Sh. Nitin Singh vs Waves Bio-Tech Pvt. Ltd

NATIONAL COMPANY LAW APPELLATE TRIBUNAL, PRINCIPAL BENCH, NEW DELHI Company Appeal (AT) (Ins) No. 876 of 2020

IN THE MATTER OF:

Nitin Singh Proprietor of Shri Shyam Printers 1st floor, RZA-119 Jeewan park Main Soam Bazar Uttam Nagar New Delhi - 110 059 ...Appellant

Vs.

Waves Bio-tech Pvt. Ltd. 418, 1st Floor, Bhera Enclave, Paschim Vihar, New Delhi -110087 ...Respondent

Present: For Appellant: Mr. Partho Bhattacharya, Advocates. For Respondents: Mr. Akshay Bhardwaj, Advocate.

DR. ASHOK KUMAR MISHRA, TECHNICAL MEMBER

1. The appeal has been filed by the 'Appellant' - Nitin Singh 'Proprietor of Shri Shyam

Printers, New Delhi' under Section 61 of the 'Insolvency and Bankruptcy Code, 2016' (in

short 'Code') against the impugned order dated 12.03.2020 passed by the 'Adjudicating

Company Appeal (AT) (Ins) No.876 of 2020 Page 1 of 14 Authority' (National Company Law Tribunal), New Delhi Bench-V in CP(IB) No.

2827/ND/2020.

2. Brief facts of the case are enumerated hereunder:

a. The 'Operational Creditor' (OC)/Appellant has an outstanding amount of Rs.

1,31,471/- since 30.12.2018.

b. The Appellant was providing 'printing and packaging material' to the 'Corporate

Debtor' (CD)/Respondent. The OC/Appellant issued a 'notice' dated 08.06.2019 under

Section 8 of the Code. Email served as per the 'master data' of the CD and the same

was not bounced.

c. The CD raised a notice of dispute on 25.06.2019. The 'dispute' is with respect to

'quality of material'.

d. The CD has further raised the issue of loss of Rs.10 lakh approx. due to 'poor quality

of goods' supplied by the OC. The 'Adjudicating Authority' on 12.03.2020 has

dismissed the petition of Appellant/OC on the ground of 'none delivery of demand

notice' etc.

3. A look at the 'impugned order' dated 12.03.2020 (appearing at page 30-37 of the Appeal

paper book) it appears that the Adjudicating Authority with a detailed order has dismissed

the petition. For a brevity and clarity, para 9, 10, 11 &12 is depicted below:-

"Para 9. It is settled principal of law that there is a difference between the procedure

for initiation of CIRP by the FCs U/s 7 of the Code and the OC u/s 9 of the Code.

So far as the FC is concerned, as per Section 7 of the Code, there is no need to

deliver the notice before the initiation of CIRP and that has been decided by the

Hon'ble Apex Court in Innoventive Industries Ltd. Vs. ICICI bank, (2017) Comp

Cas 57 (SC) held :

Company Appeal (AT) (Ins) No.876 of 2020 Page 2 of 14 " The scheme of Section 7 stands in contrast with the

scheme under Section 8 where an operational creditor is,

on the occurrence of a default, to first deliver a demand

notice of the unpaid debt to the operational debtor in the

manner provided in Section 8(1) of the Code. Under

Section 8(2), the corporate debtor can, within a period of

10 days of receipt of the demand notice or copy of the

invoice mentioned in sub-section (1), bring to the notice of

the operational creditor the existence of a dispute or the

record of the pendency of a suit or arbitration

proceedings, which is pre-existing - i.e. before such notice

or invoice was received by the corporate debtor. The

moment there is existence of such a dispute, the

operational creditor gets out of the clutches of the Code.

10. Therefore, for the initiation of CIRP u/s 9 of the IBC by

the OC, the OC is required to deliver the demand notice

upon the CD u/s 8 of the Code. The main object of the

inception of provisions of Section 8 is , "this ensures that

OC, whose debt claims are usually smaller, are not able to

put the Cd into the insolvency resolution process

prematurely or initiated the process for extraneous

considerations. It may also facilitate informal negotiations

between such creditors and the CD, which may result in a

restructuring of the debt outside the formal proceedings",

Company Appeal (AT) (Ins) No.876 of 2020 Page 3 of 14 and that is the reason in Section 8 of the IBC, the word ,

'deliver a demand notice of unpaid OC' is mentioned.

