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Mohit Minerals Ltd vs Nidhi Impotrade Pvt Ltd - (NATIONAL COMPANY LAW APPELLATE TRIBUNAL) (08 Jan 2021)

A demand notice delivered by an Advocate duly instructed by the Operational Creditor is a valid demand notice for purposes of initiation of CIRP

MANU/NL/0004/2021

Insolvency

In present case, Application filed by the Appellant- Operational Creditor under Section 9 of the Insolvency and Bankruptcy Code, 2016 ("I&B Code") came to be dismissed at the hands of the Adjudicating Authority (National Company Law Tribunal), Ahmedabad in terms of the impugned order holding the same to be not maintainable for the reasons that, the demand notice was issued without any authority.

It is well settled by now that, delivery of a demand notice of unpaid operational debt by the Operational Creditor upon the Corporate Debtor under Section 8(1) of the 'I&B Code' is a sine-qua-non for initiation of Corporate Insolvency Resolution Process (CIRP) by Operational Creditor under Section 9 of the 'I&B Code'. Format in which the demand notice is to be issued by the Operational Creditor in terms of the 'Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016' is prescribed in Form-3. The delivery of notice is to be effected in the prescribed form which must emanate from the Operational Creditor or any authorized person on its behalf.

In instant case, it is not in dispute that, the demand notice in prescribed form has been issued by the lawyer of Operational Creditor and delivered upon the Corporate Debtor. Perusal of the demand notice brings it to fore that, the same has been issued by Advocate under instructions from and on behalf of Operational Creditor. It is the dictum of the Hon'ble Apex Court in "Macquaire Bank Limited v. Shilpi Cable Technologies Limited that, a demand notice delivered by an Advocate duly instructed by the Operational Creditor would be a valid demand notice for purposes of initiation of CIRP. In view of the same, notice delivered could not be held to be bad in law unless it was shown that the lawyer was not duly instructed.

It appears from impugned order that, the Adjudicating Authority was aware of this legal proposition but in the opinion of the Adjudicating Authority, there was no due authorization backed by Board Resolution of the Operational Creditor. This finding is unsustainable as in case of a person other than an Advocate, the Board Resolution would be required but in the event of a demand notice being issued by an Advocate duly instructed by his client (Operational Creditor), there is no need of requirement of authority being backed by the Board Resolution.

Once a Company Appeal Advocate was duly instructed to issue the demand notice, there was no room for holding that the notice delivered by the Advocate was not a notice delivered by an authorized person. Thus, the finding recorded by the Adjudicating Authority in regard to invalidity of service of mandatory demand notice under Section 8(1) of the 'I&B Code' cannot be sustained. The impugned order is set aside and the matter is remitted back to the Adjudicating Authority. Appeal allowed.

Tags : APPLICATION   MAINTAINABILITY   DEMAND NOTICE  

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