Shailendra Sharma vs Ercon Composites & Ors

NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI Company Appeal (AT) (Insolvency) No. 159 of 2020 [Arising out of Order dated 01.01.2020 passed by the National Company Law Tribunal, Mumbai Bench-IV, Mumbai in CP (IB) No.749/MB/C-IV/2017]

IN THE MATTER OF: Mr. Shailendra Sharma Director of R&M International Pvt. Ltd. R/o Room No. 8, Prabhavati Lalji Niwas, Tilak Nagar, Off Aarey Road, Goregoan(east), Mumbai - 400 063 ...Appellant

Versus Ercon Composites A Registered Partnership Firm Having its office at F, 123, MIA Phase II Basin, Jodhpur, Rajasthan.

R&M International Pvt. Ltd. (Through IRP Mr. Nayana Premji Savala) Having its Registered office at A-3027, Oberoi Garden Estate, Saki Vihar Road, Chandivali, Andheri East, Mumbai - 400072.

Mr. Nayana Premji Salava (IRP of R&M International Pvt. Ltd.) Having his address at 1/101-A Vishal Susheel CHS, Nariman Road, Vile Parle East, Mumbai, Maharashtra-400057. ...Respondents

1 Company Appeal (AT) (Insolvency) No. 159 of 2020 Present: For Appellant: Mr. Gurcharan Singh, Advocate

For Respondent: Mr. Ritesh Khare, Advocate for R-1

Mr. Akhilesh, Advocate for R-3

Venugopal M. J

Preamble

The Appellant has preferred the instant Company Appeal (AT) (Insolvency)

No. 159 of 2020 being 'aggrieved' with the order dated 01.01.2020 passed by the

'National Company Law Tribunal', Mumbai Bench-IV, Mumbai in CP (IB)

No.749/MB/C-IV/2017.

2. The 'National Company Law Tribunal', Mumbai Bench-IV, Mumbai while

passing the impugned order dated 01.01.2020 at paragraph 13 to 16 had

observed the following: -

"13. The operational

creditor had replied to the said

e.mail dated 16.01.2014 on

19.1.2014 (Exhibit-2 at p-42 of the 2 Company Appeal (AT) (Insolvency) No. 159 of 2020 Reply), wherein it has been stated

that during the manufacturing

process, many times there are

problems that are faced while

cutting the strip or defective portion,

and thus there may be several cut

rolls in one roll.

14. Since the

email dated 16.01.2014

specifically notes that 'in the last

batch of carbon fiber reinforced

laminates, several imperfections

were found', it can only be taken

that the other consignments were

defect-free. Further, in the

rejoinder, the operational creditor

has taken a specific stand that the

issue of defective quality of

supplies has been raised in only

one out of twenty-seven

consignments, and that this issue

was also resolved. Even if the

3 Company Appeal (AT) (Insolvency) No. 159 of 2020 issue is assumed to be unresolved,

this would only cover one

consignment, and there is no

reason why the other consignments

ought not to be paid for, especially

when seen in the context of the

specific stand of the operational

creditor that after the issue raised

in the e.mail of 16.01.2014, four

more consignments were supplied

to the Corporate Debtor.

15. As regards the cheque

stated to have been given, as

security, this cannot be taken to be

a valid defense. In terms of section

139 of the Negotiable Instruments

Act, 1881, there is a presumption

that the holder of a cheque received

the cheque for the discharge in

whole or in part, of any debt or

other liability. While this is no

4 Company Appeal (AT) (Insolvency) No. 159 of 2020 doubt a rebuttable presumption,

the presumption stands unless the

contrary is proved. The burden of

proof is on the Corporate Debtor.

16. Therefore, the petition

made by the operational creditor is

complete in all respects as required

by law. It clearly shows that the

Corporate Debtor is in default of a

debt due and payable, and the

default is in excess of minimum

amount of one lakh rupees

stipulated u/s 4(1) of the IBC.

Therefore, the default stands

established and there is no reason

to deny the admission of the

petition."

and admitted the petition and ordered the initiation of 'Corporate Insolvency

Resolution Process' against the 'Corporate Debtor'.

5

Company Appeal (AT) (Insolvency) No. 159 of 2020 Appellant's Contentions

3. The Learned Counsel for the Appellant submits that in the instant case no

Demand Notice was ever served on the 'Corporate Debtor' / Second Respondent

as per section 8 of the 'I&B' Code.

4. The Learned Counsel for the Appellant comes out with a plea that on

perusal of the purported Demand Notice dated 25.09.2007, it can be seen that

the said notice was sent to the address 'C-2098, Oberoi Gardens Estate, Off Saki

Vihar Road, Chandivali, Andheri East, Mumbai - 4000072' which is not the

registered address of the 'Corporate Debtor' as per master data of the 'Corporate

Debtor' on MCA website.

5. The emphatic contention advanced on behalf of the Appellant is that the

registered office of the address of the 'Corporate Debtor' as per MCA website is

'A-3027, Oberoi Gardens Estate, Off Saki Vihar Road, Chandivali, Andheri East,

Mumbai - 4000072' which is the registered office of the 'Corporate Debtor' since

January, 2016 as per record of the MCA website. In short, the plea of the

Appellant is that the said Demand Notice was knowingly addressed to the wrong

address of the 'Corporate Debtor' by the First Respondent.

6. The Learned Counsel for the Appellant contends that the First Respondent

filed a Winding up Petition before the Hon'ble High Court of Bombay during the

year 2016 and no notice in the said petition was issued by the Hon'ble High

Court and as such pursuant to the notification No. GSR 1119(E) dated

07.12.2016 issued by the Central Government as per Section 434 of the 6 Company Appeal (AT) (Insolvency) No. 159 of 2020 Companies Act, 2013 r/w Section 239 of the Code, the petition was transferred

to the Adjudicating Authority, Mumbai Bench. But the Adjudicating

Authority, before considering the said petition u/s 9 of the 'I&B' Code failed to

consider the Rule 5 of the Companies (Transfer of pending proceedings) Rules,

2016, which clearly states that the petitioner shall submit all information, other

than information forming part of the records transferred in accordance with Rule

7 required for admission of the petition under sections 7, 8 or 9 of the Code.

7. The Learned Counsel for the Appellant adverts to Rule 5 of the Companies

(transfer of pending proceedings Rules, 2016 which enjoins as follows:-

"5. Transfer of pending

proceedings of Winding up on the

ground of inability to pay debts.

(1) ...