11. in the light of the aforesaid provision and the

submissions made by the ld. Counsel, when we shall

consider the case of the e Applicant, then this AA is of the

considered view that under Rule 5 of the Insolvency and

bankruptcy (Application to Adjudicating Authority) Rules

2016, there are two modes for sending demand notice, one

is either at the registered office by hand, registered post or

speed post with acknowledgement due, or second one, by

electronic mail service to a whole time director or

designated partner or key managerial personnel, if any, of

the CD, and on the basis of the facts stated in the

application, we find, the applicant had sent the demand

notice through the registered post which was returned as

"no such person found", so Rules 5 (2) (a) has not been

complied with. As far as Rule 5(2)(b) is concerned, the

applicant has sent the demand notice through electronic

mail but the CD has nowhere mention in the application,

whether it is sent on the email id of the whole time director,

designated partner or key managerial personnel of the CD.

Therefore, it can be said that the Applicant has not

delivered notice under Section 8 of the Code, in accordance

with the provisions of the Rule 5(2)(b) of the Insolvency and

Company Appeal (AT) (Ins) No.876 of 2020 Page 4 of 14 bankruptcy (Application to Adjudicating Authority )Rules

2016.

12.So, Under such circumstances, in our opinion, the

applicant has not complied the provision contained under

Rule 5 (Application to Adjudicating Authority) Rules 2016.,

therefore, this Adjudicating Authority is of the considered

view that the Applicant has not delivered the demand notice

as required u/s 8 of the Code, which is the mandatory

provisions of law and so on this ground in the absence of

delivery of demand notice as required u/s 8 of the code, the

present CP No. (IB) 2827/ND/2019 filed by the

Applicant/OC is not complete and not maintainable and

liable to be dismissed. Accordingly, it is therefore.

4. The case of the Appellant is that it has sent the 'demand notice' at the registered office of

the CD as per the 'Master Data' available on 'MCA Website' but the demand notice dated

08.06.2019 sent through speed post on 10.06.2019 could not be delivered to the CD /the

Respondent and returned back with the remarks "No such person found". Then the

OC/Appellant also sent email on 15.06.2019 at the email id mentioned in the Master data

of the Company and the email was not bounced back. So, he is raising the issue that he has

delivered the demand notice. He has also stated that CD has issued notice of dispute vide

their letter dated 25.06.2019 (appearing at page 136-138 of the Appeal paper book) and

the same is depicted below:

Company Appeal (AT) (Ins) No.876 of 2020 Page 5 of 14 Company Appeal (AT) (Ins) No.876 of 2020 Page 6 of 14

5. The OC has also stated that there was neither any 'Whole Time Director', 'Managing

Director' or any 'Key Managerial Personnel' with the CD / Respondent. Therefore, no

notice could have been even possible to be sent at their email id and the email ids of these

'Directors' were not available on the public domain. He has also attached the Ledger copy

of the CD as appearing in the appeal paper book at page 71 alongwith the copy of invoices).

6. With all the details the Appellant/OC is seeking the relief of setting aside the impugned

order dated 12.03.2020 passed by the Adjudicating Authority as stated above etc.

7. The Ld. counsel for the Respondent has submitted the followings:

a. The CD/Respondent has not received the mandatory 'demand notice' under Section 8

of the Code. They have also not received the email and have also confirmed the email

given in the 'Company Master Data' is not of the 'Directors' of the OC/Respondent

Company. They have disowned the receipt of such email. They have also leveled the

allegations that the Appellant/OC being a supplier of the Respondent and the

Respondent was in regular contact with the OC/its Director on all of the updated email

ids and contact numbers yet the Appellant choses to skip the actual and updated

communication details and issued notice to the wrong email ids due to vested interest

