2023 (3) TMI 1576 - AT - IBC

Dismissal of petition filed under Section 9 of the Insolvency and Bankruptcy Code 2016 - application not filed after the expiry of 10 days from the date of offer of notice issued under Section 8 of the Code - existence of pre-existing dispute or not. Whether the Application filed under Section 9 of the Code was premature though it has not been filed after the expiry of 10 days from the date of offer of notice issued under Section 8 of the Code? - HELD THAT - The demand notice of unpaid operational debt is a sine qua non to invoke the provision of Section 9 of the Code. The Corporate Debtor has to react within 10 days from the receipt of demand notice to set up a defence and the application under Section 9 could only be filed by the Operational Creditor after the expiry of 10 days from the date of delivery meaning thereby the application under Section 9 in no case can be filed before the expiry of 10 days from the date of delivery. In the case of C.C. Alavi Haji 2007 (5) TMI 335 - SUPREME COURT the question was whether in absence of any averments in the complaint to the effect that the accused had a role to play in the matter of non-receipt of legal notice; or that the accused deliberately avoided service of notice the same could have been entertained keeping in view the decision of this Court in Vinod Shivappa s case 2006 (5) TMI 441 - SUPREME COURT . The Hon ble Supreme Court held that Unless and until the contrary is proved by the addressee service of notice is deemed to have been effected at the time at which the letter would have been delivered in the ordinary course of business. This Court has already held that when a notice is sent by registered post and is returned with a postal endorsement refused or not available in the house or house locked or shop closed or addressee not in station due service has to be presumed. The presumption of delivery of notice cannot be drawn in the present case w.e.f. 17.03.2017 when it was first offered for delivery but could not be delivered because the premises was found locked as the notice was ultimately delivered on 21.03.2017. Therefore the date of delivery has to be taken as 21.03.2017 when it was actually delivered and not the date when it was firstly offered to be delivered on 17.03.2017. The question posed in the beginning has thus been decided accordingly in favour of the Respondent and against the Appellant. Since it is found that the date of delivery was 21.03.2017 and the petition was filed on 28.03.2017 therefore the said petition was totally premature because it is stipulated in Section 9 of the Code that the application under Section 9 could be filed only after the expiry of 10 days of the delivery of demand notice and not before the expiry of 10 days therefore the application filed by the Appellant was premature and not maintainable and has rightly been dismissed by the Adjudicating Authority. Whether there was a pre-existing dispute on account of which the application was dismissed? - HELD THAT - It is not required to go into the other issue of pre-existing dispute. Conclusion - The application under Section 9 is premature as it was filed before the expiry of the mandatory 10-day period from actual delivery of the notice. Appeal dismissed.

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Appellate Tribunal were:

(a) Whether the application filed under Section 9 of the Insolvency and Bankruptcy Code, 2016 (the Code) was premature, given that it was filed before the expiry of 10 days from the date of delivery of the demand notice issued under Section 8 of the Code;

(b) Whether there existed a pre-existing dispute between the parties that would preclude the maintainability of the application under Section 9 of the Code.

The Tribunal emphasized that the first issue was determinative and if the application was found premature, the second issue relating to the pre-existing dispute need not be adjudicated.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Prematurity of the Application under Section 9 of the Code

Relevant Legal Framework and Precedents:

The Tribunal examined Sections 8 and 9 of the Code, which prescribe the procedure for an operational creditor to initiate a corporate insolvency resolution process. Section 8 mandates delivery of a demand notice or invoice to the corporate debtor on occurrence of default, and Section 9 allows filing an application only after the expiry of 10 days from the date of delivery of such notice or invoice, provided no payment or notice of dispute is received.

The Tribunal also referred to Section 27 of the General Clauses Act, 1897, which provides a presumption of service of notice when sent by registered post to the correct address, and the Supreme Court decision in C.C. Alavi Haji v. Palapetty Muhammed, which held that where a notice is sent by registered post and returned unserved for reasons such as refusal, locked premises, or absence of addressee, service is presumed.

Court's Interpretation and Reasoning:

The Tribunal analyzed the facts regarding the delivery of the demand notice dated 14.03.2017. The notice was dispatched by speed post on the same day. The tracking report indicated multiple attempts to deliver the notice on 17.03.2017, 18.03.2017, and 20.03.2017, all unsuccessful due to locked premises. The notice was ultimately delivered on 21.03.2017.

