2017 (8) TMI 801 - AT - Insolvency and Bankruptcy

Corporate Insolvency Resolution Process - Notice issued by the advocate/ lawyer on behalf of the appellant treatment as notice under Section 8 of the I & B Code - Held that - Advocate / lawyer or Chartered Account or a Company Secretary or any other person in absence of any authority by the Operational Creditor , and if such person do not hold any position with or in relation to the Operational Creditor , cannot issue notice under Section 8 of I & B Code , which otherwise can be treated as a lawyer s notice/ pleader s notice, as distinct from notice under Section 8 of I & B Code. The demand notice/ invoice Demanding Payment under the I& B Code required to be issued in Form-3 or Form - 4. By the said notice, the Corporate Debtor is to be informed of particulars of Operational Debt , with a demand of payment, with clear understanding that the Operational Debt (in default), as claimed, is to be paid, unconditionally within ten days from the date of receipt of letter failing which the Operational Creditor will initiate a Corporate Insolvency Process in respect of Corporate Debtor , as apparent from last paragraph no. 6 of notice contained in form - 3, and quoted above. Only if such notice in Form - 3 or Form - 4 is served, the Corporate Debtor will understand the serious consequences of non-payment of Operational Debt , otherwise like any normal pleader notice/Advocate notice or like notice under Section 80 of C.P.C. or notice for initiation of proceeding under Section 433 of the Companies Act 1956, the Corporate Debtor may decide to contest the suit/case if filed, as distinct Corporate Resolution Process, where such claim otherwise cannot be contested, except where there is an existence of dispute, prior to issuance of notice under Section 8. In the present case, as the notice has been given by an advocate/lawyer and there is nothing on the record to suggest that the lawyer was authorized by the appellant, and as there is nothing on the record to suggest that the said lawyer/ advocate hold any position with or in relation to the appellant company, we hold that the notice issued by the advocate/ lawyer on behalf of the appellant cannot be treated as notice under Section 8 of the I & B Code . And for the said reason also the petition under Section 9 at the instance of the appellant against the respondent was not maintainable.

Summary

Issues Involved:
1. Maintainability of the application under Section 9 of the Insolvency and Bankruptcy Code (I&B Code) by a foreign company.
2. Requirement of a certificate from a financial institution for an operational creditor.
3. Validity of a demand notice issued by an advocate under Section 8 of the I&B Code.

Issue-wise Detailed Analysis:

1. Maintainability of the application under Section 9 of the Insolvency and Bankruptcy Code (I&B Code) by a foreign company:
The appellant, a foreign company incorporated under the laws of Singapore, sought to initiate the Corporate Insolvency Resolution Process against the respondent under Section 9 of the I&B Code. The adjudicating authority held that the application was not maintainable because the appellant did not meet the requirements stipulated in the I&B Code. Specifically, the appellant did not have an account with any financial institution as defined under sub-section (14) of Section 3 of the I&B Code, which includes scheduled banks, financial institutions as defined in the Reserve Bank of India Act, public financial institutions as defined in the Companies Act, and other institutions specified by the Central Government.

2. Requirement of a certificate from a financial institution for an operational creditor:
Section 9(3)(c) of the I&B Code mandates that an operational creditor must furnish a certificate from a financial institution maintaining the accounts of the operational creditor, confirming that there is no payment of unpaid operational debt by the corporate debtor. The appellant's bank, Macquarie Bank, Australia, did not qualify as a financial institution under the I&B Code. The tribunal referenced its previous judgment in "Smart Timing Steel Ltd. Vs. National Steel and Agro Industries Ltd.," which held that the requirement of a certificate from a financial institution is mandatory. The tribunal concluded that without such a certificate, the application under Section 9 was not maintainable.

3. Validity of a demand notice issued by an advocate under Section 8 of the I&B Code:
The tribunal examined whether the demand notice issued by an advocate on behalf of the operational creditor was valid. Section 8 of the I&B Code requires the operational creditor to deliver a demand notice of unpaid operational debt to the corporate debtor. The tribunal noted that the notice must be issued by the operational creditor or a person authorized to act on behalf of the operational creditor who holds a position with or in relation to the operational creditor. In this case, the demand notice was issued by a lawyer from Singapore, and there was no evidence that the lawyer was authorized by the appellant or held any position with the appellant company. Consequently, the tribunal held that the notice issued by the lawyer could not be treated as a valid notice under Section 8 of the I&B Code.

Conclusion:
The tribunal dismissed the appeal, holding that the application under Section 9 was not maintainable due to the absence of a certificate from a financial institution and the invalidity of the demand notice issued by an advocate. The tribunal emphasized that compliance with the procedural requirements of the I&B Code is mandatory, and failure to adhere to these requirements renders the application invalid. The appeal was dismissed with no order as to costs.