Sunil Sanghavi vs Cytech Coatings Pvt. Ltd

Sunil Sanghavi ...Appellant

Vs.

Cytech Coatings Pvt. Ltd. ...Respondent

Present: For Appellant: - Mr. K.K Sharma, Mr. Mayank Sapra and Mr. Arjun Natrajan, Advocates.

For Respondent: - Mr. Abhigya, Advocate for R1. Mr. Ashish Verma and Ms. Avika Madhura, Advocates for RP.

ORDER

30.10.2018─ This appeal has been preferred by the shareholder of

'ESS DEE Aluminium Limited'- ('Corporate Debtor') with a petition for

condonation of delay.

2. It is submitted that the impugned order was not communicated

to the Appellant and he having come to know, filed the appeal on 10th

October, 2018. If limitation is counted from the date of knowledge, then

there is no delay and otherwise there is a delay of 6 days if it is counted

from the date of the impugned order.

3. Having heard learned counsel for the Appellant, learned counsel

appearing on behalf of the 1st Respondent- 'Operational Creditor' and

learned counsel appearing on behalf of the 'Interim Resolution

Professional', we hold that there is no delay in preferring the appeal, the

Company Appeal (AT) (Insolvency) No. 635 of 2018 2

Appellant having not been communicated with the order and not being

party before the Adjudicating Authority (National Company Law

Tribunal).

I.A. No. 1753 of 2018 stands disposed of.

Company Appeal (AT) (Insolvency) No. 635 of 2018

1st Respondent- ('Operational Creditor') filed application under

Section 9 of the Insolvency and Bankruptcy Code, 2016 ('I&B Code' for

short) for initiation of 'Corporate Insolvency Resolution Process' against

'ESS DEE Aluminium Limited'- ('Corporate Debtor'). The application was

admitted by the Adjudicating Authority (National Company Law

Tribunal), Kolkata Bench, Kolkata on 18th June, 2018. Having come to

know of the initiation of 'Corporate Insolvency Resolution Process', the

Shareholder of 'ESS DEE Aluminium Limited'- ('Corporate Debtor') filed

an application before the Adjudicating Authority for recalling of the said

order on one of the grounds that notice under Section 8(1) of the 'I&B

Code' was actually not served on the 'Corporate Debtor'. The

Adjudicating Authority by impugned order dated 4th October, 2018

rejected the application with following observations:

"22. The above order is self-explanatory

regarding the service of demand notice u/s. 8 of the

I & B Code. since the corporate debtor seriously

Company Appeal (AT) (Insolvency) No. 635 of 2018 3

alleged that there was no proper service of demand

notice issued u/s. 8 of the Code as an abundant

caution, I have once again perused the records in

C.P. (IB) No. 157/KB/2018. The copy of Master

Data produced in the application is marked as

Annexure 'K'. the address of the corporate debtor

in the Master Data read as "1, Sagore Dutta Ghat

Road Kamarhati Kolkata Kolkata WB 700058

IN". It is in the said address, both the notices were

issued. Copy of demand notice produced along

with the application clearly proves that notice was

sent in the above address and copy of track

consignment produced in the C.P., proves that

notice was delivered to the corporate debtor in the

said address. It is significant to note that the

demand notice u/s. 8 of the Code was delivered to

the corporate debtor's address at Kamarhati.

Therefore, the notice to the corporate debtor u/s 8

was served at the registered address of the

corporate debtor. So no doubt proper service of

demand notice was taken note in this case before

filing the application. The service of demand notice

under Section 8 was delivered to the corporate

debtor directly and the Tribunal's notice was

Company Appeal (AT) (Insolvency) No. 635 of 2018 4

published in the news paper to the known address

of the operational creditor and to the address

shown in the Master Data as on the date of the

filing of the application. More over notice by e-mail

is also seen to be sent. Therefore, the contention

that the corporate debtor was not in receipt of the

demand notice issued under Section 8 of the code

is found devoid of any merit. So also the contention

that it has no knowledge regarding the application

filed by the applicant is also found unsustainable

upon the above said circumstances.

23. It is also significant to note here that u/s. 12

of the Companies Act, 2013 a company has to give

notice of every change of the situation of the

registered office under sub-section 4 of Section 12

and notice of change of address shall be given to

the Registrar within 15 days of the change, who

shall make relevant corrections in the Master Data.

