Jap Infratech Pvt Ltd vs Innovation House Industries Pvt Ltd

JAP Infratech Pvt Ltd ...Appellant

Vs

Innovation House Industries Pvt Ltd. .. .Respondent

Present: Mr. Chandra Shekhar Yadav, Advocate for the Appellant. Mr. Manish Paliwal, Advocate for the Respondent.

ORDER

05.12.2017- In view of the decision of Hon'ble Supreme Court in the mater

of MIs Innoventive Industries Ltd Vs Mis ICICI Bank and Another (Civil

Appeals No.8337-8338 of 20177, learned counsel for the appellant is

allowed to substitute Mr. Kumar Jyoti Ranjan and Ms Priyanka Kumari,

Directors of 'JAP Infratech Private Ltd' as appellants in place of original

appellant (corporate debtor) and to transpose 'M/ s JAP Infratech Private

Limited' as 2nd respondent. Necessary corrections be made in the records

accordingly. Mr. Kumar Jyoti Ranjan and Ms Priyanka Kumari having already

filed Vakalatnama, no separate Vakalatnama is reqUired to be filed.

(Justice S.J. Mukhopadhaya) Chairperson

(Justice Bansi Lal Bhat) Member (Judicial)

Bm/ unni r ATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI

Company Appeal. (AT)(Ins) No.242-245 of 2017

IN THE MATTER OF:

Kumar Jyoti Ranjan and Ms Priyanka Kumari ...Appellants

Vs

Innovation House Industries Pvt Ltd. ...Respondent

Present: Mr. Chandra Shekhar Yadav, Advocate for the Appellant.

Mr. Manish Paliwal, Advocate for the Respondent.

ORDER

05.12.2017- These appeals have been preferred by Mr. Kumar Jyoti Ranjan

and Ms Prlyanka Kumari, Directors Of the Corporate Debtor against the

impugned orders dated 27th July, 2017, 24th August, 2017, 4th October, 2017

and 24th October, 2017 passed by the Adjudicating Authority (National

Company Law Tribunal), New Delhi Bench passed in lB No.(IB)-

212(ND)/2017.

2. Vide order dated 27th July, 2017 the Adjudicating Authority admitted

the application preferred by Respondent, M/s Innovation House Industries

Pvt Ltd under Section 9 of the Insolvency & Bankruptcy Code, 2016

(hereinafter referred to as the 'I&B Code'), initiated corporate insolvency

resolution process against 'M/.s JAP Infratech Private Limited' (Corporate

Debtor), passed order of moratorium with certain directions and requested

the Insolvency and Bankruptcy Board of India to recommend the name of the

company Appeal (AT)(Ins) No.242-245 of 2017 -2-

Insolvency Resolution Professional. Rest of the impugned orders are

consequential to the impugned order dated 27th July, 2017, including

appointment of Interim Resolution Professional (IRP) dated 4th October, 2017.

3. Learned counsel appearing on behalf of the appellant referred to the

demand notice dated 28th February, 2017 issued under sub-section (1) of

section 8 the IBC Code and submitted that the said notice has been issued by

an advocate of "Corporate Legal Partners" namely Mr. Vikas Kumar, Advocate.

The reliance has been placed on decision of this Appellate Tribunal in the

Uttam Galva Steel Ltd Vs DF Deutsche Forfait AG & Anr-Company

Appeal (AT) (Insolvency) No 39/2017 to suggest that demand notice issued

through a lawyer is not permissible.

4. Learned counsel appearing on behalf of the respondent referred to a

certified copy of the resolution passed by the Board of Directors of 'Innovation

House Industries Private Ltd' on 13.02.2017, which reads as follows:

"Resolved that, Mr. Manish Paliwal, Mr. Vilcas Kumar, Advocates at Corporate Legal Partners, New Delhi are hereby authorized to issue notice under the Insolvency & Bankruptcy Code, 2016 against MIs JAP Infratech Private Ltd, New Delhi and further to do necessary acts in this regards.

S. According to the learned counsel for the appellant this resolution is a

forged, fabricated document now brought on record, which has been disputed

by learned counsel for the Respondent.

6. We have heard the learned counsel for the parties perused the record.

company Appeal (AT)(1ns) No.242-245 of 2017 3

7 Without going into the disputed question of fact as to whether the

resolution dated 13th February, 2017 authorising Mr. Manish Paliwal and Mr.

Vikas Kumar, Advocates to issue demand notice under sub-section ,( 1) of

section 8 of the IBC Code, what we find that the petition under Section 9

preferred by the Respondent was not maintainable for the following reasons.

8. In 'Uttam Galva Steel Ltd' wherein this Appellate Tribunal vide

judgement dated 28th 'July, 2017 having notice the relevant provisions of the

I&B Code and rules framed thereunder, held as follows:

"28. Sub-rule (1) of Rule 5 of the 'Adjudicating Authority Rules'

mandates the 'Operational Creditor' to deliver to the 'Corporate

Debtor' the demand notice in Form-3 or invoice attached with the

notice in Form-4, as quoted below: -

"Rule 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."

