Zapp India Ltd vs Maheshwar Textiles & Anr

In the matter of: Zapp India Ltd. ...Appellant Vs. Maheshwar Textiles & Anr. ...Respondents

Present: For Appellants: Shri Amol Vyas with Shri Gaurav Sharma, Advocates For Respondent: Shri Saurabh Sharma, Advocate for R-1 Shri Ashok Kriplani, Advocate for IRP

ORDER

22.09.2017 The respondent, Maheshwar Textiles & Anr. (operational

creditor) filed an application under section 9 of the Insolvency and

Bankruptcy Code, 2016 (hereinafter referred to as I&B Code) for initiation of

Corporate Insolvency Resolution Process against appellant, Zapp India Ltd.

(corporate debtor). The Adjudicating Authority (National Company Law

Tribunal), New Delhi Bench by impugned order dated 20th July, 2017 passed

in IB No.(IB)-170(ND)/2017 having admitted the application, declaring

moratorium and calling for name of Interim Resolution Professional. The

present appeal has been preferred by the appellant-corporate debtor against

the said order.

2. One of the ground taken by the appellant - corporate debtor is that the

Adjudicating Authority before admitting the application under section 9 had 2

not issued any notice to the appellant - corporate debtor and impugned order

dated 20th July, 2017 was passed in violation of rules of natural justice.

3. Learned counsel for the respondents disputed the aforesaid stand taken

by appellant and submitted that notices were issued twice on appellant one,

by order dated 30th June, 2017 and another on 10th July, 2017.

4. Learned counsel for the appellant next contended that the notice under

sub-section (1) of section 8 was not issued by the operational creditor but by

the advocate on behalf of the operational creditor.

5. From the notice dated 29th May 2017, we find that the demand notice

was issued not by the operational creditor but on its behalf by one advocate

namely, Saurabh Sharma, who claimed to be the counsel for the operational

creditor - Maheshwar Textiles & Anr.

6. Similar issue fell for consideration before this Appellate Tribunal in

"Uttam Galva Steels Limited vs. DF Deutsche Forfait AG & Anr." (Company

Appeal (AT) (Insolvency) 39 of 2017). This Appellate Tribunal by its Judgement

dated 28th July 2017 held as follows:

"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

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", meaning 3

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 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 of payment, with clear 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 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.

4

32. 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."

7. In the present case as an advocate/lawyer has given notice and there

is nothing on record to suggest that the lawyer has been authorised by 'Board

of Directors' of the Respondents - 'Maheshwar Textiles & Anr.' and there is

nothing on record to suggest that the lawyer hold any position with or in

relation with the Respondents, we hold that the notice issued by the lawyer

on behalf of the Respondents cannot be treated as a notice under section 8 of

the I&B Code and for that the petition under section 9 at the instance of the

Respondents against the Appellant was not maintainable.

8. For the reasons aforesaid, we set aside the impugned order dated 20th

July, 2017 passed by the Adjudicating Authority, New Delhi in

IB No. (IB)-170(ND)/2017 and allow the appeal.

9. In the result, the appointment of Interim Resolution Professional, order

declaring moratorium, freezing of account and all other order (s) passed by

the Adjudicating Authority pursuant to impugned order(s) and action taken 5

by the Interim Resolution Professional including the advertisement published

in the newspaper calling for applications are declared illegal. The appellant

is released from the rigour of law and allow the appellant company to function

independently through its Board of Directors with immediate effect.

10. Learned Adjudicating Authority will now determine the fee of Interim

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

Resolution Professional for the period he has worked.

11. The appeal stands disposed of with the aforesaid observation and

direction. However, in the facts and circumstances of the case, there shall be

no order as to cost. Company Petition is dismissed.

(Justice S.J. Mukhopadhaya) Chairperson

(Justice A.I.S. Cheema) (Balvinder Singh) Member (Judicial) Member (Technical)

/rs/