Company Appeal (AT) (Ins) No.876 of 2020 Page 7 of 14 and is bluntly misleading this Tribunal deliberately and intentionally to fulfil its ulterior

motives.

b. It is the settled law that anyone who approaches the Court must approach with clean

hands and the OC has failed to reflect the same and hence the present appeal is liable

to be dismissed on the same ground.

c. The CD/Respondent has submitted that the order passed by the Adjudicating Authority

is a reasoned order. It has emphatically stated that the Appellant/OC has the updated

and correct correspondence information of the Respondent with them yet the same has

not been used due to ulterior motives and the Appellant is creating a 'concocted story'

to ignore the prescribed provisions of law by misrepresentation and wrong information

8. We have gone through the submissions made by the Ld. counsel for the parties, pleadings

available on record and our finding are as under:

a. The submissions made by the Appellant and the Respondent reflects one thing

categorically that the 'Demand Notice' has not been received by the Respondent/CD.

b. It also seems very clear that the Appellant/OC has not used regular email and address

in the 'Demand Notice'. Although, it was regular supplier in 2018.

c. There is an issue of poor quality complain in respect of packing materials supplied by

the Appellant/OC and the Appellant has not disputed the same only they have

mentioned that this letter has been issued after issue of Demand Notice.

d. However, (at page 156 of the Appeal Paper book) in 'Annual Return' of

CD/Respondent, the names of three 'Directors' with their DIN Number available

e. In this context, let us see the requirement of Section 8 & 9 of the Code and provisions

of Rule 5 of the Insolvency and Bankruptcy (Application to Authority Authority) Rules,

2016.

Company Appeal (AT) (Ins) No.876 of 2020 Page 8 of 14 Section 8: Insolvency resolution by operational creditor.

(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.

(2) The corporate debtor shall, within a period of ten days of

the receipt of the demand notice or copy of the invoice

mentioned in sub-section (1) bring to the notice of the

operational creditor--

(a) existence of a dispute, [if any, or] record of the pendency of

the suit or arbitration proceedings filed before the receipt of

such notice or invoice in relation to such dispute;

(b) the [payment] of unpaid operational debt--

(i) by sending an attested copy of the record of electronic

transfer of the unpaid amount from the bank account of the

corporate debtor; or

(ii) by sending an attested copy of record that the operational

creditor has encashed a cheque issued by the corporate debtor.

Explanation.--For the purposes of this section, a "demand

notice" means a notice served by an operational creditor to the

corporate debtor demanding [payment] of the operational debt

in respect of which the default has occurred.

Company Appeal (AT) (Ins) No.876 of 2020 Page 9 of 14 Section 9 - Application for initiation of corporate insolvency

resolution process by operational creditor.

(1) After the expiry of the period of ten days from the date of

delivery of the notice or invoice demanding payment under

subsection (1) of section 8, if the operational creditor does not

receive payment from the corporate debtor or notice of the

dispute under sub-section (2) of section 8, the operational

creditor may file an application before the Adjudicating

Authority for initiating a corporate insolvency resolution

process.

(2) The application under sub-section (1) shall be filed in such

form and manner and accompanied with such fee as may be

prescribed.

(3) The operational creditor shall, along with the application

furnish--

(a) a copy of the invoice demanding payment or demand notice

delivered by the operational creditor to the corporate debtor;

(b) an affidavit to the effect that there is no notice given by the

corporate debtor relating to a dispute of the unpaid operational

debt;

(c) a copy of the certificate from the financial institutions

maintaining accounts of the operational creditor confirming

that there is no payment of an unpaid operational debt [by the

corporate debtor, if available;]

Company Appeal (AT) (Ins) No.876 of 2020 Page 10 of 14

(d) a copy of any record with information utility confirming that

there is no payment of an unpaid operational debt by the

corporate debtor, if available; and

(e) any other proof confirming that there is no payment of any

unpaid operational debt by the corporate debtor or such other

information, as may be prescribed.]