Provided that the petitioner shall

submit all information, other than

information forming part of the

records transferred in accordance

with rule 7, required for admission

of the petition under sections 7,8 or

9 of the Code, as the case may be,

including details of the proposed

insolvency professional to the 7 Company Appeal (AT) (Insolvency) No. 159 of 2020 Tribunal upto 15th day of July, 2017

failing which the petition shall stand

abated etc....."

8. The Learned Counsel for the Appellant submits that the Demand Notice

was served on the 'Corporate Debtor' along with the 'Rejoinder' filed by the First

Respondent before the Adjudicating Authority and the same was accepted by the

First Respondent in its reply and in this regard the mandatory provision of

Section 8 of 'I&B' Code in regard to the serving of Demand Notice was not

followed. In effect, in the present case no Demand Notice u/s 8 of the 'I&B' Code

was served on the 'Corporate Debtor' before filing of the petition before the

Adjudicating Authority and on this ground alone, the impugned order dated

01.01.2020 is liable to be set aside.

9. It is the stand of the Appellant that there was a pre-existing dispute as per

Section 8(2)(a) of the 'I&B' Code and the same is apparent from the fact that the

'Goods' supplied by the First Respondent were defective in nature, as they were

not of standard quality and in fact, the inferior quality of the goods was also

accepted by the First Respondent's e.mail dated 19.01.2014.

10. The Learned Counsel for the Appellant contends that in order to carry on

the cordial business relations with the First Respondent and considering the fact

that the 'dispute' in regard to the inferior goods was not resolved, the second

Respondent issued a security cheque of Rs. 69,76,937/- as per the request of

the First Respondent and on the First Respondent's representation that the said 8 Company Appeal (AT) (Insolvency) No. 159 of 2020 dispute will be resolved as soon as the cheque was issued. But the First

Respondent had not resolved the dispute and submitted the cheque to the Bank

which got returned with an endorsement 'Exceeds Arrangement'.

11. The Learned Counsel for the Appellant submits that the second

Respondent issued a legal notice dated 21.2.2017 to the First Respondent calling

upon it to make good the damages caused to it due to inferior quality of goods

supplied by the First Respondent. As a matter of fact, the said legal notice was

delivered to the First Respondent by 25.05.2017 for which a false reply was

received by the second Respondent on 23.03.2017.

Appellant's Citations

12. The Learned Counsel for the Appellant cites the judgement of this Tribunal

in the matter of 'M/s Sabari Inn Pvt. Ltd.' V. 'M/s Ramesh Associates Pvt.

Ltd.' reported in (2018)142 CLA 158(NCLAT) wherein it is held as under:-

"...11. From the

aforesaid Rule 5, it is clear after

transfer of the case the Applicant

(Respondent herein) was

required to submit all

information, other than

information forming part of the

records transferred from the High

Court, for admission of the 9

Company Appeal (AT) (Insolvency) No. 159 of 2020 petition under sections 7,8 or 9 of

the Code, as the case may be,

including details of the proposed

insolvency professional to the

Tribunal upto 15th day of July,

2017 failing which the petition

shall stand abated etc.

12. As per Section 9 of the

'I&B' Code, before admission of

application and its filing, a

demand notice under sub-

section (1) of Section 8 is

required to be issued on the

'Corporate Debtor' as quoted

below:-

8. Insolvency resolution by operational creditor.

-(1) An operational creditor

may, on the occurrence of a

default, deliver a demand

notice of unpaid operational

debtor copy of an invoice

demanding payment of the 10 Company Appeal (AT) (Insolvency) No. 159 of 2020 amount involved in the default

to the corporate debtor in such

form and manner as may be

prescribed.

13. It is only on receipt of

such notice under sub-section

(1) of Section 8 of the 'I&B'

Code, the 'Corporate Debtor'

may either pay the amount or

may dispute the claim in terms

of sub-section (2) of Section 8 of

the 'I&B' Code'.

14. 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'. As per Rule 5(1)(a) &

(b), the following person (s) are

11 Company Appeal (AT) (Insolvency) No. 159 of 2020 authorised to act on behalf of

operational creditor, as

apparent from the last portion

of Form-3 and 4 which reads as

follows:-

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 credtior Position with or in relation to the operational creditor Address of person signing

...17. Admittedly, no notice was

issued under sub-section (1) of

Section 8 of the 'I&B' Code'. In 12 Company Appeal (AT) (Insolvency) No. 159 of 2020 terms with Rule 5, other

informations were also not placed

before the Adjudicating Authority.

18. The Respondent having

failed to provide all the details as

required under Form-5 as noticed

above, the application under

sections 433 and 434 of the

Companies Act, 1956 cannot be

treated to be an application under

section 9 of the 'I&B Code' in terms

of Rule 5 of Transfer Rules, 2016.

In such circumstances, in view of

proviso to Rule 5 of the Transfer

Rules, the application under

Sections 433 and 434 of the

Companies Act, 1956 cannot be

treated to be an application under

section 9 of the 'I&B Code' in terms

of Rule 5 of Transfer Rules, 2016.

In such circumstances, in view of

proviso to Rule 5 of the Transfer

13 Company Appeal (AT) (Insolvency) No. 159 of 2020 Rules, the application under

Sections 433 and 434 of the

Companies Act, 1956 stands

abated.

19. For the reasons aforesaid,

while we set aside the impugned

order dated 20th June, 2017

passed by the Adjudicating

Authority, Chennai Bench in T.C.P.

No. 263/(IB)/2017, also declare

that the application preferred by

Respondent under Sections 433

and 434 of the Companies Act,

1956 stood abated.

20. In effect, order (s) passed by

Adjudicating Authority appointing

'Interim Resolution Professional',

declaring moratorium, freezing of

account and all other order(s)

passed by Adjudicating Authority

pursuant to impugned order and

action, if any, taken by the 'Interim

14 Company Appeal (AT) (Insolvency) No. 159 of 2020 Resolution Professional', including

the advertisement, if any, 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 is dismissed as

abated. 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......"