29. Clause (a) and (b) of sub-rule (1) of Rule 5 of the

'Adjudicating Authority Rules' provides the format in which the

demand notice/invoice demanding payment in respect of unpaid

'Operational Debt' is to be issued by 'Operational Creditor'. Asper

Rule 5(1) (a) & (b), the following person (s) are authorised to act on

behalf of operational creditor, as apparent from the last portion of

Form-3 which reads as follows: -

company Appeal (AT)(Ins) No.242-245 of 2017 4.

'6. The undersigned request you to unconditionally repay the unpaid operational debt (in default) in full within ten days from the receipt of this letter failing which we shall initiate a corporate insolvency resolution process in respect of [name of 'corpOrate debtor].

Yours sincerely,

Signature of person authorised to act on behalf of the operational creditor Name in block letters Position with or in relation to the operational' creditor Address ofperson signing

30. From bare perusal of Form-3 and Form-4, reäd'with sub-rule

(1) of Rule 5 and Section 8 of the MB Code, it is clear that an

Operational Creditor can apply himself or through a person

authorised to act on behalf of Operational Creditor. The person

who is authorised to act on behalf of Operational Creditor

is also required to state "his position with or in relation to

the Operational Creditor", meaninq thereby the person

authorised bi Operational Creditor must hold position with

or in relation to the Operational Creditor and only such

person can apply.

31. The demand notice/invoice Demanding Payment under the

I&B Code is required to be issued in Form-3 or Form -4. Through

the said formats, the 'Corporate Debtor' is to be informed of

particulars of 'Operational Debt', with a demand ofpayment, with

clear understanding that the 'Operational Debt' (in default)

company Appeal (AT)(Ins) No.242-245 of 2017 5

required to pay the debt, as claimed, unconditionally within ten

days from the date of receipt of letter failing which the

'Operational Creditor' will initiate a Corporate Insolvency Process

in respect of 'Corporate Debtor', as apparent from last paragraph

no. 6 of notice contained in Form -3, and quoted above.

Only if such notice in Form-3 is served, the 'Corporate Debtor' will

understand the serious consequences of non-payment of

'Operational Debt', otherwise like any normal pleader

notice/Advocate notice, like notice under Section80 of C.P.C. or

for proceeding under Section 433 of the Companies Act 1956, the

'Corporate Debtor' may decide to contest the suit/case if filed,

distinct Corporate Resolution Process, where such claim

otherwise cannot be contested, except where there is an existence

of dispute, prior to issue of notice under Section 8.

32. 1 In view of provisions of I&B Code, read with Rules, as

referred to above, we hold that an 'Advocate/Lawyer' or

'Chartered Accountant' or 'Company Secretary' in absence of any

authority of the Board of Directors, and holding no position with or

in relation to the Operational Creditor cannot issue any notice

under Section 8 of the I&B Code, which otherwise is a 'lawyer's

notice' as distinct from notice to be given by operational creditor in

terms of section 8 of the I&B Code."

company Appeal (AT)(Ins) No.242-245 of 2017 6.

9. In the present case the notice has been issued by a law firm namely

"Corporate Legal Partners" and there is nothing on record to suggest that the

said law firm has been authorised or holds any position with or in relation to

the respondent (operational creditor). In view of the fact that the law firm do

not hold any position 'with or in relation to the operational creditor', we hold

that the demand notice issued by the Corporate Legal Partners on behalf of

the respondent cannot be treated to be a demand notice, under sub-section

(1) of section (8) of the IBC Code and for the said reason the petition under

Section 9 was not maintainable.

10. In view of the detailed reasons and findings as recorded above we have

no option but to set aside impugned orders dated 27th July, 2017, 24th August,

2017, 4th October, 2017 and 24th October, 2017 passed by the Adjudicating

Authority (National Company Law Tribunal), New Delhi Bench passed in lB

No. (IB)-212(ND)/20 17.

11. In effect, order' (s) passed by Ld. Adjudicating Authority appointing

'Interim Resolution Professional', declaring moratorium, freezing of account

and all other order (s) passed by Adjudicating Authority pursuant to impugned

order(s) and action taken by the 'Resolution Professional', including the

advertisement published in the newspaper calling for applications and all

such orders and actions are declared illegal and are set aside. The application

preferred by Respondent under Section 9 of the I&B Code, 2016 is dismissed.

company Appeal (AT)(Ins) No.242-245 of 2017 7

Learned Adjudicating Authority will now close the proceeding. The appellant

company is released from all the rigour of law and is allowed to function

independently through its Board of Directors from immediate effect.

12. Learned Adjudicating Authority will fix the fee of 'Resolution

Professional ', and the appellant will pay the fees of the Interim Resolution

Professional, for the period he has functioned. The appeal is allowed with

aforesaid observation and direction. However, in the facts and circumstances

of the case, there shall be no order as to cost.

(Justice S.J. Mukhopadhaya) Chairperson

(Justice Bansi Lal Bhat) Member (Judicial)

company Appeal (AT)(Ins) No.242-245 of 2017

Bm/unni