2017 (10) TMI 1436 - AT - Insolvency and Bankruptcy

Corporate insolvency process - notice under sub-section (1) of Section 8 was issued by a lawyer - existence of dispute , within the meaning of Section 8 read with sub-section (5) of Section 5 of I&B Code - HELD THAT - In view of provisions of I&B Code, read with Rules, as referred to above, we hold that an Advocate/Lawyer or Chartered Accountant or Company Secretary in absence of any authority of the Board of Directors, and holding no position with or in relation to the Operational Creditor cannot issue any notice under Section 8 of the I&B Code, which otherwise is a lawyer s notice as distinct from notice to be given by operational creditor in terms of section 8 of the I&B Code. See UTTAM GALVA STEELS LIMITED VERSUS DF DEUTSCHE FORFAIT AG & ANT. 2017 (8) TMI 1198 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI . Adjudicating Authority appointing any Interim Resolution Professional or declaring moratorium, freezing of account, if any, and all other order(s) passed by Adjudicating Authority pursuant to impugned order and action taken by the Interim Resolution Professional , including the advertisement published in the newspaper calling for applications all such orders and actions are declared illegal and are set aside. The application preferred by Respondent under Section 9 of the I&B Code, 2016 is dismissed.

Summary

Issues Involved:
1. Validity of the notice issued under Section 8 of the Insolvency and Bankruptcy Code, 2016.
2. Dispute regarding the notice being issued by a lawyer instead of the Operational Creditor.

Analysis:

Issue 1: Validity of the notice issued under Section 8 of the Insolvency and Bankruptcy Code, 2016:
The appeal was filed against the order passed by the Adjudicating Authority where the application by the Operational Creditor under section 9 was admitted, moratorium was imposed, and an Interim Resolution Professional (IRP) was appointed. The main contention raised by the appellant was the existence of a dispute and the fact that the notice under Section 8 was issued by a Law Firm/Advocate, not the Operational Creditor. The Respondent did not contest that the notice was issued by a lawyer. The Appellate Tribunal referred to a previous case and highlighted the requirements under Section 8 and Rule 5 of the Adjudicating Authority Rules regarding the format and manner of issuing a demand notice for unpaid Operational Debt. It was emphasized that the person issuing the notice on behalf of the Operational Creditor must hold a position with or in relation to the Operational Creditor. Therefore, it was concluded that an Advocate/Lawyer without authority from the Board of Directors and not holding a relevant position with the Operational Creditor cannot issue a notice under Section 8 of the I&B Code.

Issue 2: Dispute regarding the notice being issued by a lawyer instead of the Operational Creditor:
Based on the findings from the previous case, the Appellate Tribunal set aside the impugned order, declaring all subsequent actions and orders as illegal. This included the appointment of the Interim Resolution Professional, declaration of moratorium, freezing of accounts, and any other actions taken. The Respondent's application under Section 9 of the I&B Code was dismissed, and the Adjudicating Authority was directed to close the proceedings. The appellant company was released from the legal constraints and allowed to function independently through its Board of Directors. The Adjudicating Authority was tasked with fixing the fee of the Interim Resolution Professional, if appointed, and the Respondents were instructed to pay the fees for the period of their function. The appeal was allowed with the mentioned observations and directions, with no order as to costs.

This detailed analysis of the judgment provides a comprehensive understanding of the issues involved and the Tribunal's decision, emphasizing the importance of compliance with the legal requirements for issuing notices under the Insolvency and Bankruptcy Code.