9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2023 (2) TMI 898 - AT - Insolvency and BankruptcyMaintainability of petition - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - application has been filed by the Operational Creditor without serving mandatory notice of demand in terms of Section 8 of the Code - Whether after transfer of winding up proceeding as per the Companies (Transfer of Pending Proceedings) Rules, 2016 r/w amendments made in Section 434 of the Companies Act, 2013 as applicable to the I B Code by Act 26 of 2018, the winding up petition which has been filed on the ground of company unable to pay its debt for treating the application under Section 9 of the Code notice under Section 8 of the Code is mandatory and without service of notice under Section 8 proceedings so transferred cannot be treated as proceedings under Section 9? Application under Section 9 required to be filed and maintained or not - HELD THAT - The manner in which the application under Section 9 is to be filed is provided in Rule 6 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 which says that it has to be in form -5 accompanied with documents and records required therein and as specified in the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations 2016. Section 9(3) further provides for the documents to be appended with the application. There is no dispute that a demand notice was served under Section 434(1)(a) of the Act, 1956 and despite receipt of demand notice and the expiry of statutory period, the Company Petition was filed under Section 433(e) of the Act, 1956 presumably on the ground that the Company is unable to pay its debt. The contention of Counsel for the Appellant that notice under Section 8 of the Code was also required to be served because of the first proviso to Rule 5 of the Rules, 2016 as per which the Operational Creditor was to submit all information, other than information forming part of the records transferred, required for admission of the petition under section 9 of the Code is not well founded because the language of this proviso does not contemplate issuance of a fresh notice under Section 8 albeit before filing of the application under Section 9. Looking from any angle, there is no requirement of issuance of a fresh notice under Section 8 of the Code as it cannot be read as a part of the submission of information as provided in first proviso to Rule 5 of the Rules, 2016. After the transfer of winding up proceedings as per Rules 2016 read with amendments made in Section 434 of the Act, 2013 as applicable to the Code by Act 26 of 2018, if the winding up petition has been filed on the ground that the Company is unable to pay its debt, for treating the application under Section 9 of the Code, notice under Section 8 of the Code is not necessary or mandatory and a petition under Section 9 shall be maintainable without service of notice under Section 8 of the Code. Correctness of the law laid down in the cases of Sabari Inn Pvt. Ltd. 2017 (12) TMI 834 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI , Mosmetro Story (FZE) 2017 (11) TMI 1945 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI and Shailendra Sharma 2021 (1) TMI 447 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI - HELD THAT - The first decision is in the case of Sabari Inn Pvt. Ltd. came on 17.11.2017. In this case, the Appellant (Corporate Debtor) entered into a contract with the Respondent Contractor therein. Although, according to the Appellant therein, pursuant to the contract, entire amount was paid but the Respondent issued a legal notice dated 07.09.2013 calling upon the Appellant to pay the outstanding sum of Rs. 12,06,508/- and thereafter filed a company petition under Section 433 434 of the Act, 1956 before the High Court of Madras. After constitution of the Tribunal and Adjudicating Authority, the said case was transferred to the Adjudicating Authority, Chennai Bench and was renumbered. In the said case, the Appellant therein raised an issue that no notice under Section 8(1) of the Code was served prior to treating the application as filed under Section 9 of the Code. It was held that no notice was issued under Section 8(1) and as per Rule 5 other informations were also not placed on record. It was thus held that the application filed under Section 433 and 434 of the Act, 1956 cannot be treated to be an application under Section 9 of the Code and hence, the application was abated. The second decision in Mosmetro Story (FZE) was delivered on 28.11.2017. In this case, the Appellant was the Corporate Debtor who used to purchase chemicals from the Operational Creditor. The Appellant therein had alleged that the he had already made the payment and settled the account but the Operational Creditor issued a legal notice on 19.08.2015 and 09.09.2015 for the payment of the outstanding sum of Rs. 1,98,75,342/- and thereafter filed the petition under Section 433 434 of the Act, 1956 before the High Court of Madras - In this case also the Corporate Debtor had taken a plea that since no notice under Section 8 (1) of the Code was served prior to treating the application under Section 9 of the Code, therefore, the application was not maintainable. In this case same view was expressed as has been expressed in the case of Sabari Inn Pvt. Ltd. (Supra) holding that neither the notice was issued under Section 8(1) nor other informations were placed before the Adjudicating Authority, therefore, the Company Petition stood abated. The case of Shailendra Sharma was decided on 13.01.2021, in which same issue was raised that before the petition is treated as an application filed under Section 9 of the Code, mandatory notice under Section 8(1) of the Code, should have been served and reference has been made to the aforesaid two decisions. It is needless to mention that since we have already held, while deciding the first question, that service of the notice under Section 8(1) of the Code is not a mandatory requirement, therefore, the decisions rendered in aforesaid three cases are held to be not a good law and are thus accordingly over ruled. The second question is accordingly decided. There is no merit in the present appeal as well and the same is thus dismissed.
