repayment of outstanding dues. The Corporate Debtor sent a consolidated reply on 05.07.2018 denying the debt following which the Operational Creditor filed a Section 9 petition. The said Section 9 application was dismissed by the Adjudicating Authority on the grounds that the demand notice issued under Section 8 of the IBC was defective and that it was hit by limitation. Aggrieved by the impugned order, the Appellant has come in appeal. 3. Making subm....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n 26.09.2018 fell within the three years limitation period. However, the Adjudicating Authority erroneously held that since the claim of the Operational Creditor arose in 2014, it was time-barred. It was pointed out that when the acknowledgement of liability basis the email of 15.01.2016 found mention in both the Section 8 demand notice and in Part IV of the Section 9 application, the Adjudicating Authority had erred in holding that in the absence of any specific date of default, the Section 9 application was barred by limitation. It was also contended by the Appellant that the finding returned by the Adjudicating Authority that the Section 8 demand notice was defective was erroneous. The Adjudicating Authority wrongly held the Section 8 demand notice in Form 3 to be invalid on the ground that invoices had not been attached alongwith the demand notice. Submission was pressed that in terms of the judgment of this Tribunal in Neeraj Jain Vs Cloudwalker Streaming Technologies Pvt. Ltd. in CA(AT)(Ins) No. 1354 of 2019, an Operational Creditor can issue a demand notice either in Form 3 or Form 4 and attachment of invoices is not mandatory where the demand notice is issued in Form 3. Hen....
X X X X Extracts X X X X
X X X X Extracts X X X X
....o contractual relationship between the Operational Creditor and the Corporate Debtor for supply of goods for the Appellant- Operational Creditor was to only receive commission as a commission agent. It was vehemently asserted that the pre-existing disputes surrounding the operational debt had been articulated both in their reply to the Section 8 Demand notice which had been rightly noticed by the Adjudicating Authority also. It was further added that the Section 9 application was hit by limitation as it was filed on 26.09.2018, while in the Section 8 demand notice, the date of default is shown to have occurred in 2014 which was clearly beyond the three years limitation period. Even the Section 9 application filed on 26.09.2018 was clearly beyond the three years limitation since the Operational Creditor had claimed the date of default to be 06.06.2015 being the last date of payment made by the Corporate Debtor. It was therefore asserted that the Adjudicating Authority had rightly held the Section 9 application to be time barred. 5. We have heard Ld. Counsel for both the parties and perused the records carefully. 6. The first issue before us is the tenability of the finding ret....
X X X X Extracts X X X X
X X X X Extracts X X X X
....in Form 3, attachment of invoices is not mandatory. It was further contended that as long as other documents substantiating the operational debt and the default thereto is placed on record that would fully satisfy the requirement of Section 8 demand notice. Hence, in the present case though invoices were not attached, furnishing of the email of 05.01.2016 and legal notice of 19.01.2018 was sufficient for the purpose of issuing Section 8 demand notice in Form 3. It was also asserted that only when the Section 8 demand notice is issued in Form 4 that the copy of invoices are required to be attached. 9. Per contra, it is the contention of the Respondent that when the outstanding debt and default thereof has been claimed on the basis of unpaid invoices, it was incumbent upon the Appellant to submit the Section 8 Demand Notice in Form 4 alongwith details of the invoices. It was contended that when the alleged debt was based on invoices, the Appellant could not have issued the Section 8 demand notice sans the invoices. 10. To arrive at our findings, at this stage, it may be useful to have a look at the manner in which the Appellant had submitted the Section 8 demand notice which is....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he Neeraj Jain judgment supra. In this judgement, we find that this Tribunal had dealt with two questions, firstly, as to whether it is the discretion of the Operational Creditor or the nature of the operational debt that determines the issuance of notice in Form 3 or Form 4 under Section 8(1) of the IBC. Secondly, it also considered the circumstances in which appending copy of the invoices becomes a mandatory requirement for issue of demand notice under Section 8(1) of the IBC. This Tribunal answered the above two questions in following manner at paragraphs 43 to 46 which is as reproduced below: "43. However, it cannot be the discretion of the Operational Creditor to deliver the Demand Notice in Form 3 even if the operational debt involves transactions where corresponding invoices are generated but are not filed in court on the pretext that the Operational Creditor has chosen to send the Notice in Form 3. 44. The use of the phrase, "deliver a demand notice of unpaid operational debt or copy of an invoice demanding payment of the amount involved" in Section 8(1) does not provide the Operational Creditor, with the discretion to send the demand notice in Form 3 or F....
X X X X Extracts X X X X
X X X X Extracts X X X X
....demanding the said amount. Merely because Section 8 provides for an option to issue the Section 8 demand notice in Form 3 or Form 4 cannot be seen to allow the Operational Creditor to take refuge of Form 3 to escape from the requirement of submission of invoices to prove the debt and amount in default. We therefore do not find any infirmity in the finding returned by the Adjudicating Authority that the demand notice served on the Corporate Debtor was not in order as the claim of the Appellant was based on generation of invoices. When the relevant Rules clearly outline that a particular Form is to be used for a particular purpose, compliance to the same cannot be ignored or brushed aside or treated as discretionary. Further what compound the situation further is that even the two documents mentioned in Form 3 of the Section 8 demand notice including the email dated 15.01.2016 were not attached to the said demand notice. 14. This brings us to the email dated 15.01.2016 which has been relied upon by the Appellant to assert that the outstanding liability had been acknowledged by the Corporate Debtor and on having committed default thereto, this was a fit case for admission of Sectio....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ejoinder to the reply of the Respondent to the Section 9 application had on their own vouched that Rasmi Marketing being a separate business entity cannot be dragged into the transactions between the Appellant and the Corporate Debtor, it is surprising that when it came to the email dated 15.01.2026, the Appellant have been endeavouring to disregard the independent and separate status of these two entities. 16. At this stage, we may have a look at to the reply to the Section 8 demand notice as furnished by the Corporate Debtor to the Operational Creditor on 05.07.2018 which is placed at page 142 of the APB. The Corporate Debtor in its reply has categorically disputed the operational debt and asserted that no goods had been purchased from Rama Traders since 2012 and hence, there was no question of payment of amount of Rs. 3.45 Cr. Even the nature of transaction has been disputed by claiming that the Operational Creditor was a commission agent and not a supplier of goods. The relevant extracts from the notice of dispute are as reproduced below:- REPLY NOTICE Dated: 5/7/2018 To M/S. Rama Traders, Prop: Raju Manasukhlal Rupareliya Sangam ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....have not given the details of materials supplied to my client's company as mentioned in your notice. Therefore, notice sent by you is illegal, null and void. Hence, there is no question of 24% interest per annum on the amount mentioned in the notice. The contents mentioned in your advocate's notice in paragraphs No.1 to 7 are totally false and fabricated and baseless allegations made by you. Therefore, my client never agrees and accepts the same and my client clearly rejects the said allegations and claim made in the illegal notice. ........ 6.Therefore, my client should not pay you an amount of Rs.3,45,55,824/- and on this illegal and fake amount; you have sent bogus notice in the form No.3 as per rule 5. In the past, you have sent illegal notice on 19.01.2018 in accordance with rule-5 and my clients have given reply to this notice making clarification accordingly. Hence, there is no need to send reply to your notice again." (Emphasis supplied) 17. We find that the Corporate Debtor in its reply on 05.07.2018 to the Section 8 notice has denied the claim raised by the Operational Creditor on the grounds that they are not legally due or payable besides....