Mohit Minerals Ltd vs Nidhi Impotrade Pvt Ltd

Mohit Minerals Ltd. ....Appellant Vs. Nidhi Impotrade Pvt. Ltd. ....Respondent Present: Appellant: Mr. Mritunjay Tiwary, Advocate. Respondent: None

ORDER

(Through Virtual Mode)

08.01.2021: Upon proof of service of notice on Respondent, its

appearance was awaited on the last date of hearing. Even today, nobody has

turned up to defend the appeal on behalf of Respondent. In the given

circumstances, we proceed to hear learned counsel for the Appellant and

dispose off the appeal.

2. Application filed by the Appellant- Operational Creditor under Section 9

of the Insolvency and Bankruptcy Code, 2016 ("I&B Code" for short) came to be

dismissed at the hands of the Adjudicating Authority (National Company Law

Tribunal), Ahmedabad Bench, Ahmedabad, Court No.II, in terms of the

impugned order dated 4th September, 2020 holding the same to be not

maintainable for the reasons that the demand notice was issued without any

authority.

Contd/-........

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3. Heard learned counsel for the Appellant and perused the record.

4. It is well settled by now that delivery of a demand notice of unpaid

operational debt by the Operational Creditor upon the Corporate Debtor under

Section 8(1) of the 'I&B Code' is a sine-qua-non for initiation of Corporate

Insolvency Resolution Process (CIRP) by Operational Creditor under Section 9

of the 'I&B Code'. Format in which the demand notice is to be issued by the

Operational Creditor in terms of the 'Insolvency and Bankruptcy (Application to

Adjudicating Authority) Rules, 2016' is prescribed in Form-3. The delivery of

notice is to be effected in the prescribed form which must emanate from the

Operational Creditor or any authorized person on its behalf. In the case in

hand, it is not in controversy that the demand notice in prescribed form has

been issued by the lawyer of Operational Creditor and delivered upon the

Corporate Debtor. Perusal of the demand notice forming Annexure A-16 to the

appeal paper book at Page 227, Volume-II brings it to fore that the same has

been issued by one Mr. Sumit Kumar, Advocate under instructions from and

on behalf of Operational Creditor. It is the dictum of the Hon'ble Apex Court in

"Macquaire Bank Limited v. Shilpi Cable Technologies Limited- (2018) 2

SCC 674" that a demand notice delivered by an Advocate duly instructed by

the Operational Creditor would be a valid demand notice for purposes of

initiation of CIRP. In view of the same, notice delivered could not be held to be

bad in law unless it was shown that the lawyer was not duly instructed. It

appears from para 10 of the impugned order that the Adjudicating Authority

Company Appeal (AT) (Insolvency) No. 905 of 2020 -3-

was aware of this legal proposition but in the opinion of the Adjudicating

Authority there was no due authorization backed by Board Resolution of the

Operational Creditor. This finding is unsustainable as in case of a person other

than an Advocate, the Board Resolution would be required but in the event of a

demand notice being issued by an Advocate duly instructed by his client

(Operational Creditor), there is no need of requirement of authority being

backed by the Board Resolution.

5. Learned counsel for the Appellant has pointed out that the Adjudicating

Authority itself has, in "SVG Fashion Limited v. Arpita Filaments Pvt. Ltd.-

Company Petition No. (IB)-182/9/NCLT/AHM/2018" decided on 26th

September, 2019, held:

"10............Further, with regard to the issue of demand

notice issued through advocate is also not sustainable as

it is already settled by the Hon'ble Supreme Court that

the Advocate can issue demand notice on behalf of his

client i.e. operational creditor."

6. It is evident that the learned Adjudicating Authority had taken the

correct view which is reflected in the aforesaid order. Judicial consistency

would demand that the same view, which was based on the judgment of the

Hon'ble Apex Court, should have been taken in the latter case as well. Once an

Company Appeal (AT) (Insolvency) No. 905 of 2020 -4-

Advocate was duly instructed to issue the demand notice, there was no room

for holding that the notice delivered by the Advocate was not a notice delivered

by an authorized person.

7. Viewed thus, the finding recorded by the Adjudicating Authority in

regard to invalidity of service of mandatory demand notice under Section 8(1) of

the 'I&B Code' cannot be sustained. The impugned order is set aside and the

matter is remitted back to the Adjudicating Authority with direction that in the

event of the application being complete in all respects, it may, having regard to

the key ingredients of debt and default, pass an order of admission or

otherwise as warranted under law. However, before passing such order, it may

provide an opportunity to the Corporate Debtor to settle the claim of Appellant-

Operational Creditor. Accordingly, the appeal is allowed.

The Appellant is directed to appear before the Adjudicating Authority on

15th February, 2021. A copy of this order be communicated to the Adjudicating

Authority forthwith.

[Justice Bansi Lal Bhat] Acting Chairperson

[Justice Anant Bijay Singh] Member (Judicial)

[Shreesha Merla] Member (Technical) AR/g

Company Appeal (AT) (Insolvency) No. 905 of 2020