NCLAT (11.02.2020) in K. B. Polychem (India) Ltd. Vs. Kaygee Shoetech Private Limited [Company Appeal (AT) (Insolvency) No. 1010 of 2019] held that;
The Appellant has given sufficient evidence to show the delivery of demand notice. There is no specific denial of service of demand notice. The corporate debtor has itself stated that in reply to the demand notice, he had raised the dispute of unpaid operational debt.
Excerpts of the order;
This present Appeal is preferred against the Impugned Order dated 27th August 2019 passed by the Adjudicating Authority/Hon‟ble National Company Law Tribunal, Kolkata Bench, Kolkata in C.P. (IB) No.1306/KB/2018 filed under Section 9 of the Insolvency and Bankruptcy Code, 2016, whereby the Adjudicating Authority has rejected the Application filed under Section 9 of the Insolvency and Bankruptcy Code, 2016 (for short „I&B Code‟). The parties are represented by their original status in the company petition for the sake of convenience.
The brief facts as stated in the Appeal is that Appellant/Applicant had filed an Application under Section 9 of the Insolvency and Bankruptcy Code, 2016 after serving the demand notice under Section 8 of the Insolvency and Bankruptcy Code, 2016. The Appellant contends that the demand notice dated 30.07.2018/01.08.2018 under Section 8 of the Insolvency and Bankruptcy Code, 2016 was sent by Speed Post, but it was returned with the remark of the Postal Authorities as “not available”. The Adjudicating Authority rejected the petition on the ground that service of the demand notice of the Corporate Debtor is not established. The contention of the Operational Creditor that demand notice sent to the Director of the Company is not returned. Hence, demand notice shall be deemed served, given the General Clauses Act, 1987 and Section 114 of the Indian Evidence Act, 1872. The Adjudicating Authority further holds that I & B Code, 2016 is a complete Code in itself and provisions of Indian Evidence Act, 1872 and General Clauses Act, 1987 is not applicable unless specifically covered in I & B Code, 2016, and based on these, the petition has been dismissed.
The appellant raised the argument that the reply of the respondent itself, is a proof of service of notice on the respondent. The respondent in para 6 of the reply, has not specifically denied the service of demand notice. It is further stated that “the alleged claim made by the applicant against Kaygee Shoetech Private Limited, in the purported demand notice, is baseless, false, incorrect and/or denied and disputed in entirety”.
The appellant emphasized on para 6 of the reply by the corporate debtor, which is as under:
“as stated above, the purported demand notice contended false allegations and do not merit any detailed reply”.---------------------------- --- “it is stated that the notice under Section 9 of I & B Code, 2016 was not in accordance with the applicable provisions and/or regulations”. (Quoted verbatim)
The appellant contends that the averments of the respondent about demand notice in the reply, lead to the only irresistible conclusion that the demand notice under Section 8 of I & B Code, 2016 was duly served upon Corporate Debtor. Appellant alleges that the Adjudicating Authority rejected the Application filed under Section 9 of I & B Code, 2016, based on the premise of non-service of demand notice, even though the Corporate Debtor has itself admitted the service of demand notice, in its reply to the petition.
The point of law which arises for our consideration is as under: Whether deemed service of demand notice under Section 8 of I & B Code, 2016 is sufficient, to trigger the process U/S 9 of the Code?
We have heard the arguments of the Learned Counsel for the parties and perused the record.
Thus the language of Sec 9 leaves no doubt that delivery of demand notice is necessary, for initiating the corporate insolvency resolution process under Sec 9 of the Code. Mode of service of demand notice is provided in Rule 5 of the Adjudicating Authority Rules. In the case in hand, in the reply of the corporate debtor, it is noted that:
“It is stated that the notice issued under IBC was not in accordance with the applicable provisions and/or Regulations. The applicant is trying to mislead the Hon’ble NCLT as inspite of receiving reply from KSPL to demand notice; as KSPL has given reply to the said demand notice wherein all facts were again repeated whereas the applicant in the affidavit annexed to the application has stated that no reply has been given by the corporate debtor relating to a dispute of unpaid operational debt and are silent about reply received from KSPL” (Quoted verbatim)
Based on the above reply of the corporate debtor, it is apparent that the corporate debtor has not denied the service of demand notice in its reply to the petition. It is apparent that initially, the corporate debtor took the plea that demand notice was not as per applicable Rules and Regulations. The corporate debtor in its reply further stated that it is incorrect to allege that the corporate debtor has not given a reply to demand notice and has not raised the dispute of unpaid operational debt.
The Appellant has given sufficient evidence to show the delivery of demand notice. There is no specific denial of service of demand notice. The corporate debtor has itself stated that in reply to the demand notice, he had raised the dispute of unpaid operational debt. But no document is placed before us to show the existence of dispute before issuance of demand notice. Copy of invoices, demand notice, bank statement all other documents are placed before us which clearly shows that the corporate debtor failed to pay off the operational debt of more than Rs One Lac, despite service of demand notice.
It is apparent that the Application for Initiation of Corporate Resolution Process was filed on 15th September, 2018, and impugned invoices were raised between 03rd March, 2017 to 27th March, 2017. The Corporate Debtor made the last payment of Rs.4,08,205/- partial liability on 20th June, 2017, therefore, it is apparent that petition is within statutory period of limitation i.e. 3 years. Thus we are of the considered opinion that the Adjudicating Authority erred in rejecting the application filed u/s 9 of the Code.
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