13. The Learned Counsel for the Appellant relies on the decision of this

Tribunal in the matter of 'Uttam Galva Steels Ltd.' V. 'DF Deutsche Forfait

AG & Anr.' dated 28.7.2017 (Comp. App. (AT) (Ins.) 39/2017) reported in

(2017)204 Comp. Cas. Pg. 511 wherein it is observed as under:

"30. From bare

perusal of Form-3 and Form-4 read

with sub-rule (1) of Rule 5 and

Section 8 of the 'I&B' Code, it is

15 Company Appeal (AT) (Insolvency) No. 159 of 2020 clear that an operational creditor

can apply himself or through a

person authorised to act on behalf

of the 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", meaning thereby the

person authorised by 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 IB

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

of payment, with clear

16 Company Appeal (AT) (Insolvency) No. 159 of 2020 understanding that the operational

debt (in default) 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 section 80 of CPC or

for proceeding under section 433

of the Companies Act, 1956, the

Corporate Debtor may decide to

17 Company Appeal (AT) (Insolvency) No. 159 of 2020 contest the suit/case if filed,

distinct Corporate Resolution

Process, where such claim

otherwise cannot be contested,

accept where there is an existence

of dispute, prior to issue of notice

under Section 8"

14. The Learned Counsel for the Appellant refers to the judgement of the

Hon'ble Supreme Court in the matter of 'Swiss Ribbons Pvt. Ltd. & Anr.' V.

'Union of India and Ors.' writ petition (civil) no. 99 of 2018 dated

25.01.2019 reported in 2019 4 SCC p. 17 wherein it is observed and held as

under:-

"...24. ...On the other hand,

under sections 8 and 9, an

operational creditor may, on the

occurrence of a default, deliver a

demand notice which must then

be replied to within the specified

period. What is important is that

at this stage, if an application is

filed before the Adjudicating

Authority for initiating the

18 Company Appeal (AT) (Insolvency) No. 159 of 2020 corporate insolvency resolution

process, the corporate debtor can

prove that the debt is disputed.

When the debt is so disputed,

such application would be

rejected..."

"... 27. ...On the other hand,

contracts with operational

creditors are relatable to supply

of goods and services in the

operation of business. Financial

contracts generally involve large

sums of money. By way of

contrast, operational contracts

have dues whose quantum is

generally less. In the running of

a business, operational creditors

can be many as opposed to

financial creditors, who lend

finance for the set up or working

of business. Also, financial

creditors have specified

19 Company Appeal (AT) (Insolvency) No. 159 of 2020 repayment schedules, and

defaults entitle financial

creditors to recall a loan in

totality. Contracts with

operational creditors do not have

any such stipulations. Also, the

forum in which dispute resolution

takes place is completely

different. Contract with

operational creditors can and do

have arbitration clauses where

dispute resolution is done

privately. Operational debts also

tend to be recurring in nature and

the possibility of genuine

disputes in case of operational

debts is much higher when

compared to financial debts. A

simple example will suffice.

Goods that are supplied may be

substandard. Goods may not

have been supplied at all. All

these qua operational debts are 20 Company Appeal (AT) (Insolvency) No. 159 of 2020 matters to be proved in

arbitration or in the courts of

law."

15. The Learned Counsel for the Appellant seeks in aid the decision of Hon'ble

Supreme Court in the matter of 'Mobilox Innovations Pvt. Ltd.' V. 'Kirusa

Software (p) Ltd.', 2018 1 SCC at pg. 353 wherein at paragraph 33, 34, 38 and

51 it is observed as under:-

"33. The scheme under

Sections 8 and 9 of the Code,

appears to be that an operational

creditor, as defined, may, on the

occurrence of a default (i.e., on

non-payment of a debt, any part

whereof has become due and

payable and has not been

repaid), deliver a demand notice

of such unpaid operational debt

or deliver the copy of an invoice

demanding payment of such

amount to the corporate debtor in

the form set out in Rule 5 of the

Insolvency and Bankruptcy

21 Company Appeal (AT) (Insolvency) No. 159 of 2020 (Application to Adjudicating

Authority) Rules, 2016 read with

Form 3 or 4, as the case may be

(Section 8(1)). Within a period of

10 days of the receipt of such

demand notice or copy of invoice,

the corporate debtor must bring

to the notice of the operational

creditor the existence of a dispute

and/or the record of the

pendency of a suit or arbitration

proceeding filed before the

receipt of such notice or invoice in

relation to such dispute (Section

8(2)(a). What is important is that

the existence of the dispute

and/or the suit or arbitration

proceeding must be pre-existing -

i.e. it must exist before the receipt

of the demand notice or invoice,

as the case may be. In case the

unpaid operational debt has

been repaid, the corporate debtor 22 Company Appeal (AT) (Insolvency) No. 159 of 2020 shall within a period of 10 days

send an attested copy of the

record of the electronic transfer of

the unpaid amount from the bank

account of the corporate debtor or

send an attested copy of the

record that the operational

creditor has encashed a cheque

or otherwise received payment

from the corporate debtor

(Section 8(2)(b). It is only if, after

the expiry of the period of the

said 10 days, the operational

creditor does not either receive

payment from the corporate

debtor or notice of dispute, that

the operational creditor may

trigger the insolvency process by

filing an application before the

adjudicating authority under

Sections 9(1) and 9(2). This

application is to be filed under

Rule 6 of the Insolvency and 23 Company Appeal (AT) (Insolvency) No. 159 of 2020 Bankruptcy (Application to

Adjudicating Authority) Rules,

2016 in Form 5, accompanied

with documents and records that

are required under the said form.

Under Rule 6(2), the applicant is

to dispatch by registered post or

speed post, a copy of the

application to the registered

office of the corporate debtor.

Under Section 9(3), along with

the application, the statutory

requirement is to furnish a copy

of the invoice or demand notice,

an affidavit to the effect that

there is no notice given by the

corporate debtor relating to a

dispute of the unpaid operational

debt and a copy of the certificate

from the financial institution

maintaining accounts of the

operational creditor confirming

that there is no payment of an 24 Company Appeal (AT) (Insolvency) No. 159 of 2020 unpaid operational debt by the

corporate debtor. Apart from this

information, the other

information required under Form

5 is also to be given. Once this is

done, the adjudicating authority

may either admit the application

or reject it. If the application

made under sub-section (2) is

incomplete, the adjudicating

authority, under the proviso to

sub-section 5, may give a notice

to the applicant to rectify defects

within 7 days of the receipt of the

notice from the adjudicating

authority to make the application

complete. Once this is done, and

the adjudicating authority finds

that either there is no repayment

of the unpaid operational debt

after the invoice (Section 9(5)(i)(b)

or the invoice or notice of

payment to the corporate debtor 25 Company Appeal (AT) (Insolvency) No. 159 of 2020 has been delivered by the

operational creditor (Section

9(5)(i)(c), or that no notice of

dispute has been received by the

operational creditor from the

corporate debtor or that there is

record of such dispute in the

information utility (Section

9(5)(i)(d), or that there is no

disciplinary proceeding pending

against any resolution

professional proposed by the

operational creditor (Section

9(5)(i)(e), it shall admit the

application within 14 days of the

receipt of the application, after

which the corporate insolvency

resolution process gets triggered.

