2023 (5) TMI 661 - AT - Insolvency and Bankruptcy

Maintainability of application filed u/s 9 of IBC - NCLT admitted the application - Non service of demand notice - it is alleged that before filing the Section 9 Application Section 8 notice was not issued - HELD THAT - The letter dated 07.08.2013 clearly contains acknowledgement of the debt by the Corporate Debtor. The submission which has been pressed by the Appellant is that the payment was to be made when the work starts. The said statement at best stated the time from when payment shall start, which was accepted by the Operational Creditor. The fact that payment was to take place from the date work start does not in any manner absolve the liability of the Appellant since acknowledgment was very much there. From the order of the Adjudicating Authority, it is clear that the debt was never disputed. Insofar as the question of Section 8 notice not being issued, on basis of which Appellant contends that there was no default, sufficient to notice that notice was issued to the Corporate Debtor in the winding up petition, subsequently which was transferred. The submission of learned counsel for the Appellant that no default was committed cannot be accepted. Thus, present is a case where debt was proved and default was committed by the Appellant - there are no error in the order the Adjudicating Authority admitting Section 9 application - There is no merit in the Appeal, Appeal is dismissed.

Summary

Issues Involved:
The judgment deals with the issues of whether a Section 8 notice was necessary before filing a Section 9 application, the timing of default in relation to debt, acknowledgment of debt by the Corporate Debtor, and the sufficiency of notice in the winding up petition.

Issue 1: Section 8 Notice Requirement
The Appellant argued that no Section 8 notice was issued before the Section 9 application, challenging the admission order. The Larger Bench clarified that in this case, no notice under Section 8(1) was necessary for filing the Section 9 application. The Appeal was placed for hearing after this clarification.

Issue 2: Timing of Default in Relation to Debt
The Appellant contended that no default of debt had occurred before the admission of the Section 9 application. They highlighted a letter indicating that payment was to be made when work starts, suggesting the liability arose only then. However, the Respondent argued that the Corporate Debtor's only defense was the lack of Section 8 notice, implying no other submission needed consideration.

Issue 3: Acknowledgment of Debt
The letter dated 07.08.2013 was crucial as it acknowledged the debt by the Corporate Debtor. Although the Appellant claimed payment was to start with work commencement, the acknowledgment still established liability. The Adjudicating Authority's order confirmed that the debt was never disputed, supporting the admission of the Section 9 application.

Issue 4: Sufficiency of Notice in Winding Up Petition
Before the Section 9 application, a Company Petition was filed in the High Court, with subsequent proceedings in the NCLT. The Corporate Debtor received notice in the winding up petition, which was later transferred. Despite the Appellant's argument of no default, the Court found that sufficient notice had been provided, rejecting the claim of no default.

In conclusion, the judgment upheld the Adjudicating Authority's decision to admit the Section 9 application, as the debt was proven, and default was established by the Appellant. The Court dismissed the Appeal, finding no error in the admission order.