The Appellant contended that as per Section 27 of the General Clauses Act, 1897, the date of first attempted delivery (17.03.2017) should be presumed as the date of delivery, making the Section 9 application filed on 28.03.2017 compliant with the 10-day period. The Respondent argued that actual delivery occurred on 21.03.2017, and since the application was filed before the expiry of 10 days from that date, it was premature and thus rightly dismissed.

The Tribunal distinguished the present case from C.C. Alavi Haji, noting that the Supreme Court's decision related to proceedings under Section 138 of the Negotiable Instruments Act, 1881, where the notice was never actually delivered, thus requiring presumption. In contrast, here the notice was actually delivered after three days of failed attempts. The Tribunal underscored that the legislature's language in Sections 8 and 9 of the Code explicitly requires "delivery of the demand notice" and filing the application only after 10 days from such delivery, with no provision for deemed delivery.

The Tribunal observed that presumption under Section 27 of the General Clauses Act applies where actual delivery has not taken place, but cannot override an established fact of actual delivery. It emphasized that "giving notice" is a process, and "receipt of notice" is the accomplishment of that process, thus actual receipt is determinative.

Key Evidence and Findings:

The tracking report was pivotal, showing repeated failed attempts due to locked premises and final delivery on 21.03.2017. No evidence was produced to rebut the actual delivery date. The Tribunal found no precedent or authority supporting the Appellant's contention that the date of first attempted delivery should be taken as the date of delivery when actual delivery occurred later.

Application of Law to Facts:

Applying the statutory language and judicial precedents, the Tribunal held that the application under Section 9 filed on 28.03.2017 was premature since it was filed before the expiry of 10 days from actual delivery on 21.03.2017. The presumption of delivery under Section 27 could not be invoked to backdate the date of delivery to 17.03.2017.

Treatment of Competing Arguments:

The Tribunal considered the Appellant's reliance on Section 27 of the General Clauses Act and the Supreme Court's decision in C.C. Alavi Haji but distinguished the facts and legislative context. It accepted the Respondent's argument that the Code's language mandates actual delivery and that the presumption of delivery cannot supplant proof of actual delivery. The Tribunal also noted the absence of any legislative provision deeming delivery on first attempt or any judicial authority supporting such a proposition in the context of the Code.

Conclusions:

The Tribunal concluded that the application under Section 9 was premature and rightly dismissed by the Adjudicating Authority.

Issue 2: Pre-existing Dispute

The Tribunal did not adjudicate this issue as the prematurity of the application was dispositive.

3. SIGNIFICANT HOLDINGS

"The demand notice of unpaid operational debt is a sine qua non to invoke the provision of Section 9 of the Code. The Corporate Debtor has to react within 10 days from the receipt of demand notice to set up a defence and the application under Section 9 could only be filed by the Operational Creditor after the expiry of 10 days from the date of delivery meaning thereby the application under Section 9, in no case, can be filed before the expiry of 10 days from the date of delivery."

"Section 27 gives rise to a presumption that service of notice has been effected when it is sent to the correct address by registered post. In view of the said presumption, when stating that a notice has been sent by registered post to the address of the drawer, it is unnecessary to further aver in the complaint that in spite of the return of the notice unserved, it is deemed to have been served or that the addressee is deemed to have knowledge of the notice. Unless and until the contrary is proved by the addressee, service of notice is deemed to have been effected at the time at which the letter would have been delivered in the ordinary course of business."

"In the present case, the presumption of delivery of notice cannot be drawn w.e.f. 17.03.2017 when it was first offered for delivery but could not be delivered because the premises was found locked as the notice was ultimately delivered on 21.03.2017. Therefore, the date of delivery has to be taken as 21.03.2017 when it was actually delivered and not the date when it was firstly offered to be delivered on 17.03.2017."

"Giving notice in the context is not the same as receipt of notice. Giving is a process of which receipt is the accomplishment."

"The application filed under Section 9 of the Code before the expiry of 10 days from the date of delivery of the demand notice is premature and not maintainable."

Final determination: The application under Section 9 was premature as it was filed before the expiry of the mandatory 10-day period from actual delivery of the notice. The appeal was dismissed accordingly.

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