On the other hand, the

adjudicating authority shall,

within 14 days of the receipt of

an application by the operational

creditor, reject such application if 26 Company Appeal (AT) (Insolvency) No. 159 of 2020 the application is incomplete and

has not been completed within

the period of 7 days granted by

the proviso (Section 9(5)(ii)(a). It

may also reject the application

where there has been repayment

of the operational debt (Section

9(5)(ii)(b), or the creditor has not

delivered the invoice or notice for

payment to the corporate debtor

(Section 9(5)(ii)(c). It may also

reject the application if the notice

of dispute has been received by

the operational creditor or there

is a record of dispute in the

information utility (Section

9(5)(ii)(d). Section 9(5)(ii)(d) refers

to the notice of an existing

dispute that has so been

received, as it must read with

Section 8(2)(a). Also, if any

disciplinary proceeding is

pending against any proposed 27 Company Appeal (AT) (Insolvency) No. 159 of 2020 resolution professional, the

application may be rejected

(Section 9(5)(ii)(e).

34. Therefore, the

adjudicating authority, when

examining an application under

Section 9 of the Act will have to

determine:

(i) Whether there is an

"operational debt" as defined

exceeding Rs. 1 lakh? (See

Section 4 of the Act)

(ii) Whether the

documentary evidence

furnished with the application

shows that the aforesaid debt

is due and payable and has

not yet been paid? And

(iii) Whether there is

existence of a dispute between

the parties or the record of the

pendency of a suit or arbitration 28 Company Appeal (AT) (Insolvency) No. 159 of 2020 proceeding filed before the

receipt of the demand notice of

the unpaid operational debt in

relation to such dispute?

38. 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. The

corporate debtor is then given

a period of 10 days from the

receipt of the demand notice or

copy of the invoice to bring to

the notice of the operational

creditor the existence of a

dispute, if any. We have also

seen the notes on clauses

annexed to the Insolvency and

Bankruptcy Bill of 2015, in

29 Company Appeal (AT) (Insolvency) No. 159 of 2020 which the "existence of a

dispute" alone is mentioned.

Even otherwise, the word

"and" occurring in Section

8(2)(a) must be read as "or"

keeping in mind the legislative

intent and the fact that an

anomalous situation would

arise if it is not read as "or". If

read as "and", disputes would

only stave off the bankruptcy

process if they are already

pending in a suit or arbitration

proceedings and not

otherwise. This would lead to

great hardship; in that a

dispute may arise a few days

before triggering of the

insolvency process, in which

case, though a dispute may

exist, there is no time to

approach either an arbitral

tribunal or a court. Further, 30 Company Appeal (AT) (Insolvency) No. 159 of 2020 given the fact that long

limitation periods are allowed,

where disputes may arise and

do not reach an arbitral

tribunal or a court for upto

three years, such persons

would be outside the purview

of Section 8(2) leading to

bankruptcy proceedings

commencing against them.

Such an anomaly cannot

possibly have been intended

by the legislature nor has it so

been intended. We have also

seen that one of the objects of

the code qua operational debts

is to ensure that the amount of

such debts, which is usually

smaller than that of financial

debts, does not enable

operational creditors to put the

corporate debtor into the

insolvency resolution process 31 Company Appeal (AT) (Insolvency) No. 159 of 2020 prematurely or initiate the

process for extraneous

considerations. It is for this

reason that it is enough that a

dispute exists between the

parties.

51. It is clear, therefore, that

once the operational creditor has

filed an application, which is

otherwise complete, the

adjudicating authority must

reject the application under

Section 9(5)(2)(d) if notice of

dispute has been received by

the operational creditor or there

is a record of dispute in the

information utility. It is clear

that such notice must bring to

the notice of the operational

creditor the "existence" of a

dispute or the fact that a suit or

arbitration proceeding relating

32 Company Appeal (AT) (Insolvency) No. 159 of 2020 to a dispute is pending between

the parties. Therefore, all that

the adjudicating authority is to

see at this stage is whether

there is a plausible contention

which requires further

investigation and that the

"dispute" is not a patently feeble

legal argument or an assertion

of fact unsupported by evidence.

It is important to separate the

grain from the chaff and to reject

a spurious defence which is

mere bluster. However, in doing

so, the court does not need to be

satisfied that the defence is

likely to succeed. The Court

does not at this stage examine

the merits of the dispute except

to the extent indicated above.

So long as a dispute truly exists

in fact and is not spurious,

hypothetical or illusory, the 33 Company Appeal (AT) (Insolvency) No. 159 of 2020 adjudicating authority has to

reject the application".

First Respondent's Contentions

16. The Learned Counsel for the First Respondent submits that the second

Respondent/ R&M International Pvt. Ltd. was purchasing Carbon Fibre

Laminates from the First Respondent through e.mail dated 16.01.2014 had

informed the First Respondent that they found several imperfections in the last

batch of Carbon Fibre reinforced Laminates. Apart from this, it is the stand of

the First Respondent that the Second Respondent wanted to know about the

challenges involved thus establishing that there existed no pre-existing dispute.

In fact, the relevant portions of the e.mail dated 16.01.2014 sent by R-2 to R-1

run as under:-

"In the last batch of Carbon fiber

reinforced laminates, several

imperfections were found. The

snap shots of those have been

attached herewith."

Kindly make a note of such imperfections and let us know the challenge involved.

17. The Learned Counsel for the First Respondent contends that on

19.01.2014 the First Respondent suggested an alternative recourse and

thereafter the issue was resolved. Besides this, there were multiple transactions

between the Respondent No.1 and 2 post the 'alleged dispute' on 01.02.2014,

34 Company Appeal (AT) (Insolvency) No. 159 of 2020 17.02.2014, 26.02.2014 and 02.03.2014 against different invoices, clearly

establishing that the issues were resolved and these would show that there

existed no pre-existing dispute.

18. The Learned Counsel for the First Respondent points out that the Second

Respondent's authorised signatory through letter dated 08.07.2014 had agreed

to pay Rs. 79,76,937/- for the purpose of clearing all outstanding payment

against the Purchase Orders.

19. In fact, the Second Respondent issued five postdated cheques bearing Nos.

135229, 135230, 135231, 135232 and 135233 respectively in favour of the first

Respondent. However, the three cheques were returned by the Bank unpaid for

the reason of 'insufficient fund' and fresh cheque was issued dated 03.03.2015

bearing no. 100380 for Rs. 69,76,937/- after adjusting Rs. ten lakhs which was

the outstanding sum, which was again dishonoured on 05.03.2015 for the

reason 'exceeds arrangement'.

