2019 (3) TMI 194 - AT - Insolvency and Bankruptcy

Initiation of Corporate Insolvency Resolution Process - demand notice under Section 8 of the Code was duly sent through courier to the registered office address but the same was returned to the Applicant with remark S/A RTO - HELD THAT - Adjudicating Authority erred in rejecting the application under Section 9 on wrong presumption that demand notice is to be served on the Registered Office of the Corporate Debtor and not on Corporate Office (Industrial Area Office herein). If the demand notice under Section 8 (1) is served on Corporate Debtor either on its Registered Office or its Corporate Office, it should be treated to be valid service of notice under Section 8 and application under Section 9 on failure of payment, if filed after 10 days, is maintainable. We accordingly set aside the impugned order dated 17th September, 2018 passed by the Adjudicating Authority (National Company Law Tribunal) and remit the case to Adjudicating Authority to admit application under Section 9 without going into other issues in the matter, in view of deemed service on the Corporate Debtor. A fresh notice may be issued to the Corporate Debtor to give an opportunity, in its both aforesaid addresses to enable the Respondent to settle the claim with the Appellant and enable the Appellant to withdraw its petition.

Summary

Issues: Application under Section 9 of the Insolvency and Bankruptcy Code, 2016 rejected due to improper service of demand notice under Section 8.

Analysis:
1. The Appellant filed an application under Section 9 of the Insolvency and Bankruptcy Code, 2016 against the Respondent for initiation of Corporate Insolvency Resolution Process. The Adjudicating Authority rejected the application under Section 9, citing improper service of the demand notice under Section 8.

2. The Appellant contended that the demand notice under Section 8 was sent to both the Registered Office and Industrial Area Office of the Respondent. While the notice sent to the Registered Office was returned, the notice sent to the Industrial Area Office was duly served on the Corporate Debtor.

3. Despite notices being issued to both addresses of the Respondent, nobody appeared on behalf of the Corporate Debtor during the proceedings. The Adjudicating Authority adjourned the case to provide another opportunity for the Respondent to appear, but they still did not participate.

4. The Adjudicating Authority rejected the application under Section 9, stating that the notice was not served on the Registered Office of the Respondent, even though the dispatch proofs and tracking report confirmed that the notice was received by the Corporate Office of the Respondent.

5. The Respondent did not dispute the outstanding claim against them, nor did they contest the completeness of the application under Section 9. The Appellant had followed all necessary procedures, including sending a demand notice and filing the application correctly.

6. The Appellate Tribunal held that the Adjudicating Authority erred in rejecting the application under Section 9 based on the presumption that the demand notice should be served only on the Registered Office. The Tribunal clarified that serving the demand notice at either the Registered Office or the Corporate Office is sufficient for valid notice under Section 8.

7. The impugned order was set aside, and the case was remitted to the Adjudicating Authority to admit the application under Section 9. The Respondent was given another opportunity to settle the claim, and if not settled, the application under Section 9 would be admitted, leading to the appointment of an Interim Resolution Professional and the imposition of a moratorium. The appeal was allowed with these directions.