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2022 (4) TMI 13 - AT - Insolvency and BankruptcyInitiation of CIRP - Going Concern - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - service of demand notice - HELD THAT - In the Application filed under Section 9, there is specific mention of notice dated 06.04.2019 issued by the Operational Creditor. Notice dated 06.04.2019 specifically mentioned in the List of Dates and Events as well as in Part-IV of the Application and copy of notice dated 06.04.2019 was filed as Annexure A-4 along with the Application. In the reply, which was filed by Corporate Debtor dated 18.09.2019, there was no plea that notice dated 06.04.2019 was not served on the Corporate Debtor. Both in the preliminary objection and reply on merits, there is no specific denial of non-receipt of notice dated 06.04.2019, which clearly supports the submission of learned Counsel of the Operational Creditor that notice was duly issued on correct address and was served on the Respondent Corporate Debtor. The learned Counsel for the Appellant relied on judgment of this Tribunal in ANIL SYAL VERSUS SANJEEV KAPOOR 2020 (1) TMI 472 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI as well as JAYA PATEL VERSUS GAS JEANS PVT. LTD. ORS. 2018 (10) TMI 1909 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI and contends that service of notice under Section 8 is sine qua non for proceedings under Section 9 of the Code. There can be no doubt about the above proposition laid down by this Tribunal in the above cases - However, present is a case where, notice was duly served by the Operational Creditor on the correct address of the Appellant-Corporate Debtor. Operational Debt due or not - HELD THAT - The mere fact that when the Corporate Debtor did not pay the amount, suit for recovery was filed in the year 2016 by the Operational Creditor, which was also Decreed on 08.09.2016, does not in any manner effect the transaction out of which the amount fell due. The fact that amount was adjudicated and a Decree was passed, in no manner take away the nature of operational debt - the Application filed by Respondent under Section 9 was fully maintainable and the claim of the Respondent was a claim of operational debt and there are no merit in the submission of the learned Counsel for the Appellant that there was no operational debt . The provisions of the Code namely under Section 238 shall have an overriding effect. Hence the Application under Section 9 filed by the Operational Creditor cannot be defeated on the ground that any Application for execution was pending, more so, when inspite of Decree passed on 08.09.2016, no payment was made by the Corporate Debtor. Even when a going concern is unable to discharge its debt, the Operational Creditor is entitled to invoke Section 9, hence, the Application filed by Operational Creditor under Section 9 cannot be said to be non-maintainable on the ground that Corporate Debtor is a going concern - there are no substance in any of the submission of the learned Counsel for the Appellant - appeal dismissed.
Issues Involved:
1. Service of Notice under Section 8 of the Insolvency and Bankruptcy Code, 2016. 2. Maintainability of Application under Section 9 based on a Civil Court Decree. 3. Status of Corporate Debtor as a going concern affecting the maintainability of the Application. Issue-wise Detailed Analysis: 1. Service of Notice under Section 8 of the Insolvency and Bankruptcy Code, 2016: The Appellant argued that the notice under Section 8 of the Code dated 06.04.2019 was not served on the Corporate Debtor as it was sent to an incorrect address. The notice was sent to '24, Sainki Farms, Delhi-110062' instead of the correct address '54-A, Sainik Farm, Khanpur, New Delhi-110062'. The Adjudicating Authority did not return any finding regarding the service of notice, which is a mandatory requirement. The Respondent countered that the notice was sent to the correct address and was duly received by the Corporate Debtor. The Operational Creditor filed an affidavit of compliance, including a photocopy of the receipt issued by India Post. The discrepancy in the address on the postal receipt was due to a mistake by the Postal Authorities, not the Operational Creditor. The Tribunal found that the notice was addressed correctly and was served on the Corporate Debtor. The Corporate Debtor's reply to the Section 9 Application did not mention non-receipt of the notice. The Tribunal concluded that the notice was duly served, and the first submission of the Appellant was rejected. 2. Maintainability of Application under Section 9 based on a Civil Court Decree: The Appellant contended that the Application under Section 9 was based on a Civil Court Decree dated 08.09.2016, which cannot be considered an 'operational debt'. The Appellant argued that the Respondent should have pursued the Execution Application instead of filing under Section 9 of the Code. The Tribunal noted that the debt arose from the supply of poly propylene by the Operational Creditor to the Corporate Debtor, which is covered under the definition of 'operational debt' as per Section 5(21) of the Code. The mere fact that the debt was adjudicated and a Decree was passed does not change the nature of the operational debt. The Tribunal held that the Application under Section 9 was maintainable and the claim was an operational debt. The Tribunal also referenced its previous judgments, stating that the pendency of an Execution Application does not preclude the initiation of proceedings under the Code. The Tribunal rejected the Appellant's second submission, affirming the maintainability of the Section 9 Application. 3. Status of Corporate Debtor as a going concern affecting the maintainability of the Application: The Appellant argued that the Corporate Debtor is a going concern with a significant turnover and employees, hence the Application under Section 9 should not be maintainable. The Tribunal dismissed this argument, stating that the status of the Corporate Debtor as a going concern does not affect the right of the Operational Creditor to invoke Section 9 of the Code. The Tribunal emphasized that even a going concern must discharge its debts, and the Application under Section 9 remains valid. Conclusion: The Tribunal found no merit in any of the submissions made by the Appellant. The judgment of the Adjudicating Authority admitting the Section 9 Application filed by the Respondent was upheld. The Appeal was dismissed, and no order as to costs was made.
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