20. The Learned Counsel for the First Respondent comes out with a plea that

the First Respondent issued a legal notice dated 14.03.2015 u/s 138 of the

Negotiable Instrument Act, 1881 requesting the Second Respondent to pay the

amount of the cheque within 15 days from the date of receipt of the legal notice.

First Respondent's Citation

21. Advancing his arguments, the Learned Counsel for the First Respondent

refers to the decision of this Tribunal in the matter of 'Sudhi Sachdev' V. 'APPL

Industries Ltd.', 2018 SCC online NCLAT, 775 in Comp. Appl. (AT)(Ins.)

623/2018 dtd. 13.11.2018 wherein it is observed that as soon as the 35 Company Appeal (AT) (Insolvency) No. 159 of 2020 proceedings are initiated u/s 138/141 of the N.I. Act, 1881, it would make the

debt admissible.

22. The Learned Counsel for the First Respondent forcefully submits that post

filing of the petition in the year 2015 before the Hon'ble High Court of Mumbai

and after transfer of the said petition to the 'National Company Law Tribunal',

Mumbai on 01.02.2017, the second Respondent issued a letter to the first

Respondent on 21.02.2017, wrongly mentioning the details of articles being

delivered by the First Respondent to the second Respondent during 2014-2016.

In fact, to mislead this Tribunal, the second Respondent presented a letter dated

23.03.2017 that the first Respondent never supplied carbon fibre raw material

to the second Respondent whereas the reply was denial of supply of raw material

and it was made clear in this reply that the First Respondent had supplied

'Carbon Fibre Reinforced Laminates' which is different from 'Carbon Fibre Raw

Material' which was mentioned to have been supplied by the First Respondent.

In this regard, the First Respondent's stand is that the 'Carbon Fibre Reinforced

Laminates' is a different product than 'Carbon Fibre Raw Material', hence was

disputed in the reply letter dated 23.03.2017. Indeed, no action / suit / dispute

was ever taken/raised by the second Respondent based on the contents of the

letter dated 23.03.2017.

23. Yet another argument advanced on behalf of the First Respondent is that

the 'Demand Notice' for the amount of the cheque dishonoured is in the record

of the petition transferred to the 'National Company Law Tribunal' and that the

mandatory information required in Form-5 is all available in the records of the 36 Company Appeal (AT) (Insolvency) No. 159 of 2020 company petition transferred. Moreover, the First Respondent apprehended that

the Second Respondent was likely to sell off its Assets and / or deal with them

and / or create third party interest leaving the First Respondent high and dry,

which perforced the First Respondent to issue a 'statutory notice' dated

23.07.2015 as per section 433 of the Companies Act, 1956. Thereafter, a petition

dated 20.11.2015 before the Hon'ble High Court of Bombay for winding up of the

second Respondent was filed on 03.09.2016 vide CP/552/2016.

24. The Learned Counsel for the First Respondent points out that the

notification no. G.S.R. 1119 (E) dated 07.12./2016 was issued by the Ministry

of Corporate Affairs as per Rule 5 of the Companies (Transfer of pending

proceedings) Rules, 2016 which came into effect from 01.04.2017. The Registry

of the Hon'ble High Court of Bombay on 01.02.2017 vide letter No.

COM/58/2016 had transferred the winding up petition to the 'National Company

Law Tribunal', Mumbai Bench and the same was numbered as CP (IB)

No.749/2017.

25. The Learned Counsel for the First Respondent adverts to the proviso to

Rule 5 of the Companies (transfer of pending proceedings) Rules, 2016 which

reads as under: -

"Provided that the

petitioner shall submit all

information, other than

information forming part of the

record transferred in accordance 37

Company Appeal (AT) (Insolvency) No. 159 of 2020 with rule 7, required for

admission of the petition under

section 7,8 or 9 of the code...."

and contends that there was no requirement of sending a demand notice afresh,

nor filing of the petition in Form-5, when the petition was transferred from the

Hon'ble High Court of Mumbai, had this on record of the petition transferred.

26. The Learned Counsel for the First Respondent submits that when the

Company had appeared before the 'Adjudicating Authority' and contested the

matter on 'merits', based on the principles of Estoppel/Waiver, it cannot be

allowed to raise these aspects in Appeal.

27. The Learned Counsel for the First Respondent cites an extract from

'Maxwell on the Interpretation Of Statute' (11th Edition) pgs. 377-378 which

runs to the following effect:-

"A defendant in an

action in a county court

which has jurisdiction over

the case subject to leave

being given, may waive want

of leave; and the defendant,

even in a criminal case before

justices, if the subject matter

be within their jurisdiction,

may waive any irregularity 38 Company Appeal (AT) (Insolvency) No. 159 of 2020 in the summons, or indeed

dispensed with the summons

altogether, and he does so in

such cases not, indeed, by

appearing merely but by

appearing and entering on

the case on its merits. The

tribunal having jurisdiction

over the matter, he would not

be allowed to take his chance

of prevailing on the merits

and to reserve his objections

to a mere preliminary

irregularity..."

Pleas of Third Respondent

28. The Third Respondent/Interim Resolution Professional of the Second

Respondent/Corporate Debtor takes a stand that the First Respondent had

deposited a sum of Rs. one lakh pursuant to the order dated 07.01.2020 passed

by this Hon'ble Tribunal to meet the expenses arising out of the issuance of

public notice and inviting claims. Further, a sum of Rs. 11,33,016/- was to be

paid to him and in this regard, he prays for directions being issued to the Second

Respondent to pay the same to him.

39

Company Appeal (AT) (Insolvency) No. 159 of 2020 Assessment

29. At the outset, this Tribunal points out that it is the plea of the Appellant

that the alleged Demand Notice dated 25.09.2017 of the First Respondent was

sent to an address 'C-2098, Oberoi Gardens Estate, Off Saki Vihar Road,

Chandivali, Andheri East, Mumbai - 4000072' and the same was not the

registered address of the 'Corporate Debtor' as per the master data of the

'Corporate Debtor'/ Second Respondent on MCA website. Continuing further,

the clear-cut stand of the Appellant is that the registered office of the address as

per MCA website is 'A-3027, Oberoi Garden Estate, Saki Vihar Road, Chandivali,

Andheri East, Mumbai - 400072 and the same is the registered office of the

'Corporate Debtor' since January, 2016 as form INC 22. In effect, the contention

of the Appellant is that the Demand Notice was knowingly addressed to the

wrong address of the 'Corporate Debtor'/Second Respondent by the First

Respondent/ Petitioner.

