2025 (4) TMI 458 - AT - IBC

Admission of section 7 application filed by the Bank of Baroda (BoB) - order admitting Section 7 application passed without service of notice on the appellant - HELD THAT - In Rule 38(1) the expression at the email address as provided in the petition or application or in the reply . It clearly refers to petition which was filed by the financial creditor under Section 7 and email address as provided in Section 7 is the address on which process can be served on the corporate debtor. Thus it is not persuaded to accept the submission of the appellant that in the present case service under Rule 38(1) was not possible the corporate debtor having not been filed any petition application or reply. The authorised representatives of the bank also physically visited the premises who have submitted a report. Thus the service of the notice was duly made to the appellant and the adjudicating authority proceeded to hear the matter only after service was duly affected on corporate debtor. It is relevant to notice that the appellant during his submissions has not even questioned the debt and default on the part of the corporate debtor. The debt and default was fully proved by the financial creditor. The copy of CIBIL Reports and statements of account were also filed by the financial creditor. The corporate debtor was well aware of the several proceedings initiated by the financial creditor against the corporate debtor. Conclusion - No good ground has been made to interfere with the impugned order admitting Section 7 application. Appeal dismissed.

ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment include:

1. Whether the service of notice on the corporate debtor was conducted in accordance with Rule 38 of the NCLT Rules, 2016.

2. Whether the adjudicating authority was justified in admitting the Section 7 application filed by the Bank of Baroda (BoB) against the corporate debtor.

3. Whether the appellant, a suspended director of the corporate debtor, had valid grounds to contest the admission of the Section 7 application based on alleged improper service of notice.

ISSUE-WISE DETAILED ANALYSIS

1. Service of Notice under Rule 38 of the NCLT Rules, 2016

Relevant legal framework and precedents: Rule 38 of the NCLT Rules, 2016, outlines the methods by which notices and processes may be served. Sub-rule (1) allows service by post or email as provided in the petition, application, or reply. Sub-rule (2) allows physical service through hand delivery, registered post, or courier.

Court's interpretation and reasoning: The Court interpreted Rule 38(1) to mean that the email address provided in the petition filed by the financial creditor is a valid address for service. The Court found that service was effected through email addresses registered with the MCA and those provided in the petition.

Key evidence and findings: The financial creditor submitted affidavits of service indicating that notices were sent via email and attempted physical delivery. The affidavits included reports from service agencies and photographs of the premises visited.

Application of law to facts: The Court found that service was duly made by email to the addresses registered with the MCA and the financial creditor's records. The appellant's argument that service was not possible without a petition, application, or reply from the corporate debtor was rejected.

Treatment of competing arguments: The appellant argued that service by email was invalid since no petition or reply was filed by the corporate debtor. The Court dismissed this argument, stating that the email address in the financial creditor's petition sufficed for service under Rule 38(1).

Conclusions: The Court concluded that the service of notice was properly executed in compliance with Rule 38, and the adjudicating authority was correct in proceeding with the hearing.

2. Justification for Admitting Section 7 Application

Relevant legal framework and precedents: Section 7 of the Insolvency and Bankruptcy Code, 2016 allows financial creditors to initiate insolvency proceedings against a corporate debtor upon default.

Court's interpretation and reasoning: The Court determined that the adjudicating authority had sufficient evidence of debt and default, justifying the admission of the Section 7 application.

Key evidence and findings: The financial creditor provided CIBIL reports, statements of account, and other documentation proving the corporate debtor's default. The corporate debtor did not contest the debt or default.

Application of law to facts: The Court applied Section 7, finding that the financial creditor had established the existence of a financial debt and default, warranting the initiation of insolvency proceedings.

Treatment of competing arguments: The appellant did not contest the debt or default but focused on procedural issues regarding notice service. The Court found no merit in these procedural arguments.

Conclusions: The Court concluded that the adjudicating authority correctly admitted the Section 7 application based on clear evidence of debt and default.

SIGNIFICANT HOLDINGS

Preserve verbatim quotes of crucial legal reasoning: The Court stated, "We are satisfied that service of the notice was duly made to the appellant and the adjudicating authority proceeded to hear the matter only after service was duly affected on corporate debtor."

Core principles established: The judgment reinforces the principle that service of notice under Rule 38 can be effected using email addresses provided in the financial creditor's petition. It also underscores the importance of establishing debt and default for admitting a Section 7 application.

Final determinations on each issue: The Court dismissed the appeal, upholding the adjudicating authority's order admitting the Section 7 application. The Court found no procedural or substantive grounds to interfere with the order.

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