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2025 (5) TMI 775 - AT - IBCAdmission of section 9 application - valid service of Demand notice or not - Existence of pre-existing disputes between the two parties or not. Valid service of Section 8 Demand notice on the Appellant by the Respondent No.2 - HELD THAT - On looking at the sequence of events in the present case it is found that the Operational Creditor had initially sent the Section 8 Demand Notice by speed post which was admittedly unsuccessful. The notice was thereafter sent on the registered email address of the Corporate Debtor which address had been provided by them to the Ministry of Corporate Affairs. The same email ID is uploaded and disclosed on the Company Master Data. The ground taken by the Appellant that their registered email account was not in use since it was handled by an employee who had discontinued working with them after July 2021 lacks foundation since this address has been depicted as the email ID in public documents even after July 2021. To contend that the demand notice was not served on an operational email ID was simply a ruse raised to overcome the admission of Section 9 application admitted against them. Since the Demand Notice had been delivered at the registered email address of the Corporate Debtor which was on the public domain the contention of the Corporate Debtor that the demand notice had not been served upon them does not appeal to reason. There was no cogent basis for the Appellant to claim that Section 8 demand notice had not been validly served on them. Existence of pre-existing disputes between the two parties or not - HELD THAT - The outstanding amount as per ledger filed by the Appellant in their Rejoinder-Reply at pages 27-28 is Rs.1, 65, 97, 750/- which is identical to the outstanding principal sum claimed by the Operational Creditor. There is also no correlation between the invoices raised by the Operational Creditor between 16.11.2017 to 27.12.2017 and the letter dated 05.06.2018 raising an alleged dispute for a sum of Rs.19, 41, 740/- on account of defective goods supplied. Further when we see the letter of 05.07.2018 we notice that the Corporate Debtor had mentioned therein that if the damaged socks were not replaced they would be constrained to issue any debit note of Rs.19, 41, 740/-. However there is no material on record to substantiate that any such debit note was issued. No supporting documents are available on record to show exchange of any sustained correspondence with the Operational Creditor having taken place with regard to this dispute. Thus there is nothing credible to substantiate the pre- existence of dispute. Further if there was actually a dispute between the two parties basis the letter of 05.07.2018 it remains unexplained as to why the Corporate Debtor had continued to make the further payments to the Operational Creditor on 14.12.2021 15.12.2021 and 21.12.2021 aggregating to Rs.40, 00, 000/- to the Operational Creditor. Coming to the contention of the Appellant that they had purportedly paid Rs.1, 40, 00, 000/- to Clever Knit allegedly on the instructions of the Operational Creditor it is constrained to note that there are no communication showing any authorisation or request given by the Operational Creditor to the Corporate Debtor for making any such payments to Clever Knit. On looking at the alleged pre-existing dispute raised by the Corporate Debtor in the present matter it is not convincing that the disputes are genuine and real. The defence taken by the Corporate Debtor of having been supplied with defective goods as the basis of pre-existing disputes is a moonshine defence. Conclusion - The Corporate Debtor has defaulted in the payment of operational debt which amount had clearly become due and payable and further in the absence of any credible and real pre-existing dispute there are no error has been committed by the Adjudicating Authority in admitting the application under Section 9 of IBC and putting the Corporate Debtor into CIRP. Appeal dismissed.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered by the Tribunal in this appeal under Section 61 of the Insolvency and Bankruptcy Code, 2016 ("IBC") were:
2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Validity of Service of Section 8 Demand Notice Relevant Legal Framework and Precedents: The IBC mandates under Section 8(1) that an Operational Creditor must deliver a demand notice to the Corporate Debtor upon default before initiating proceedings under Section 9. The Tribunal relied on precedents including the judgments in Shailendra Sharma vs Ercon Composite and Sunil Sanghavi vs Cytech Coatings Pvt. Ltd. which emphasize that valid service of the Section 8 notice is a mandatory precondition and not a mere formality. The Tribunal also considered the ruling in Rajnish Gupta v. Union Bank of India and Naresh Kumar Aggarwal v. CFM Asset Reconstruction Pvt. Ltd. which held that service by email on the registered email ID with the Ministry of Corporate Affairs (MCA) suffices for valid notice. Court's Interpretation and Reasoning: The Operational Creditor initially sent the demand notice by speed post, which was returned undelivered. Subsequently, the notice was served by email to the Corporate Debtor's registered email address as per MCA records. The Corporate Debtor contended that this email was non-operational since July 2021 and managed by a former employee, thus invalidating service. The Tribunal rejected this contention, noting that the email address remained the official registered email on public documents, including MCA Company Master Data and Annual Returns, even after the employee's exit. The Tribunal distinguished the present facts from the precedent in Sharad Kesarwani vs Planetcast Media Services Ltd. where notice was sent to a wrong address despite knowledge of the correct address. Here, the Operational Creditor sent the notice to the correct registered email address. Key Evidence and Findings: The Tribunal relied on documentary evidence including the Company Master Data as on 20.07.2024, Board Resolutions dated 30.11.2021, and Annual Returns for FY 2020-21, all showing the same registered email address. The Tribunal found no credible basis for the Corporate Debtor's assertion that the email ID was non-operational. Application of Law to Facts: Since the demand notice was sent to the registered email address publicly disclosed by the Corporate Debtor, the statutory requirement under Section 8(1) was