(4) An operational creditor initiating a corporate insolvency

resolution process under this section, may propose a resolution

professional to act as an interim resolution professional. (5)

The Adjudicating Authority shall, within fourteen days of the

receipt of the application under sub-section (2), by an order--

(i) admit the application and communicate such decision to the

operational creditor and the corporate debtor if,--

(a) the application made under sub-section (2) is complete;

(b) there is no [payment] of the unpaid operational debt;

(c) the invoice or notice for payment to the corporate debtor

has been delivered by the operational creditor;

(d) no notice of dispute has been received by the operational

creditor or there is no record of dispute in the information

utility; and

(e) there is no disciplinary proceeding pending against any

resolution professional proposed under sub-section (4), if any.

(ii) reject the application and communicate such decision to the

operational creditor and the corporate debtor, if--

Company Appeal (AT) (Ins) No.876 of 2020 Page 11 of 14

(a) the application made under sub-section (2) is incomplete;

(b) there has been [payment] of the unpaid operational debt;

(c) the creditor has not delivered the invoice or notice for

payment to the corporate debtor;

(d) notice of dispute has been received by the operational

creditor or there is a record of dispute in the information utility;

or

(e) any disciplinary proceeding is pending against any

proposed resolution professional:

Provided that Adjudicating Authority, shall before rejecting an

application under sub-clause (a) of clause (ii) give a notice to

the applicant to rectify the defect in his application within seven

days of the date of receipt of such notice from the adjudicating

Authority.

(6) The corporate insolvency resolution process shall

commence from the date of admission of the application under

sub-section (5) of this section."

Rule 5 - Demand notice by operational creditor.--

(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.

(2) The demand notice or the copy of the invoice demanding

payment referred to in sub- section (2) of section 8 of the Code,

Company Appeal (AT) (Ins) No.876 of 2020 Page 12 of 14 may be delivered to the corporate debtor, (a) at the registered

office by hand, registered post or speed post with

acknowledgement due; or (b) by electronic mail service to a

whole time director or designated partner or key managerial

personnel, if any, of the corporate debtor.

(3) A copy of demand notice or invoice demanding payment

served under this rule by an operational creditor shall also be

filed with an information utility, if any."

f. From the above, it is very much clear that receipt of demand notice by the CD is a must.

In the present case, the demand notice has not received by the CD.

g. There also exists some disputes with respect to poor quality of packing materials

supplied by the OC to the CD and the CD has visited the godown for inspection and

observed the discrepancies in the inner packing carton and outer packing carton

supplied by the OC. CD has even requested to replace the material which has not been

done by OC.

h. The Hon'ble Supreme Court has also held in Mobilox Innovations Private Limited

Versus Kirusa Software Private Limited in Civil Appeal No. 9405 of 2017 at para 29 as

under:

"It is, thus, clear that so far as an operational creditor is

concerned, a demand notice of an unpaid operational debt or

copy of an invoice demanding payment of the amount

involved must be delivered in the prescribed form."

i. In view of the aforesaid facts and circumstances the case, there seems that the

OC/Appellant wants to build up a pressure for releasing the payment. However, the

Company Appeal (AT) (Ins) No.876 of 2020 Page 13 of 14 provisions of the Code cannot be applied from chasing of payment as held by the

Hon'ble Supreme Court in Civil Appeal No.9597 of 2018, "Transmission Corporation

of Andhra Pradesh limited Vs. Equipment Conductors and Cables Limited" vide para

15 has already held that IBC is not intended to be a substitute to a recovery forum and

also laid down that whenever there is existence of real dispute, the IBC provisions

cannot be invoked.

j. All these reflect that the delivery of demand notice is a must for any further action

under Section 9 of the Code.

k. Hence, we are of the view , in the aforesaid facts and circumstances, that we do not

find any infirmity in the impugned order of the Adjudicating authority and we uphold

the order of the Adjudicating Authority. Accordingly, the Appeal is dismissed.

Pending Application, if any, stands disposed off.

No order as to costs.

(Justice Ashok Bhushan) Chairperson

(Dr. Ashok Kumar Mishra) Member(Technical)

(Dr. Alok Srivastava) Member (Technical)

31st January, 2022

New Delhi

Raushan.K

Company Appeal (AT) (Ins) No.876 of 2020 Page 14 of 14