The applicant/corporate debtor has no such case

that there was change of address or any written

communication has been issued stating that there

is change of address. Therefore, the contention on

the side of the corporate debtor that there was no

proper service of notice is found unsustainable

Company Appeal (AT) (Insolvency) No. 635 of 2018 5

under law. Therefore, the prayer for setting aside

the order of appointment of IRP for want of proper

service of notice is found unsustainable under

law."

2. According to Appellant, the office of the 'Corporate Debtor' was

not functioning in the Kolkata address which was closed much earlier

and was functioning at Bombay, namely-- "ESS DEE Aluminium Ltd.

at Akurli Road, Kandivali (E), Mumbai- 400 101". This was also known

to the 'Operational Creditor' who filed the Interlocutory Application

before the Adjudicating Authority showing the address at Mumbai of the

'Corporate Debtor'.

3. It is further submitted that the parties have already settled the

matter and as per the settlement, the amount has already been

deposited with the Registrar, NCLT, Kolkata Bench.

4. Learned counsel appearing on behalf of the 1st Respondent-

'Operational Creditor' accepted that the notice was not served in the

Bombay address where the office was functioning. He further submits

that they have settled the claim.

5. Learned counsel appearing on behalf of the 'Interim Resolution

Professional' opposed the prayer and submits that a large number of

creditors have already filed their claim. He referred to paragraphs 22

and 23, as quoted above, to suggest that the notice was served legally

in the valid address of the 'Corporate Debtor'.

Company Appeal (AT) (Insolvency) No. 635 of 2018 6

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

order.

7. We do not agree with the argument that technical notice was

served in the valid address of the 'Corporate Debtor'. The provision

relating to demand notice under Section 8(1) amounts to an advance

notice to caution the 'Corporate Debtor', that if it does not pay the

defaulted amount of debt, then the 'Operational Creditor' may file an

application under Section 9 of the 'I&B Code' for initiation of 'Corporate

Insolvency Resolution Process'. It is only on receipt of such demand

notice under Section 8(1), the 'Corporate Debtor' will decide either to pay

it or to reply under Section 8(2). It is only thereafter the 'Operational

Creditor' may file an application under Section 9 after 10 days of service

of notice.

8. From the provision of Section 8, it is clear that the legislature

intended to put the 'Corporate Debtor' on notice that the amount due

having defaulted if the amount is not paid. The 'Operational Creditor'

may take steps for 'Corporate Insolvency Resolution Process' against the

'Corporate Debtor'. It is not a mere formality but mandate of law that

such notice is actually served on the 'Corporate Debtor' who may act

accordingly. For the said reason, the Adjudicating Authority is required

to record its satisfaction that the records, including service of demand

notice are in order. The Adjudicating Authority is required to satisfy

Company Appeal (AT) (Insolvency) No. 635 of 2018 7

itself that the notice was actually served on the 'Corporate Debtor' not

that technically it was served in the address.

9. The Adjudicating Authority having failed to do so, we have no

other option but to set aside the order dated 18th June, 2018 and the

order dated 4th October, 2018. The parties having settled the matter we

are not remitting the matter to the Adjudicating Authority. The

Adjudicating Authority will direct the Registrar NCLT, Kolkata Bench to

release the amount in favour of the 1st Respondent- 'Cytech Coatings

Private Limited' deposited on behalf of the 'Corporate Debtor'

immediately.

10. In effect, order (s), passed by the Adjudicating Authority

appointing 'Resolution Professional', declaring moratorium, freezing of

account, and all other order (s) passed by the Adjudicating Authority

pursuant to impugned order and action, taken by the 'Resolution

Professional', including the advertisement, published in the newspaper

calling for applications 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' is dismissed. Learned Adjudicating Authority

will now close the proceeding. The 'Corporate Debtor' (company) is

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

independently through its Board of Directors from immediate effect.

11. The Adjudicating Authority will fix the fee of 'Resolution

Professional' and the 'Corporate Debtor' will pay the fees for the period

Company Appeal (AT) (Insolvency) No. 635 of 2018 8

he has functioned along with cost if any incurred. The appeal is allowed

with aforesaid observation. 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) Ar/uk

Company Appeal (AT) (Insolvency) No. 635 of 2018