fulfilled. The Tribunal held that the Corporate Debtor was bound by their own representation of the email address and could not claim non-receipt on the ground of non-operation. Treatment of Competing Arguments: The Corporate Debtor's argument that the email was non-operational and that substituted service should have been ordered was dismissed as lacking foundation. The Operational Creditor's reliance on multiple precedents supporting service by email on registered addresses was accepted. Conclusion: The Section 8 Demand Notice was validly served on the Corporate Debtor, satisfying the mandatory precondition for filing the Section 9 petition. Issue 2: Alleged Violation of Natural Justice by Ex-Parte Admission Relevant Legal Framework: Principles of natural justice require that a party be given a meaningful opportunity to be heard before adverse orders are passed. The IBC proceedings also mandate fair hearing before admission of insolvency applications. Court's Interpretation and Reasoning: The Tribunal noted that the Corporate Debtor was duly informed of hearing dates by email sent by the Operational Creditor to the registered email address. Despite multiple opportunities and adjournments (hearings on 12.09.2023, 16.10.2023, and 22.11.2023), the Corporate Debtor failed to appear or file any reply. The Tribunal held that the Corporate Debtor could not claim prejudice from non-hearing when they themselves chose not to participate. Key Evidence and Findings: Emails evidencing service of hearing notices and the Corporate Debtor's non-appearance were relied upon. Application of Law to Facts: The Tribunal applied the principle that a party cannot take advantage of its own default or non-participation to claim violation of natural justice. Treatment of Competing Arguments: The Corporate Debtor's claim of denial of opportunity was rejected in light of their consistent non-appearance despite notice. Conclusion: No violation of natural justice occurred; the ex-parte admission was justified. Issue 3: Existence of Pre-Existing Disputes Relevant Legal Framework and Precedents: The Supreme Court in Mobilox Innovations Pvt Ltd. vs Kirusa Software Pvt Ltd. clarified that the Adjudicating Authority must reject a Section 9 petition if a bona fide pre-existing dispute exists, either by notice of dispute or record in the information utility. However, the dispute must be real and not a feeble or spurious legal argument unsupported by evidence. Court's Interpretation and Reasoning: The Corporate Debtor contended a dispute existed regarding defective goods supplied (letter dated 05.07.2018) and payments made to a subcontractor (Clever Knit) which allegedly extinguished the debt claimed by the Operational Creditor. The Tribunal examined the evidence and found no credible material substantiating the alleged defective goods dispute as no debit note was issued, no sustained correspondence existed, and payments continued after the alleged dispute. The Tribunal also found no communication authorizing payments to Clever Knit by the Operational Creditor or any dispute raised by the Corporate Debtor prior to the demand notice or petition filing. The ledger showed outstanding dues matching the Operational Creditor's claim. Key Evidence and Findings: The letter dated 05.07.2018, ledger accounts, absence of debit notes or correspondence, payments made post-dispute, and lack of documentary evidence of authorization for payments to Clever Knit were critical. Application of Law to Facts: The Tribunal applied the Mobilox test, concluding that the purported dispute was a "moonshine defence," lacking credible foundation and not sufficient to bar admission of the Section 9 petition. Treatment of Competing Arguments: The Tribunal rejected the Corporate Debtor's argument that the dispute was genuine and that the debt was not crystallized due to pending MSME claims by Clever Knit, holding such claims irrelevant to the present petition. Conclusion: No real or bona fide pre-existing dispute existed; the Section 9 petition was rightly admitted. Issue 4: Allegation of Malafide Intent and Misuse of Insolvency Process Relevant Legal Framework: The IBC aims at insolvency resolution and not recovery proceedings; misuse of the process can vitiate admission. Court's Interpretation and Reasoning: The Tribunal found no evidence that the Operational Creditor filed the Section 9 petition with malafide intent. The debt was due and payable, and the petition was filed following statutory procedure. The absence of any credible dispute and the Corporate Debtor's failure to respond supported the genuineness of the petition. Conclusion: The petition was not filed with malafide intent; the insolvency process was rightly invoked. 3. SIGNIFICANT HOLDINGS "The Operational Creditor had met with the requirements prescribed by the statutory construct of IBC by having served the demand notice on the registered email address of the Corporate Debtor after the earlier delivery of the said notice by post had been unsuccessful." "The Corporate Debtor was therefore clearly bound by the representation made by them to the world at large about their registered email address having placed the same on the public domain." "The Appellant cannot be seen to take advantage of their own misdoing of not presenting themselves before the Adjudicating Authority on the dates fixed for hearing." "So long as a dispute truly exists in fact and is not spurious, hypothetical or illusory, the adjudicating authority has to reject the application." "We are of the considered view that the defence taken by the Corporate Debtor of having been supplied with defective goods as the basis of pre-existing disputes is a moonshine defence." "The Corporate Debtor has defaulted in the payment of operational debt which amount had clearly become due and payable, and further in the absence of any credible and real pre-existing dispute, we find that no error has been committed by the Adjudicating Authority in admitting the application under Section 9 of IBC and putting the Corporate Debtor into CIRP." These holdings establish the core principles that valid service of the Section 8 notice via registered email suffices, non-appearance cannot be excused to claim violation of natural justice, and only bona fide disputes bar admission of Section 9 petitions. The Tribunal upheld the admission of the Section 9 petition and initiation of CIRP, dismissing the appeal as devoid of merit.
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