Sec 9 of IBC leaves no doubt that delivery of Demand Notice is necessary

Sec 9 of IBC leaves no doubt that delivery of Demand Notice is necessary

The Appellate Tribunal opined that the Adjudicating Authority had rightly dismissed the Application by giving liberty to file a fresh case under the provisions of law after delivery of Demand Notice upon the Corporate Debtor as per Rule 5 of the Insolvency and Bankruptcy Rules 2016

The Appeal filed by the Appellant/Operational Creditor (Jyoti Strips Private Limited) under Section 61(1) of the Insolvency and Bankruptcy Code 2016 (Code/IBC) against the Impugned Order passed by the Adjudicating Authority (National Company Law Tribunal, New Delhi, Bench-V) was dismissed by the National Company Law Appellate Tribunal (NCLAT) on 5 February 2021.

By the impugned Order the Adjudicating Authority had dismissed the Petition preferred by the Appellant on the ground that the provisions of Section 8 of the Code read with Rule 5 of the Insolvency and Bankruptcy Rules, 2016 had not been complied with.

The appellant submitted that the Adjudicating Authority had erred in holding that provisions of Section 8 read with Rule 5 of the Insolvency and Bankruptcy, Rules, 2016 were not complied with; that the notice sent by speed post returned with an endorsement 'addressee left without instructions', which service ought to have been held by the Adjudicating Authority as deemed 'sufficient'.

It was also contended that Section 27 of the General Clauses Act stipulates that the service shall be deemed to be effected by properly addressing and posting the registered post unless proved to the contrary and the Adjudicating Authority ought to have taken into consideration Rule 35 of the (Companies Incorporation Rules 2014).

The respondent contended that the Appellant/Operational Creditor had failed to serve the statutory Demand Notice as per Section 8 of the Code and the documents which were filed along with the Petition under Section 9 itself showed that there had been non-service of the Demand Notice.

It was also submitted that the provisions of Section 27 of the General Clauses Act shall not apply as the Appellant was very much aware that the Respondent had already shifted from the address mentioned in the notice and furthermore, the Appellant was required to serve the notice at the address which is mentioned on the invoices issued by the Appellant from time to time.

The Appellate Tribunal observed that the Demand Notice sent through speed post and courier to the New Delhi address was returned with an endorsement 'addressee left without instructions'. Therefore, the contention of the Appellant that the Adjudicating Authority ought to have relied on Section 20 of the Companies Act 2013, read with Rule 35, was untenable keeping in view that the postal endorsement was not 'refused' or 'house locked' or addressee not in the station but rather the 'addressee had left without instructions'.

Section 8 of the Code read with Rule 5 of the Rules stipulates that the service of Demand Notice to the Corporate Debtor on the 'Registered Address' is a mandatory one. In the instant case, the documentary evidence established that the Appellant was very much in the knowledge of the Registered Address as the Legal Notice issued prior to the Demand Notice was addressed to the Registered Address. Furthermore, a perusal of the invoices also evidenced that the Appellant herein had supplied the goods to the Registered Address of the Respondent Company.

The Appellate Tribunal perused the 'Master Data' relied upon by the Appellant and also the subject email and note that there was no documentary evidence on record to establish that the email was sent as per the provisions mandated under Rule 5 of the Insolvency and Bankruptcy Rules, 2016.

Hence, it concurred with the findings given by the Adjudicating Authority with respect to the fact that the Appellant herein had nowhere mentioned in the Application to whom the email was addressed to as it is clearly stipulated in Rule 5(1) of the Insolvency and Bankruptcy Rules 2016 that the notice shall be delivered by electronic mail service to a whole-time Director or Designated Partner or key managerial personnel, if any, of the Corporate Debtor.

The Appellate Tribunal was also of the opinion that the Adjudicating Authority had rightly dismissed the Application by giving liberty to file a fresh case under the provisions of law after delivery of Demand Notice upon the Corporate Debtor as per Rule 5 of the Insolvency and Bankruptcy Rules 2016.

Having regard to the fact that this Application was dismissed way back in 18.06.2020, the Appellate Tribunal requested that on issuing fresh notice to the Corporate Debtor and on the filing of a fresh Application under Section 9 of the Code, the Adjudicating Authority shall decide the admissibility or otherwise of the Application as expeditiously as practicable.