R.A.J. Krishna Construction Company Private Limited Vs. Newera Solutions Private Limited - As an arbitration notice is a formal communication from one party to the other, initiating arbitration proceedings, the arbitration notice evidences a pre-existing dispute. This therefore constitutes sufficient ground for rejection of a Section 9 application.

 NCLAT (2025.01.08) in R.A.J. Krishna Construction Company Private Limited Vs. Newera Solutions Private Limited [Company Appeal (AT) (Insolvency) No. 83 of 2024] held that;.

• In terms of the provisions of Section 9 (5) (d) of IBC 2016, the Adjudicating Authority should admit the application only if there is no record of dispute or no notice of dispute has been received by the OC.

• The pre-existing dispute must relate to the transaction or debt that forms the basis of the Section 9 application.

• As an arbitration notice is a formal communication from one party to the other, initiating arbitration proceedings, the arbitration notice evidences a pre-existing dispute. This therefore constitutes sufficient ground for rejection of a Section 9 application.

Excerpts of the Order;

The present appeal filed under Section 61 of Insolvency and Bankruptcy Code 2016 (‘IBC’ in short) by the Appellant arises out of the Order dated 26.10.2023 (hereinafter referred to as ‘Impugned Order’) passed by the Adjudicating Authority (National Company Law Tribunal, New Delhi, Bench-II) in CP (IB) No. 205(ND)/2023. By the impugned order, the Adjudicating Authority has dismissed the Section 9 application filed by the Operational Creditor for initiating Corporate Insolvency Resolution Process (‘CIRP’ in short) against the Corporate Debtor-New Era Solutions Private Limited. Aggrieved by the said impugned order, the present appeal has been filed by the Appellant-R.A.J. Krishna Construction Private Limited. 

# 2. Making his submissions, Shri Harshit Khare, the Ld. Counsel for the Appellant-Operational Creditor submitted that the Appellant is engaged in the business of project management and consultancy and turnkey construction of infrastructure projects. The Appellant was awarded a work by Home & Soul (‘H&S’ in short) vide a work order dated 12.10.2018. (For convenience, we shall hereinafter refer to the work order of 12.10.2018 as ‘original work order’). Subsequently, an addendum to the work order of 12.10.2018 was issued on09.01.2019. Attention was also adverted to another addendum to original work order which was signed on 14.12.2020 between the Operational Creditor and H&S. Elaborating on the relevant clauses of the addendum of 14.12.2020, the Appellant asserted that clause-1 of the addendum made the Corporate Debtor responsible for execution of the original work order. In terms clause-2 of addendum of 14.12.2020, the Appellant was mandated to raise the Running Account Bills (‘RA Bills’ in short) upon the Corporate Debtor while clause-3 thereto directed that the Appellant was to raise all invoices directly on the Corporate Debtor. In pursuance of clause-3, the Appellant claimed that it raised invoices on the Corporate Debtor from 03.02.2021 onwards and the Corporate Debtor also released payment against these invoices to the Operational Creditor. 

# 3. It was also submitted that a Memorandum of Understanding (‘MoU’ inshort) dated 07.12.2020 was also entered into between the Appellant and Corporate Debtor, which MoU according to the Appellant, transferred the rights, titles, obligations and interests of H&S under the original work order and related addendum upon the Corporate Debtor. With the project having come under the complete management and control of the Corporate Debtor, it was canvassed by the Appellant that the contractual relationship between the Operational Creditor and H&S ceased to exist. Thus, it was asserted that the Corporate Debtor had stepped into the shoes of H&S. To buttress their argument that the Corporate Debtor had stepped into the shoes of the H&S, it was submitted that this could be inferred from the fact that the Corporate Debtor issued an addendum on14.03.2022 extending the time for completion of the work under the original work order. It was strenuously contended that with the execution of the MoUand the addendum, the common intent and understanding between the Operational Creditor, Corporate Debtor and H&S was that there was a novationand alteration of the original work order giving rise to a new contract in terms of Section 62 of the Indian Contract Act, 1872. 

# 4. Elaborating their contentions further, it was submitted that inspite of the novated contract, on 01.10.2022, H&S unilaterally and unauthorisedly issued a letter directing the Appellant-Operational Creditor to demobilize from the project site and payments were stopped. The amount payable, after making adjustments, as on November 2022 by the Corporate Debtor to the Operational Creditor as per RA Bills stood at Rs.9.21 cr. It was also contended that the ledger statement of the Appellant clearly shows that ad-hoc payments to the tune of Rs. 6.24 cr. had been made by the Corporate Debtor against the RA Bills raised by them which substantiates acknowledgement of debt liability on the part of the Corporate Debtor. Since payment to them stopped, the Appellant issued Section 8 demand notice on 25.02.2023 and the due amount qua the Corporate Debtor stood at Rs. 2.96 cr. The Corporate Debtor did not reply to the demand notice within 10 days but sent a belated reply on 17.03.2023. The Corporate Debtor also did not make any further payments within the stipulated time of tendays as provided for under the IBC. 

