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2023 (12) TMI 314 - AT - Insolvency and BankruptcyInitiation of CIRP - non-service of notice to Appellant/Corporate Debtor under Section 8 of IBC - Operational Creditor has failed to adduce valid proof of delivery of demand notice - HELD THAT - There is no doubt that in terms of the statutory construct of the IBC, an application for initiation of corporate insolvency resolution process can be filed by Operational Creditor only after expiry of period of 10 days from the date of delivery of the Section 8 demand notice on the Corporate Debtor. The impugned order has held at paragraph 19 that the Corporate Debtor was served with a notice dated 04.11.2019 which notice was not responded to by the Corporate Debtor. However, there is no specific finding recorded on whether the notice was actually served on the Corporate Debtor, a factum which has been seriously contested by the Corporate Debtor. Further it is the case of the Appellant that the proof of service claimed by the Operational Creditor was wrong proof of service. In view of the mandatory provision under Section 8 of IBC read with Rule 5 of Insolvency and Bankruptcy, (Application to Adjudicating Authority) Rules, 2016 which entails that for initiation of insolvency resolution by an Operational Creditor a demand notice has to be served by the unpaid Operational Debtor on the Corporate Debtor, the contention of the Appellant deserves due consideration. The order of the Adjudicating Authority is silent on the actual delivery of the Section 8 notice which is a bone of contention between the two parties - this aspect needs to be appropriately examined and hence matter remanded back to the Adjudicating Authority to consider the Section 9 application afresh with particular reference to actual and proper delivery of the demand notice on the Corporate Debtor. Appeal allowed by way of remand.
Issues Involved:
1. Whether the Section 9 application was erroneously admitted by the Adjudicating Authority. 2. Whether the statutory demand notice under Section 8 of the IBC was served on the Corporate Debtor. 3. Whether the address to which the demand notice was sent was correct. 4. Whether the Section 9 application is maintainable without proof of service of the demand notice. Summary: Issue 1: Erroneous Admission of Section 9 Application The Appellant argued that the Adjudicating Authority erroneously allowed the Section 9 application filed by the Operational Creditor, asserting that the existence of debt and default by the Corporate Debtor was established without proper examination. The Appellant contended that the demand notice required under Section 8 of the IBC was not complied with, making the Section 9 application questionable. Issue 2: Service of Statutory Demand Notice The Appellant claimed that no demand notice was received from the Operational Creditor and that there was no proof of delivery to the Corporate Debtor. The postal receipt and tracking report only showed that the notice was served by the Advocate of the Operational Creditor on the Operational Creditor itself. The Appellant cited a precedent where non-service of the demand notice was deemed a non-curable defect. Issue 3: Correct Address for Demand Notice The Appellant further argued that the demand notice was sent to the corporate office instead of the registered office of the Corporate Debtor, which is contrary to the scheme of the IBC. The Operational Creditor failed to provide proof of correct service, and the reasons given for the failure were deemed flimsy. Issue 4: Maintainability of Section 9 Application The Respondent countered that the demand notice was served as per the due process of law and that the issue of non-service should have been raised earlier. They explained that the proof of delivery was a clerical error and that the notice was indeed addressed to the Corporate Debtor. The Respondent also argued that numerous communications had been exchanged between the corporate office of the Corporate Debtor and the Operational Creditor, making the service at the corporate office valid. Judgment: The Tribunal noted that the prerequisites for triggering CIRP under Section 9 of the IBC include the existence of debt, default by the Corporate Debtor, and proper delivery of the demand notice. The Tribunal found merit in the Appellant's contention that the demand notice was not properly served, as the proof of service was flawed and the notice was sent to the wrong address. The Tribunal emphasized that compliance with Section 8 of the IBC is mandatory. The Tribunal concluded that the Adjudicating Authority's order was silent on the actual delivery of the Section 8 notice, which is a key contention. The matter was remanded back to the Adjudicating Authority to reconsider the Section 9 application with particular reference to the proper delivery of the demand notice. The appeal was allowed, and the impugned order dated 13.05.2023 was set aside. The orders initiating CIRP and appointing an interim Resolution Professional were declared illegal and set aside. The interim Resolution Professional was to be paid actual expenses and nominal fees by the Operational Creditor. No order as to costs.
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