9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2017 (12) TMI 850 - SC - Insolvency and BankruptcyCorporate insolvency process - whether, in relation to an operational debt, the provision contained in Section 9(3)(c) of the Code is mandatory? - Held that - In the present case, the rules merely flesh out what is already contained in the statute and must, therefore, be construed along with the statute. Read with the Code, they form a self-contained code being contemporanea expositio by the Executive which is charged with carrying out the provisions of the Code. The true construction of Section 9(3)(c) is that it is a procedural provision, which is directory in nature, as the Adjudicatory Authority Rules read with the Code clearly demonstrate. Whether a demand notice of an unpaid operational debt can be issued by a lawyer on behalf of the operational creditor? - Held that - Since there is no clear disharmony between the two Parliamentary statutes in the present case which cannot be resolved by harmonious interpretation, it is clear that both statutes must be read together. Also, we must not forget that Section 30 of the Advocates Act deals with the fundamental right under Article 19(1)(g) of the Constitution to practice one s profession. Therefore, a conjoint reading of Section 30 of the Advocates Act and Sections 8 and 9 of the Code together with the Adjudicatory Authority Rules and Forms thereunder would yield the result that a notice sent on behalf of an operational creditor by a lawyer would be in order.
Issues Involved:
1. Whether Section 9(3)(c) of the Insolvency and Bankruptcy Code, 2016 (IBC) is mandatory. 2. Whether a demand notice of an unpaid operational debt can be issued by a lawyer on behalf of the operational creditor. Issue-wise Detailed Analysis: 1. Whether Section 9(3)(c) of the Insolvency and Bankruptcy Code, 2016 (IBC) is mandatory: The first issue revolves around the interpretation of Section 9(3)(c) of the IBC. The provision requires the operational creditor to furnish a copy of the certificate from the financial institution maintaining accounts of the operational creditor confirming that there is no payment of the unpaid operational debt by the corporate debtor. The NCLT and NCLAT had dismissed the application for non-compliance with this provision, treating it as mandatory. The Supreme Court, however, held that Section 9(3)(c) is not a mandatory provision but directory. The Court reasoned that the term "confirming" in Section 9(3)(c) indicates that the certificate is merely an additional piece of evidence to confirm the unpaid operational debt, not a precondition to filing an application. The Court highlighted that the procedural rules and forms under the IBC also suggest that the certificate is not mandatory, as evidenced by the phrase "if available" in Annexure III of Form 5. The Court emphasized that procedural provisions should not be construed in a manner that causes serious general inconvenience or absurd results, especially when compliance is impossible, as in the case of foreign operational creditors who may not have dealings with financial institutions defined under Section 3(14) of the IBC. The Court further noted that the primary condition for triggering the insolvency process is the occurrence of a default, which can be proved by other documentary evidence. The Court concluded that the procedural requirement under Section 9(3)(c) should not act as a threshold bar to the processing of an application under Section 9, especially when it is impossible to comply with. 2. Whether a demand notice of an unpaid operational debt can be issued by a lawyer on behalf of the operational creditor: The second issue pertains to whether a demand notice under Section 8 of the IBC can be issued by a lawyer on behalf of the operational creditor. The NCLAT had held that a lawyer cannot issue such a notice unless explicitly authorized by the operational creditor. The Supreme Court disagreed with the NCLAT's interpretation. The Court observed that Section 8 of the IBC allows for the delivery of a demand notice by an operational creditor, and the term "deliver" implies that the notice can be sent by an authorized agent, including a lawyer. The Court referred to Forms 3 and 5 under the Adjudicating Authority Rules, which require the signature of a person "authorized to act" on behalf of the operational creditor, indicating that an authorized agent or lawyer can issue the notice. The Court also referred to Section 30 of the Advocates Act, which entitles advocates to practice before any tribunal or authority, and held that the term "practice" includes all preparatory steps leading to the filing of an application. The Court emphasized that the harmonious construction of the IBC and the Advocates Act supports the conclusion that a lawyer can issue a demand notice on behalf of the operational creditor. Conclusion: The Supreme Court set aside the NCLAT's judgment on both counts. It held that Section 9(3)(c) of the IBC is directory, not mandatory, and that a demand notice under Section 8 can be issued by a lawyer on behalf of the operational creditor. The cases were remanded to the NCLAT for further proceedings under the IBC.
|