30. The Appellant takes a plea that the First Respondent in its reply before

this Tribunal in Appeal at page 12 had inter alia averred that a Demand Notice

dated 25.02017 u/s 8(1) of the 'I&B' Code was sent to the second Respondent at

his registered address but the same was returned unserved on account of

Debtor's company changing its registered address and hence, there is a violation

of mandatory provision of section 8 of the code i.e., serving of a 'Demand Notice'

being a pre-requisite for filing of an application under 9 of the 'I&B' Code. In

short, the submission made on behalf of the Appellant is that no 'Demand Notice'

40 Company Appeal (AT) (Insolvency) No. 159 of 2020 u/s 8 of the 'I&B' Code was served on the Second Respondent / Corporate Debtor

before filing of the petition.

31. The contra stand of the First Respondent is that in compliance with Rule

5 of the Companies (transfer of pending proceedings, Rules, 2016) though a fresh

'Demand Notice' was not essentially required to be served in Form 3/Form 4

because of the fact that in the records transferred from the Hon'ble Bombay High

Court to the 'National Company Law Tribunal', statutory notice u/s 433 of the

Companies Act was part of the record so transferred, yet a 'Demand Notice' dated

25.09.2017 as per Section 8(1)of the 'I&B' Code was sent to the 'Corporate

Debtor'/second Respondent at its registered address but the same got returned

as 'unserved' on account of the debtor's company changing its registered address

without complying the procedure mandated under the Companies Act, 2013.

Apart from this, the First Respondent has come out with the plea that the

Demand Notice was appended with the rejoinder and was duly served upon the

second Respondent along with the rejoinder and the same is on the record of the

'National Company Law Tribunal', Mumbai.

32. It is seen from the 'Company's Master Data' (Annexure A-3 pg. 51) of the

Appeal paper book (vide diary no. 30460 dated 21.01.2020) that the registered

office of the Second Respondent/Corporate Debtor is mentioned as under:-

A-3027, Oberoi Garden Estate, Off Saki Vihar Road, Chandivali, Andheri East, Mumbai City MH - 400072 IN

41 Company Appeal (AT) (Insolvency) No. 159 of 2020

33. It is to be pointed out that the First Respondent in its reply to the instant

Appeal filed by the Appellant had clearly stated that a Rejoinder to the reply of

the 'Corporate Debtor' was filed by it all with the copy of notice sent in form 3

before the 'Adjudicating Authority' in April, 2017.

34. The First Respondent in its reply to the present Appeal before this Tribunal

has averred that as directed by the Adjudicating Authority on 04.01.2018 the

First Respondent had issued a notice on the second Respondent that a Company

Petition for winding up of the Second Respondent was filed for failure on its part

to pay the outstanding debt amount and further that the Second Respondent

was also informed that the First Respondent had tried to serve the copy of the

petition on the registered address of the Second Respondent but the same was

returned unserved on the account of the company changing its registered

address, without a notice and, therefore, the Second Respondent was served with

a copy of the petition on 18.01.2018 and the copy of the notice dated 04.01.2018

addressed to the three Directors (i) Mr. Gopal Raj (ii) Ms. Rachna Gopal Raj

and Mr. Sahil Pradip Mhatre of the Second Respondent Company.

35. It transpires that on 25.09.2017, the First Respondent's Advocate had

issued a Demand Notice dated 25.09.2017 in Form no. 3 (See clause (a) of sub-

rule (1) of rule 5) to the Second Respondent / R&M International Pvt. Ltd.,

Mumbai demanding payment in respect of unpaid operational debt under the

'I&B' Code.

36. A perusal of the aforesaid Demand Notice issued by the First Respondent's

Advocate dated 25.09.2017 shows that a sum of Rs. 69,76,937+interest @ 18% 42 Company Appeal (AT) (Insolvency) No. 159 of 2020 p.a. was claimed from the date of filing of the petition, till payment of realisation.

According to the First Respondent outstanding amount agreed by the debtor

company was Rs. 79,76,937/-, out of which the debtor company paid Rs. 10

lakhs. As such the total amount of default claimed was Rs. 69,76,937/- plus

interest @ 18% p.a. from the date of filing of the petition, till payment of

realisation.

37. At S.No. 7 of the Form no. 3 the First Respondent / petitioner had relied

upon 11 documents to prove the existence of 'Operational Debt' and the amount

in default (inclusive of the copy of payment schedule dated 08.07.2014 to

creditor company, the copy of cheque of Union Bank of India dated 03.03.2015

for Rs. 69,76,937/-, legal notice issued by the First Respondent's Advocate to

the debtor Company dated 23.07.2015). In short, in the aforesaid Demand

Notice dated 25.09.2017 of the First Respondent's Advocate issued to the Second

Respondent / Company ten days' time was specified from the date of receipt of

the said notice to dispute the existence or amount of unpaid 'operational debt'

(in default) and also it was mentioned that if the debt was repaid before the

receipt of the said notice, for such repayment the Company was required to

demonstrate the same. Therefore, the Appellant cannot take a plea that no

Demand Notice as per Form 3 of 'I&B' Code was issued to the Second

Respondent.

38. Be it noted, that as per Section 8 of the 'I&B' Code an 'Operational Creditor'

is required to deliver a demand notice on the occurrence of the default within ten

days from the receipt of the demand notice, the Corporate Debtor shall bring to 43 Company Appeal (AT) (Insolvency) No. 159 of 2020 the notice of the 'Operational Creditor' the 'existence of a dispute', if any, and the

record of the pendency of the suit or arbitration proceedings before the receipt

of such notice or invoice in relation to such dispute. As a matter of fact, the

'dispute' must be existing prior to the receipt of the notice and the same can be

in a form other than a pending suit or arbitration proceeding.

39. It is to be remembered that a 'Demand Notice' is forerunner to the

commencement of insolvency proceedings against a Corporate Debtor. An

unpaid 'Demand Notice' is good enough to exhibit the Debtor's inability to pay

its debts for the purpose of 'Bankruptcy Proceedings'. If a bonafide dispute is

established then an 'Insolvency' petition is not the appropriate proceeding to

determine the validity of a disputed debt.

40. It is to be pointed out that service of notice of demand as per section 8 of

the code has to be sent by registered post or speed post as required by Rule

5(2)(a) and (b) of the Insolvency & Bankruptcy application to Adjudicating

Authority Rules, 2016. Section 8 of the Code espouse the test for default to all

cases of 'Applicants' that may initiate 'Insolvency Proceedings' against the

'Corporate Debtor'.

