2017 (5) TMI 1573 - AT - Companies Law

Initiation of Corporate Insolvency Resolution process - no notice issued - Held that - Giving a prior notice under Section 8 of I&B Code is mandatory before initiation of interim resolution process such notice having not been issued in this case the adjudicating authority rightly rejected the application.

Summary

Issues:
- Rejection of application for initiation of Corporate Insolvency Resolution process under Section 9 of the Insolvency & Bankruptcy Code, 2016.
- Interpretation of the mandatory requirement of issuing a notice under Section 8 of the I&B Code before filing an application under Section 9.
- Comparison with a previous case regarding the issuance of notices under different statutes.

Analysis:
The judgment pertains to an appeal against the rejection of an application for initiating the Corporate Insolvency Resolution process under Section 9 of the Insolvency & Bankruptcy Code, 2016. The appellant, claiming to be an operational creditor, argued that the rejection based on the technicality of not issuing a notice under Section 8 was unjustified. The appellant contended that a notice issued under the Companies Act, 1956, with a longer statutory period, should suffice. However, the law mandates the issuance of a notice under Section 8 of the I&B Code before filing an application under Section 9. The relevant sections clearly outline this requirement, emphasizing the necessity of compliance with the prescribed procedure.

In a similar case previously considered by the Appellate Tribunal, the issue of notice under Section 8 of the I&B Code was pivotal. The tribunal rejected arguments that notices issued under other statutes, such as the Companies Act, could substitute the specific requirement of Section 8. The tribunal emphasized the mandatory nature of the notice under Section 8 before initiating the insolvency resolution process. The judgment underscored the importance of strict adherence to the statutory provisions to ensure the integrity and effectiveness of the insolvency resolution framework.

Therefore, in the present case, the Appellate Tribunal upheld the decision of the adjudicating authority to reject the application due to the absence of a notice under Section 8 of the I&B Code. The tribunal reiterated the significance of complying with the procedural requirements outlined in the Code to maintain the integrity of the insolvency resolution mechanism. Consequently, the appeal was dismissed, emphasizing the mandatory nature of issuing a notice under Section 8 before initiating the corporate insolvency resolution process.