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TMI Blog2020 (10) TMI 329X X X X Extracts X X X X X X X X Extracts X X X X ..... der for substituted service by publication of notice in the newspaper. In such circumstances, passing of an order for an ex-parte hearing against the Corporate Debtor, based on substituted service, cannot be held proper in the light of the law laid down by Hon ble Supreme Court in the Neerja Realtors (P) Ltd [ 2018 (1) TMI 1536 - SUPREME COURT ]. Admittedly, in this case, the demand notice, dated 22nd March 2019, in Form-3, was issued against the Corporate Debtor by registered post, which could not be served on account of insufficient address. After that, the demand notice dated 21st May 2019 in Form-3 was again sent through speed post. On perusal of the email dated 14th July 2018, it appears that the Corporate Debtor objected to the posting of wrong revenue on barter ledgers . It also appears from a perusal of email correspondence dated 17th October 2018 that the Corporate Debtor objected to releasing post-dated cheque of ₹ 73 lakhs without keeping it informed to the Corporate Debtor. It is also stated in the email that management fees will be paid after the barter reconciliation issue is resolved. By perusal of email communication dated 17th January 2019, it appears that di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pre-operation advice for launching Hotel and further for the operation and management services after the launch of the Hotel. The Appellant entered into the Management and Technical Service Agreement from now on will be referred to as MTSA with Respondent No. 1. As per the Agreement, the Respondent No.1 was responsible for the training of the staff. However, they failed to provide proper training to the hotel staff. They were posting wrong revenue on barter ledger to hide their under performance since the Hotel started its commercial operations. As per terms of the Agreement, no payment was supposed to be made to any person without prior information of the Appellant. But the Respondent No.1/Operational Creditor in violation the terms of MTSA issued post-dated cheques of Rs. Seventy-three lakhs to itself even without informing the Appellant about the same. 4. The Appellant/Corporate Debtor further contends that as per the Agreement, all the money received as revenue from the operations of the Hotel was supposed to be deposited in the bank account of the Hotel, which was to be operated by the authorized representative appointed by Respondent No.1/Operational Creditor. Further, all t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpany Appeal filed by the Appellant is devoid of any merit and as such liable to be dismissed. 11. It is submitted that the Appeal is liable to be dismissed on the ground that the same is filed beyond 30 days from the date of passing of the impugned order which is beyond the statutory period as prescribed under Section 61(2) of the I B Code. 12. The Respondent No.1 further submits that the Appellant had the sufficient knowledge of initiation of proceedings under Section 9 of the I B Code against him by admitting the receiving of Demand notice sent to him, and further when the Respondent No.1 sent a copy of Application, in Form-5, filed under Section 9 of the I B Code. The service on the corporate office of the Appellant has been proved by the Affidavit of Service, containing tracking report of successful delivery of the same. 13. The Respondent No.1/Operational Creditor further submits that the Adjudicating Authority based on the affidavit of service and other documents, filed with the petition regarding service of notice, passed an order to proceed ex-parte against the Appellant, as there was no representation from the Corporate Debtor despite substituted service of notice through ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thin the statutory period of Limitation as prescribed under Section 61(2) of the Code. 21. The Learned Counsel for the Appellant submits that the impugned order is liable to be set aside on the sole premise of the failure of compliance with the service procedure prescribed under Rule 5 of the Insolvency and Bankruptcy (Application to Adjudication Authority) Rules, 2016. It is submitted that the prescribed mode of service as per Rule 6(2) is a registered post or speed post. The publication of notice is not a prescribed mode of service and hence impugned order is liable to be set aside on this ground. It is further submitted that registered notice issued against the Corporate Debtor was returned with the postal remarks want of sufficient address . In such a situation Respondent No.1 was not stopped from serving the Corporate Debtor via email. 22. Learned Counsel for the Operational Creditors submits that as per Clause (a)(b) of sub-rule (2) of Rule 5 of the Insolvency and Bankruptcy (Application to Adjudication Authority) Rules, 2016, the demand notice or the copy of an invoice demanding payment, may be delivered to the Corporate Debtor at the registered office by hand, registered po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the notice through email. 25. The Hon ble Supreme Court in case of Neerja Realtors (P) Ltd. Vs. Janglu2018 (2) SCC 649 has held that for ordering substituted service the Court is required to be satisfied that there is reason to be read that Defendant is keeping out of the way for the purpose of avoiding service or for any other reason, the summons cannot be served in an ordinary way. Thus, while making that Order, Court must apply its mind to requirements under Order 5 Rule 20 of CPC and indicate in its order and due consideration of provisions contained in Order 5 of Rule 20. 26. In the present case, the notice issued against the Corporate Debtor returned unserved because of insufficient address . After that, without exploring the possibility of service by other modes like email, the Adjudicating Authority passed the order for substituted service by publication of notice in the newspaper. In such circumstances, passing of an order for an ex-parte hearing against the Corporate Debtor, based on substituted service, cannot be held proper in the light of the law laid down by Hon ble Supreme Court in the Neerja Realtors (P) Ltd (supra). 27. The Learned Counsel for the Appellant/Corp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reme, in the case of 2018(1)SCC 353 Mobilox Innovation Pvt Ltd vs. Kirusa Software Pvt Ltd, in the following words: Para 40 It is clear, therefore, that once the operational Creditor has filed an application, which is otherwise complete, the adjudicating authority must reject the Application under S.9(5)(2)(d) if notice of dispute has been received by the operational Creditor or there is a record of dispute in the information utility. It is clear that such notice must bring to the notice of the operational Creditor the existence of a dispute or the fact that a suit or arbitration proceeding relating to a dispute is pending between the parties. Therefore, all that the adjudicating authority is to see at this stage is whether there is a plausible contention which requires further investigation and that the dispute is not a patently feeble legal argument or an assertion of fact unsupported by evidence. It is important to separate the grain 9 Company Appeal (AT)(Insolvency) No.542/2020 from the chaff and to reject a spurious defence which is mere bluster. However, in doing so, the Court does not need to be satisfied that the defence is likely to succeed. The Court does not at this stag ..... X X X X Extracts X X X X X X X X Extracts X X X X
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