41. On 04.01.2018, the Advocate of the First Respondent had issued notice to

the Directors of the Second Respondent / Corporate Debtor at Mumbai address

wherein at paragraph 2 and 3 it is mentioned as under:-

"2. The said

petition was sought to be

served on the regd. office of the 44 Company Appeal (AT) (Insolvency) No. 159 of 2020 company R&M International

Pvt. Ltd. but the same could

not be served at the office.

3. the matter

was listed for hearing on

11.12.2017 and directions

were given that notice of the

petition to be given you being

Directors of R&M International

Pvt. Ltd. the matter is now

adjourned to 22.01.2018 before

National Company Law

Tribunal, Court Room No. 2."

and they were to remain present if they desire so etc.

42. A defective bankruptcy notice is not curable whether it is or not, the test

is whether the mistake is such which would could not possibly mislead the

debtor as per decision 'A.Debtor Re (No.21/1950)ex.p; the Debtor V.

Bowmaker' 1950(2) ALLER 1129DC:1951 1Ch p. 313.

43. In fact, a change in address of the registered office of the 'Corporate

Debtor' cannot be a ruse for failure of the concerned party to send/issue a

'Demand Notice' as per section 8 of the code. As a matter of fact, the service of

Demand Notice to the 'Corporate Debtor' as per section 8 is a mandatory one.

45

Company Appeal (AT) (Insolvency) No. 159 of 2020

44. In the decision of Hon'ble Supreme Court 'Macquaire' V. 'Shilpi Cable

Technologies Ltd.' reported in 2018 1 Comp. LJ. at p. 270 it is held that the

requirement of Section 9(3) of the Code in producing a copy of the certificate from

the financial institution accounts of the 'Operational Creditor' affirming the non-

payment of debt is not a condition precedent for triggering the insolvency process

under the Code. Suffice it to point out that the requirement u/s 9(3) of the Code

is only 'Directory'.

45. It is to be pointed out that an 'Operational Creditor' shall deliver to the

'Corporate Debtor' a Demand Notice in Form-3 or a copy of an invoice attached

with a notice in Form-4 as per Rule 5 of the Insolvency and Bankruptcy

(Application to Adjudicating Authority) Rules, 2016. The Demand Notice or the

copy of the invoice demanding payment referred to in sub-section 2 of section 8

of the code may be delivered to the 'Corporate Debtor' at the registered office by

hand, registered post or speed post with acknowledgement due or by electronic

mail service to a whole time Director or designated partner or key managerial

personnel, if any, of the 'Corporate Debtor'. Besides these, a copy of Demand

Notice of invoice demanding payment shall also be filed with an information

utility.

46. Be it noted, that only if a 'Demand Notice' / Invoice demanding payment

under the code is issued, the 'Corporate Debtor' will appreciate in right earnest

the consequences flowing on account of failure to pay the 'operational debt'.

Also, that, after transfer of the case from Hon'ble High Court to the Tribunal

(in respect of the winding up petition) an 'Operational Creditor' is required to 46 Company Appeal (AT) (Insolvency) No. 159 of 2020 submit all information including the details of the proposed Insolvency

professional.

47. An application filed u/s 9 of the 'I&B' Code, 2016 without serving notice

u/s 8 of the code is not maintainable. Indeed, a mere failure to serve the

'Demand Notice' is not a curable defect. A 'Bankruptcy' notice sets in motion the

entire process leading to 'Bankruptcy' and it is to be rigidly and narrowly

construed.

48. It is to be relevantly pointed out that in the decision 'M/s. Paper Mill P.

Ltd.' V. 'Arjun Chemicals reported in 2018 91 taxmann.com.389(NCLAT) it

is observed and held that where a notice u/s 8 of the 'I&B' Code was not issued,

the petition for 'Insolvency Resolution Process' is to be regarded as an incomplete

and thus the order is to be set aside.

49. In reality, a 'Demand Notice' not in proper format and issued by an

Advocate cannot be treated as a notice u/s 8 of the Code as per decision 'J.P.

Engineers Pvt. Ltd.' V. 'Murti Udyog Ltd.' reported in

Manu/NC/1416/2017.

50. To put it succinctly, serving of 'Demand Notice' together with the

'Rejoinder' filed by the First Respondent/'Operational Creditor' before the

'Adjudicating Authority' is not the requirement of 'Law'.

51. It cannot be lost sight off that the amount shown in 'Bank Certificate' is

proof of the 'Dues'.

47

Company Appeal (AT) (Insolvency) No. 159 of 2020 Waiver / Approbation and Reprobation

52. It must be borne in mind that the principle of 'Waiver' or of 'Approbation'

and 'Reprobation' lies at the root of Conduct Productive of change of activation

and this aspect is similar to the rule of Constructive Res Judicata as per

Explanation IV of Section 11 of Civil Procedure Code. A person cannot be

permitted to approbate and reprobate by firstly agreeing to abide by the terms

and conditions of a given case / issue(s) and later seeking to deny the liability as

per the agreed terms.

53. As far as the present case is concerned, although a plea is taken on behalf

of the first Respondent / Petitioner that though a fresh Demand Notice was not

essentially required to be served in Form-3/Form-4 because of the fact in the

records transferred from the Hon'ble Bombay High Court in respect of the

winding up petition, to the 'National Company Law Tribunal' , statutory notice

u/s 433 of the Companies Act was part of the record so transferred, yet a

demand notice dated 25.09.2017 u/s 8(1) of the 'I&B' Code was sent to the

second Respondent's regd. address but the same was returned unserved on

account of debtor's company changing its registered address, without complying

the mandate procedure as per Companies Act, 2013 and that apart, the Demand

Notice was appended with the rejoinder and was duly served upon the second

Respondent along with the rejoinder and the same is in the record of the

Tribunal, Mumbai and added further, a rejoinder to the reply was filed by the

First Respondent / Operational Creditor all with the copy of notice sent in Form-

3 before the Adjudicating Authority in 2017, this Tribunal is of the considered 48 Company Appeal (AT) (Insolvency) No. 159 of 2020 view that service of 'Demand Notice' to the second Respondent/Corporate Debtor

is mandatory as per Section 8 of the Code.