Issues Involved:
1. Whether a notice under Section 8 of the Insolvency and Bankruptcy Code, 2016 is mandatory after the transfer of a winding-up petition to the Adjudicating Authority. 2. Whether the law laid down in previous cases regarding the necessity of a Section 8 notice is correct. Detailed Analysis: Issue 1: Mandatory Notice under Section 8 of the Insolvency and Bankruptcy Code, 2016 The appeal challenges the Adjudicating Authority's order admitting an application filed under Section 9 of the Insolvency and Bankruptcy Code, 2016 (the Code) without serving a mandatory notice of demand under Section 8 of the Code. The Appellant argued that the application was not maintainable without this notice, as it is a mandatory requirement under Section 8. The Respondent contended that the notice under Section 8 was unnecessary because a statutory notice under Section 434(1) of the Companies Act, 1956 had already been served. The Tribunal examined the scheme of the Code, particularly the requirements for filing an application under Section 9, which necessitates a demand notice under Section 8. However, it also considered the legislative intent behind Section 434 of the Companies Act, 2013, which allows for the transfer of pending winding-up proceedings to the Tribunal to be dealt with under the Code. The Tribunal concluded that the language of Rule 5 of the Companies (Transfer of Pending Proceedings) Rules, 2016 does not mandate the issuance of a fresh notice under Section 8 for applications transferred from winding-up petitions. The statutory notice served under Section 434(1) of the Companies Act, 1956 suffices for the purpose of initiating proceedings under Section 9 of the Code. Therefore, the first question was answered in the negative, stating that a notice under Section 8 is not necessary or mandatory after the transfer of winding-up proceedings. Issue 2: Correctness of Previous Judgments The Tribunal reviewed three previous decisions'Sabari Inn Pvt. Ltd. Vs. Rameesh Associates Pvt. Ltd., Mosmetro Story (FZE) Vs. BASF India Ltd. & Anr., and Shailendra Sharma, Director of R&M International Pvt. Ltd. Vs. Ercon Composites (Through IRP Mr. Nayana Premji Savala) & Anr.'which held that a notice under Section 8 is mandatory even after the transfer of winding-up petitions. In Sabari Inn Pvt. Ltd., the Tribunal had ruled that an application under Section 9 of the Code was not maintainable without a Section 8 notice. Similarly, in Mosmetro Story (FZE), the Tribunal held that the absence of a Section 8 notice rendered the application invalid. The Shailendra Sharma case reiterated these views. However, the Tribunal in the current judgment found that these decisions were not laying down the correct law. It held that the service of a notice under Section 8 is not a mandatory requirement for applications transferred from winding-up petitions. Consequently, the previous decisions were overruled. Conclusion: The Tribunal concluded that after the transfer of winding-up proceedings, a notice under Section 8 of the Code is not mandatory for treating the application under Section 9. The appeal was dismissed, affirming that the application filed by the Operational Creditor was maintainable without the Section 8 notice. The previous judgments requiring such a notice were overruled as incorrect interpretations of the law.
|
