2019 (8) TMI 1698 - AT - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor will make payment of dues or not - Operational Creditors - service of demand notice - Jurisdiction of NCLT Mumbai - HELD THAT - Pursuant to Section 408 of the Companies Act, 2013, the National Company Law Tribunal has been constituted in different States. In terms of the said provision, the Central Government has notified and vested the power on respective National Company Law Tribunals to deal with the matter within its territory, where the registered Offices of the Companies are situated. As per Section 60(1) of the I B Code - the National Company Law Tribunal, Mumbai Bench has the jurisdiction to entertain an application under Section 9 of the I B Code and the Appellant cannot derive advantage of the terms of the Agreement reached between the parties. Service of Demand Notice - HELD THAT - Corporate Debtor was not served with the Demand Notice in terms of Section 8(1) of the I B Code. However, from the record it is found that Demand Notice under Section 8(1) of the I B Code was issued by the Respondent - Operational Creditor on 6th March, 2018 demanding the repayment of US 971,412.98 plus ancillary obligations @ 15 % p.a. amounting to US 286.804.44 and despite receiving of the said Demand Notice, the Corporate Debtor had not replied, nor repaid the outstanding dues. The Adjudicating Authority has as such not accepted such plea based on record. Also, option was given to the Appellant to suggest whether the Appellant or the Corporate Debtor would agree to repay the debt as payable to the Operational Creditor , but it is informed that the Corporate Debtor or the Appellant is not in a position to do so. Appeal dismissed.

Summary

Issues:
1. Application for substitution of the Appellant.
2. Jurisdiction of the National Company Law Tribunal.
3. Service of Demand Notice under Section 8(1) of the I&B Code.

Analysis:

1. The judgment dealt with an application for substitution filed by the Director of the 'Corporate Debtor' to replace the Corporate Debtor as the Appellant in the case. The Appellate Tribunal allowed the Appellant to delete the name of the Corporate Debtor from the Cause Title and proceed with the Director as the sole Appellant, with the Corporate Debtor being impleaded as the 3rd Respondent.

2. The issue of jurisdiction was raised concerning the National Company Law Tribunal, Mumbai Bench's authority to entertain an application under Section 9 of the Insolvency and Bankruptcy Code. The Appellant argued that as per an Agreement between the parties, any legal action should be pursued in a German court due to the Respondent's location. However, citing a previous judgment, the Tribunal held that insolvency proceedings are distinct from regular litigation and that the Tribunal had jurisdiction based on the location of the Corporate Debtor's registered office.

3. The matter of serving a Demand Notice under Section 8(1) of the I&B Code was also addressed. The Respondent had issued a Demand Notice to the Corporate Debtor, which went unanswered, leading to the Adjudicating Authority not accepting the plea that the notice was not served. Despite offering the Appellant or the Corporate Debtor the option to repay the debt, neither party was in a position to do so. Consequently, the Tribunal declined to interfere with the impugned order and dismissed the Appeal for lack of merit.