2020 (4) TMI 155 - AT - Insolvency and Bankruptcy

Maintainability of application- initiation of CIRP - deemed SCN - Appeal has been filed mainly on the ground that demand notice sent at the registered office of the Corporate Debtor, was returned with the remarks of the Postal Authorities not available . Whether deemed service of demand notice under section 8 of I B Code, 2016 is sufficient, to trigger the process U/S 9 of the Code? HELD THAT - It is apparent that the corporate debtor has not denied the service of demand notice in its reply to the petition. It is apparent that initially, the corporate debtor took the plea that demand notice was not as per applicable Rules and Regulations. The corporate debtor in its reply further stated that it is incorrect to allege that the corporate debtor has not given a reply to demand notice and has not raised the dispute of unpaid operational debt - The Appellant has given sufficient evidence to show the delivery of demand notice. There is no specific denial of service of demand notice. The corporate debtor has itself stated that in reply to the demand notice, he had raised the dispute of unpaid operational debt. But no document is placed before us to show the existence of dispute before issuance of demand notice. Copy of invoices, demand notice, bank statement all other documents are placed before us which clearly shows that the corporate debtor failed to pay off the operational debt of more than Rs. One Lac, despite service of demand notice. It is apparent that the Application for Initiation of Corporate Resolution Process was filed on 15th September, 2018, and impugned invoices were raised between 03rd March, 2017 to 27th March, 2017. The Corporate Debtor made the last payment of ₹ 4,08,205/- partial liability on 20th June, 2017, therefore, it is apparent that petition is within statutory period of limitation i.e. 3 years. Thus we are of the considered opinion that the Adjudicating Authority erred in rejecting the application filed u/s 9 of the Code - Appeal allowed.

Issues Involved:
1. Service of Demand Notice under Section 8 of the Insolvency and Bankruptcy Code (I&B Code), 2016.
2. Applicability of the General Clauses Act, 1897, and Indian Evidence Act, 1872 to the I&B Code, 2016.
3. Existence of Dispute prior to the delivery of the Demand Notice.
4. Compliance with statutory period of limitation.

Issue-wise Detailed Analysis:

1. Service of Demand Notice under Section 8 of the Insolvency and Bankruptcy Code (I&B Code), 2016:
The primary issue revolves around whether the demand notice under Section 8 of the I&B Code, 2016 was properly served. The appellant contended that the demand notice was sent via Speed Post to the registered office of the Corporate Debtor but was returned with the remark "not available." However, the notice sent to the Director's residence was not returned. The Adjudicating Authority rejected the petition on the grounds that the service of the demand notice was not established. The appellant argued that the Corporate Debtor's reply to the demand notice itself served as proof of service, as the Corporate Debtor did not specifically deny receiving the notice in their reply.

2. Applicability of the General Clauses Act, 1897, and Indian Evidence Act, 1872 to the I&B Code, 2016:
The Adjudicating Authority held that the I&B Code, 2016 is a complete code in itself, and the provisions of the Indian Evidence Act, 1872, and the General Clauses Act, 1897 are not applicable unless specifically covered in the I&B Code, 2016. The appellant argued that the notice should be deemed served based on the General Clauses Act and Section 114 of the Indian Evidence Act, which provides for a presumption of service.

3. Existence of Dispute prior to the delivery of the Demand Notice:
The Adjudicating Authority emphasized that the purpose of the demand notice under Section 8 is to provide the Corporate Debtor an opportunity to communicate any existing dispute before proceeding under Section 9. The appellant provided evidence that the Corporate Debtor had received the demand notice and had replied, thereby acknowledging the notice and disputing the claim. The Corporate Debtor's reply did not deny the service of the demand notice but argued that the notice was not in accordance with the applicable provisions and regulations.

4. Compliance with statutory period of limitation:
The application for initiating the Corporate Insolvency Resolution Process (CIRP) was filed within the statutory period of limitation. The invoices in question were raised between March 3, 2017, and March 27, 2017, and the last payment was made on June 20, 2017. The petition was filed on September 15, 2018, which is within the three-year limitation period.

Conclusion:
The Tribunal concluded that the Adjudicating Authority erred in rejecting the application filed under Section 9 of the I&B Code, 2016. The appellant provided sufficient evidence to show the delivery of the demand notice, and there was no specific denial of service by the Corporate Debtor. The Corporate Debtor's reply acknowledged the receipt of the notice and raised a dispute, but no evidence was provided to show the existence of a dispute before the issuance of the demand notice. The application was also filed within the statutory period of limitation. Therefore, the appeal was allowed, the impugned order was set aside, and the Adjudicating Authority was directed to pass the order of admission. The parties were instructed to be present before the Adjudicating Authority on February 24, 2020.

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