TMI Blog2017 (6) TMI 880X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant confirming that there is no payment of an unpaid operational debt by the Corporate Debtor”. From the record we find that the appellant was given opportunity to complete the record by enclosing the certificate of “Financial Institution” and thereby to remove the defects within 7 days but failed to do so. In J.K. Jute Mills Co. Ltd. v. Surendra Trading Co. [2017 (6) TMI 254 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, ALLAHABAD], the Appellate Tribunal was considering whether the time limit prescribed in 'I & B Code' 2016 for admitting or rejecting the petition or initiation of Insolvency Resolution Process is mandatory? The Appellate Tribunal, by Judgment dated 1st May 2017 held that proviso to sub-section (5) of section 7 and proviso to sub-section (5) of section 9 granting “Financial Creditor/Operational Creditor” to complete the documents, if incomplete is mandatory. This Appellate Tribunal in “J.K. Jute Mills Company Limited, the appellant having failed to complete the documents within 7 days, the Tribunal was right in dismissing the application preferred by the Appellant. The argument that the foreign companies having no office in India or no account in India w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s whether filing of a copy of certificate from the Financial Institution maintaining accounts of the Operational Creditor confirming that there is no payment of unpaid operational debt by the 'Corporate Debtor' as prescribed under clause (c) of sub-section 3 of Section 9 of the 'I B Code' is mandatory or directory. 3. The appellant who claimed to be 'Operational Creditor' filed an application under Section 9 of 'I B Code' for initiation of Corporate Insolvency Resolution Process, enclosing some of the relevant documents. However, no copy of the certificate from the Financial Institution maintaining account of the 'Operational Creditor as prescribed under clause(c) of sub- section (3) of Section 9 was enclosed. For the said reason the adjudicating authority rejected the application. 4. For deciding the issue it is desirable to notice relevant provisions of 'I B Code' and Rules framed thereunder. Sub-section (14) of Section 3 defines 'Financial Institution' means-- (a) a scheduled bank; (b) financial institution as defined in section 45-1 of the Reserve Bank of India Act, 1934 (2 of 1934); and (c) Public fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, as clause (c) of sub-section (3) of section 7 does not relate to prescription of time. 10. Section 9 deals with application for initiation of corporate insolvency resolution process by 'operational creditor' which reads as follows: - 9. Application for initiation of corporate insolvency resolution process by operational creditor: (1) After the expiry of the period often days from the date of delivery of the notice or invoice demanding payment under sub-section (1) of section 8, if the operational creditor does not receive payment from the corporate debtor or notice of the dispute under sub-section (2) of section 8, the operational creditor may file an application before the Adjudicating Authority for initiating a corporate insolvency resolution process. (2) The application under sub-section (1) shall be filed in such form and manner and accompanied with such fee as may be prescribed. (3) The operational creditor shall, along with the application furnish- (a) a copy of the invoice demanding payment or demand notice delivered by the operational creditor to the corporate debtor; (b) an affidavit to the effect that there is no notice given ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it would be crystal clear that, the entire provision of sub- clause (3) of Section 9 required to be mandatorily followed and it is not empty statutory formality. 12. Sub-section (2) stipulates filing of an application under Section (1) only in the form and manner and accompanied with such fees as may be prescribed. The Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules 2016 (hereinafter referred to as 'Adjudicating Authority Rules 2016' for short) are also enacted in exercise of the power conferred by Clauses (c), (d), (e), (f), of sub-section 239 read with sections 7, 8, 9 and 10 of the 'I B Code'. The rules provide the procedure required to be followed by filing an application by corporate insolvency resolution process. As per Rule 6 of the Adjudicating Authority' Rules 2016, an operational creditor shall make an application for initiating the corporate insolvency process under section 9, in Form 5 accompanied with documents and records required therein. As per sub-rule (2) of Rule 6 it is mandatory again to dispatch a copy of application filed with the adjudicating authority, by registered post or speed post to the registered office ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ining the question whether a provision is mandatory or directory, one must look into the subject-matter and consider the importance of the provision disregarded and the relation of that provision to the general object intended to be secured. No doubt, all laws are mandatory in the sense they impose the duty to obey on those who come within its purview. But it does not follow that every departure from it shall taint the proceedings with a fatal blemish. The determination of the question whether a provision is mandatory or directory would, in the ultimate analysis, depend upon the intent of the law-maker. And that has to be gathered not only from the phraseology of the provision but also by considering its nature, its design and the consequences which would follow from construing it in one way or the other. 16.1 Therefore, it is clear that the word 'shall' used in sub-section (3) of section 9 of 1 B Code' is mandatory, including clause 3 therein. 17. The appellant has enclosed a Final Award given by Sole-Arbitrator, Hong Kong Special Administrative Region, People's republic of China dated 18th August 2014 to suggest that the respondent Corporate Debtor is li ..... X X X X Extracts X X X X X X X X Extracts X X X X
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