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TMI Blog2021 (7) TMI 714X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the Neeraj Jain [ 2020 (3) TMI 99 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL NEW DELHI ] decided by Hon'ble NCLAT were different from the facts of the present case inasmuch as no invoice was ever sent by the Operational Creditor in that case, whereas the Operational Creditor in the present case has annexed the invoices with its demand notice sent in Form 3. Hence, the conclusion made in the aforesaid Judgment is binding on this Adjudicating Authority only in a situation where invoice is not only generated but is also a relevant document to prove the existence of default but the same is not annexed with the Demand Notice sent in Form 3 or Form 4. In a situation where an Operational Debt arises out of the provision of goods and services and pursuant to that Invoices are raised, there is no illegality in choosing the Form 3 as provided in Rule 5(1)(a) of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 for sending the Demand Notice provided that the Unpaid Invoices forming part of the transaction are annexed therewith - issuance of Demand Notice in Form 3 annexed with invoices by the Operational Creditor in the present case would be in order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er aspects of the Petition, it was decided to examine the validity of the demand notice that was issued by the Operational Creditor. Accordingly, the arguments were heard on this limited aspect and order was reserved on the issue : Whether the Demand Notice based on invoices sent by the Operational creditor was in compliance of Rule 5 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016? 8. That during the course of hearing, it was submitted by the Ld. Counsel appearing for the Operational Creditor that the Demand Notice dated 22.04.2020 sent in Form 3 on the basis of invoices is in terms of Rule 5 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016, the contents of which reads as below- Demand notice by operational creditor 5. (1) An operational creditor shall deliver to the corporate debtor, the following documents, namely:- (a) a demand notice in Form 3; or (b) a copy of an invoice attached with a notice in Form 4. 9. In the light of the above provision, it was submitted by the Ld. Counsel for the Operational Creditor that the Legislature has cast the word 'or' between the option ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rity has ignored the settled position of law that a claim for damages cannot amount to an operational debt; that the Learned Adjudicating Authority has failed to appreciate that a mere claim for damages, does not even amount to operational debt within the meaning of the debt and so the Corporate Debtor can't be treated to have committed default; that the Adjudicating Authority has failed to determine, whether such an amount claimed, was due and payable, under the terms of the Supply Agreement. 8. Ld. Counsel for the Operational Creditor submits that it is the discretion of the Operational Creditor, to either send the demand notice under Form 3 or send an invoice demanding payment of the amount due as per Form 4 of the Adjudicating Authority Rules, 2016. In case, the operational creditor prefers for the first option; then in that situation, it is not required to send a copy of the invoice along with the Demand Notice. It is further contended by him that if notice is sent in Form 3, then it is also not necessary to submit the invoice along with the Application in Form 5. 14. From the aforesaid facts of the case, it can be inferred that the Demand Notice in the Neeraj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the invoices as 'document' along with the demand notice sent in Form 3 prescribed under Rule 5(1) of the Rules, 2016, as required in column 7 of the Form 3. 17. At this juncture, we also consider it proper to refer to the Judgment of Hon'ble NCLAT passed subsequently on 15.02.2021 in the matter of Aparna Enterprise Ltd. Vs. SJR Prime Corporation Pvt. Ltd. in Company Appeal (AT) (Insolvency) No. 632 of 2020, wherein discussion is made as to which of the judgments including the Neeraj Jain case shall not be applicable in that case. That the facts regarding 'annexing of invoices' was held as one of the exception in the aforesaid discussion. The relevant extract of the aforesaid Judgment are reproduced below: 5......... The Appellant has also clarified the inapplicability of the judgments cited by the Respondent and the same are reproduced below: Neeraj Jain Vs. Cloudwalker Streaming Technologies Pvt. Ltd. and Ors., Company Appeal (AT) (Ins) No. 1354 of 2019. Facts : the said appeal was filed by the erstwhile director of the Corporate Debtor. The present appeal arose out of an order passed by the ld. Adjudicating Authority, wherein the Ld. Adj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Insolvency and Bankruptcy (Application to Adjudicating Authority Rules, 2016). The Corporate Debtor neither made the payment nor sent any notice of dispute and the alleged outstanding amount of more than ₹ 1,00,000/- (Rupees one lac). There is sufficient evidence on record to prove the amount due and payable against the Corporate Debtor in the circumstances. 21. In the circumstances stated above, we are of the considered opinion that the service of the demand notice on the corporate debtor was proper. Despite service of notice under Section 8(1) of the I B Code, 2016 the Corporate Debtor neither made the payment not raised any dispute of the outstanding amount.... b) SMS Integrated Facility Services Private Limited Vs. Expat Educational Institute Order dated 23.04.2021 Company Appeal (AT) (CH) (Insolvency) No. 41 of 2021, where the Chennai Bench of Hon'ble NCLAT held that: 6. It is also relevant to point out here that consideration of mere debt and default in question, without knowing/serving notice on the information notice on even the Corporate Debtor, would be futile exercise. Even the information furnished on behalf of the Petitioner, as stated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n respect of the provision of goods or services including employment or a debt in respect of the repayment of dues arising under any law for the time being in force and payable to the Central Government, any State Government or any local authority. Thus, the definition of the Operational Debt includes the debt arising out of the provision of Goods and Services, which invariably are supplied against invoices. Thus, for establishing the default of the Operational Debt obviously there shall be invoices which are recognized under Column 7 (List of documents attached to this application in order to prove the existence of operational debt and the amount in default) of the Form 3 as an attachment to the other Documents. Similar finding is given in Para 37 of the Neeraj Jain Case (Supra), which is reproduced below: 37. Thus, if the demand notice is sent in Form 3, then the Operational Creditor has to submit the document to prove the existence of operational debt and the amount in default along with the notice. The said document may either be invoice or any other document to prove the existence of the operational debt and the amount in default. This situation may arise when t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Appeal No. 15135 Of 2017, that: 32.......it is well settled that procedure is the handmaid of justice and a procedural provision cannot be stretched and considered as mandatory, when it causes serious general inconvenience. As has been held in Mahanth Ram Das v. Ganga Das (1961) 3 SCR 763 at 767-768. 26. However, we would still like to see - whether the Operational Creditor in the present case has delivered the Demand Notice in terms of Section 8(1) of IBC 2016 in the light of its interpretation by the Hon'ble NCLAT in the Neeraj Jain case. For that, we would like to refer to Section 8(1) of IBC 2016 and extract of Para 45 of the Neeraj Jain Judgment: Section 8(1) of IBC, 2016: 8. (1) An operational creditor may, on the occurrence of a default, deliver a demand notice of unpaid operational debt or copy of an invoice demanding payment of the amount involved in the default to the corporate debtor in such form and manner as may be prescribed. Para 45 of the Neeraj Jain Judgment: 45 It is important to mention that legislative provisions are made with a larger perspective to deal with all the eventualities that may arise in the implementation of the s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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