54. In the instant case the Adjudicating Authority while passing the impugned

order on 01.01.2020 in CP (IB) No.749/MB/C-IV/2017 had admitted the

application without there being service of demand notice to the Second

Respondent / 'Corporate Debtor' which is admitted by the First

Respondent/Operational Creditor in its 'Reply' filed before this Tribunal and a

plea of the registered address of the Second Respondent / Corporate Debtor

being changed by the debtor Company will not hold water for the failure of the

First Respondent / Operational Creditor to send a notice u/s 8 of the Code. In

this regard, even the Adjudicating Authority in the impugned order at paragraph

5(i) had mentioned that the 'Operational Creditor' had stated in para 8 of its

'Rejoinder' that the 'Demand Notice' was returned unserved and that the said

Authority had not adverted to about the aspect of sufficiency of service of

'Demand Notice' to the Second Respondent / Corporate Debtor which is

mandatory as per Section 8 of the code and as such it is held by this Tribunal

that the impugned order is not a valid one in the eye of Law.

55. Although, a plea is taken on behalf of the first Respondent that a fresh

Demand Notice was not essentially required to be served in Form-3/Form-4 in

compliance with Rule 5 of the Companies (Transfer of pending proceedings)

Rules, 2016, this Tribunal is of view that the said plea cannot be acceded to in

view of Rule 5 of the Companies (transfer of pending proceedings) Rules, 2016.

49

Company Appeal (AT) (Insolvency) No. 159 of 2020

56. At this juncture, this Tribunal cites the Judgement of this Tribunal in the

matter of 'MesmetroStroy (FZE) Vs. BASF India Ltd. and Ors.' in Company

Appeal (AT)(Ins.) No. 229 and 230 of 2017 dated 28.11.2017 reported in

(2018)142 CLA152 wherein at paragraph 15 to 17 it is observed as under:-

"15. Admittedly, no notice was

issued under sub-section (1) of

section 8 of the 'I&B' Code. In terms

with Rule 5 other information were

also not placed before the

Adjudicating Authority.

16. The Respondent having

failed to provide all the details as

required under Form 5 as noticed

above, the application u/s 433 and

434 of the Companies Act, 1956

cannot be treated to be an

application u/s 9 of the 'I&B' Code

in terms of Rule 5 of Transfer Rules,

2016. In such circumstances in

view of proviso to Rule 5 of the

Transfer Rules, the application u/s

433 and 434 of the Companies Act,

1956 stands abated".

50

Company Appeal (AT) (Insolvency) No. 159 of 2020

57. Also, this Tribunal points out the judgement dated 25.10.2017 in

Company Appeal (AT)(Ins.) No. 207 of 2017 in the matter of 'Transparent

Technologies P. Ltd.' V. 'Multi Trade' wherein it is at paragraph 4 it is among

other things observed as follows:-

"4.... Though with

regard to paragraph 8(f), the

Respondent has denied the

averments relating to serving a

copy of form 5, but there is

nothing on record to suggest that

any notice under sub-section (1) of

section 8 was issued and served

or the application under Form-5

was filed. The respondent has

also taken a plea that there is no

requirement of furnishing the copy

of the application on the

appellant, however, such

submission cannot be

accepted...."

58. It cannot be forgotten that the proceedings under section 138 of NI Act,

1881 pertain to criminal liability for dishonour of cheques issued and do not

bar an application u/s 9 of the code as opined by this Tribunal. Likewise, the 51 Company Appeal (AT) (Insolvency) No. 159 of 2020 pendency of proceedings under Or.37 of the Civil Procedure Code will not

prohibit an application under Section 9 of the Code.

59. Even though on behalf of the First Respondent it is contended that the

Second Respondent/Corporate Debtor had mentioned that they will be making

payment all outstanding amount of Rs. 79,76,937/- as per letter of the Second

Respondent dated 08.07.2014 against the purchase and the same being an

admission of the debt, this Tribunal is of the considered view that since the

'Service of notice' at the registered address of the 'Corporate Debtor' was not

established to the subjective satisfaction of this Tribunal and the admitted fact

being that the notice sent to the Second Respondent at its registered office got

returned, the said admission of debt and the reference made to the NI Act, 1881

in regard to the presumption that a 'Holder of Cheque' received the cheque for

the discharge either in whole or in part of any debt or other liability will not in

any way heighten or improve the case of Appellant any further.

Conclusion

60. In view of the fact that in the instant case Section 8 notice under 'I&B'

Code was not served upon the Second Respondent / Corporate Debtor and

admittedly the same got returned as mentioned Supra, this Tribunal comes to

a consequent conclusion that the impugned order dated 01.01.2020 passed by

the Adjudicating Authority in CP (IB) No.749/MB/C-IV/2017 in admitting the

petition is not legally tenable and the same is accordingly set aside by this

Tribunal to secure the ends of justice. As a logical corollary, this Tribunal

declares illegal the order passed by the 'Adjudicating Authority' in appointing 52 Company Appeal (AT) (Insolvency) No. 159 of 2020 the 'Interim Resolution Professional', declaring moratorium and all other orders

passed by the 'Adjudicating Authority' pursuant to the impugned order and

action, if any, taken by the '' Interim Resolution Professional' (including the

advertisement, if any, published in the newspaper calling for applications and

all such orders) and that the petition/application filed by the First Respondent

is dismissed as abated. The Adjudicating Authority is required to close the

CIRP proceeding. The Second Respondent/Company is released from all the

rigour of Law and is allowed to function independently through its Board of

Directors with immediate effect. The Adjudicating Authority will fix the fee of

'Interim Resolution Professional' and the 'Expenses' incurred and that the

Appellant will pay the fees of the said Resolution Professional for the period

functioned.

61. In fine, the instant Appeal is allowed with aforesaid observations and

directions. No costs. IA 389/20(Stay Application) is closed. Before parting

with the case, this Tribunal grants liberty to the First Respondent/Operational

Creditor to issue fresh notice to the Second Respondent/Corporate Debtor as

per Section 8(1) of the 'I&B' Code and on receipt of service of such notice if there

is 'Debt and Default', to file a fresh application u/s 9 of the Code before the

'Adjudicating Authority' and to seek redressal of grievances in accordance with

law. It is made quite clear that when such fresh application is projected by the

First Respondent/Operational Creditor the same is to be determined by the

53 Company Appeal (AT) (Insolvency) No. 159 of 2020 Adjudicating authority on merits, of course in a fair, just and dispassionate

manner uninfluenced and untrammeled with any of the observations made by

this Tribunal, in the instant Appeal.

[Justice Venugopal M.] Member (Judicial)

[Dr. Alok Srivastava] Member (Technical)

NEW DELHI

13th January, 2021

ss

54 Company Appeal (AT) (Insolvency) No. 159 of 2020