2017 (10) TMI 1486 - AT - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Service of notice - case of petitioner is that notice under sub-section (1) of Section 8 was not issued by the Operational Creditor but through its lawyer/ advocate - principles of natural justice - HELD THAT - The issue is covered by the decision in the case of UTTAM GALVA STEELS LIMITED VERSUS DF DEUTSCHE FORFAIT AG ANT. 2017 (8) TMI 1198 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI where it was held that the notice issued by the lawyer on behalf of the Respondents can not be treated as a notice under section 8 of the I B Code and for that the petition under section 9 at the instance of the Respondents against the Appellant was not maintainable. The present case is covered by the decision in Uttam Galva Steels Limited - In this circumstances, we have no other option but to set aside the impugned order. The application preferred by Respondent under Section 9 of the I B Code, 2016 is dismissed.

Summary

Issues:
Admission of application under Section 9 of the Insolvency and Bankruptcy Code, 2016 without proper notice to the appellant.

Analysis:
The appeal was filed by the appellant, a Corporate Debtor, against the order passed by the Adjudicating Authority admitting the application under Section 9 of the Insolvency and Bankruptcy Code, 2016. The appellant contended that the impugned order was in violation of natural justice as no notice was served on them. The Operational Creditor, however, argued that notice was indeed issued to the appellant before the admission of the case. The Adjudicating Authority had directed the Operational Creditor to issue the notice, which was not in accordance with the law. The Appellate Tribunal cited a previous case where it was established that it is the duty of the Adjudicating Authority to issue notice and not the party. Additionally, the notice issued by the advocate on behalf of the Operational Creditor did not comply with the requirements of the law as it did not mention the position and relation with the Operational Creditor as mandated.

Further Analysis:
The Appellate Tribunal referred to specific provisions of the Insolvency and Bankruptcy Code and the Adjudicating Authority Rules regarding the issuance of demand notices to the Corporate Debtor. It was highlighted that the notice must be in a prescribed format and must clearly inform the Corporate Debtor of the operational debt and the consequences of non-payment. The Tribunal emphasized that only a person authorized to act on behalf of the Operational Creditor, holding a position with or in relation to the Operational Creditor, can issue such a notice. In this case, the advocate who issued the notice did not hold such a position, rendering the notice invalid.

Conclusion:
Based on the legal precedents and the specific provisions of the law, the Appellate Tribunal set aside the impugned order admitting the application under Section 9 of the Insolvency and Bankruptcy Code. Consequently, all orders passed by the Adjudicating Authority, including the appointment of an Interim Resolution Professional and the declaration of moratorium, were declared illegal and set aside. The Corporate Debtor was released from the obligations imposed by the impugned order and allowed to function independently through its Board of Directors. The Adjudicating Authority was directed to close the proceedings, and the Interim Resolution Professional's fee, if appointed, was to be fixed and paid by the Respondent. The appeal was allowed with observations and directions, with no order as to costs.