# 5. In their belated reply to the demand notice dated 17.03.2023, the Corporate Debtor raised the issue of pre-existing dispute based on invocation of arbitration by issue of notice on 19.01.2023. It was contended that the Adjudicating Authority wrongly held the invocation of the arbitration notice as a pre-existing dispute. The Ld. Counsel of the Appellant emphatically asserted that this arbitration notice cannot be a ground for pre-existing dispute as this arbitration notice was not issued by the Corporate Debtor but had been issued by H&S to the Appellant. Even endorsement of the arbitration notice by H&S was not sent to the Corporate Debtor. When the Corporate Debtor was not a party to the arbitration notice, the notice cannot be held to be a ground for pre-existing dispute between Operational Creditor and Corporate Debtor. The Adjudicating Authority had failed to appreciate that in terms of Section 5(6)(b) of the IBC, the pre-existing dispute was required to be between the Operational Creditor and Corporate Debtor. It was also contended that the Adjudicating Authority had grossly erred in interpreting Section 8(2) of the IBC by taking a view that the arbitration notice issued by a third party other than the Corporate Debtor amounted to pre-existence of dispute. Reliance has been placed on the judgment of this Tribunal in Chetan Sharma vs. Jai Lakshmi Solvents Pvt. Ltd. 2018SCC Online NCLAT 240 to buttress their argument that a dispute under Section 5(6) of the IBC has to be between the Corporate Debtor and the Operational Creditor. 

# 6. It was also pointed out that there was a novation of the original contract contained in the original work order. Therefore, on the novation of the contract, the arbitration notice issued by H&S cannot be treated as an arbitration notice issued by the Corporate Debtor. It was mentioned that since the rights, titles of H&S under the original work order stood transferred to the Corporate Debtor, H&S had no right to invoke arbitration as there was no privity of contract existing any longer between them and the Appellant. The arbitration clause was contained in the original work order which original work order was not an adequately stamped document and hence not a valid document. 

# 7. Rebutting the argument raised by the Appellant, Shri R.K. Gupta, the Ld. Counsel for the Respondent submitted that the contention of the Operational Creditor that there was novation of contact is misplaced because the conditions precedent for novation of contract were not fulfilled. Firstly, the addendum letter of 14.12.2020 was not signed by the Corporate Debtor as the signatories therein were only the Operational Creditor and H&S. Secondly, no novated work order was issued by the Corporate Debtor replacing the original work order even after 14.12.2020. Thirdly, the Operational Creditor has also referred only to the original work order issued by H&S in their reply to arbitration invocation on10.02.2023 and not referred to any novated work order issued by the Corporate Debtor. Lastly, all running invoices/payment advice issued by Operational Creditor also bear reference to the original work order of 12.10.2018 issued by H&S. It was also submitted that even the Hon’ble High Court of Delhi while considering the application under Section 11(5) and (6) of Arbitration and Conciliation Act filed by H&S held on 01.02.2024 that there has been no novation of the contract as placed at Annex R2 of their Reply affidavit. 

# 8. It is also contended by the Respondent that the Operational Creditor has provided copies of unsigned and unverified running bills with their demand notice of 25.02.2023. RA Bills at Sl. Nos. 1 to 22 related to work order issued by H&S on 12.10.2018. The Corporate Debtor on receipt of the demand notice had in their reply clearly and specifically stated that these bills were not signed by the Operational Creditor nor verified by the billing team of H&S and the Corporate Debtor and hence been based on fraud and fabricated document. This aspect had been brought to the knowledge of the Adjudicating Authority in the Corporate Debtor’s reply to the Section 9 application at pages 375-387 of APB. The Operational Creditor never refuted the reply of the Corporate Debtor that the payment advice/invoices are forged. It was also pointed out that the payment advice placed at pages128 to 131 and 137 to 144 of the Appeal Paper Book (“APB” in short), there is clear evidence of their business practice that RA bills were always verified by the billing team of H&S and the Corporate Debtor. However, no such verification was carried out in the case of invoices against which the Section 8 demand notice had been issued. Hence, the claim in the demand notice was not tenable. Moreover, in the absence of existence of any tax invoice with the notice of demand, it cannot be said that there was any default on the part of the Corporate Debtor. 

# 9. It was also vehemently contended that Section 9 application by an Operational Creditor cannot be sustained in case there is evidence of existence of dispute and such dispute has been communicated to the Operational Creditor as has happened in the present case. The dispute should however come into existence before the receipt of Section 8 notice. In the present case, an arbitral notice dated 19.01.2023 which indisputably preceded the date of issue of Section8 demand notice had been brought to the knowledge of the Appellant- Operational Creditor and the dispute related to the quality of service in respect of the original work order dated 12.10.2018 was issued. Further, the Appellant in their reply to arbitration notice had categorically referred to the original work order of H&S and not to any other novated or fresh work order. Even their response to the arbitration notice was sent to both H&S and the Corporate Debtor on 10.02.2023 as placed at page191 of APB. Thus, it is a clear admission on the part of the Operational Creditor that they were aware that arbitration was invoked by H&S on 19.01.2023 in relation to the original work order of 12.10.2018. Since the Section 8 Demand Notice was issued on 23.02.2023, it was clearly subsequent to the notice of invocation of arbitration of 19.01.2023. Moreover, the arbitration notice raised several disputes like delay in completion of work and losses on account of delay, improper maintenance of site, unsatisfactory work, etc. In the wake of such pre-existing disputes as raised in the arbitral proceedings, the Adjudicating Authority had not committed any error in rejecting the Section 9 application. 

# 10. We have duly considered the arguments advanced by the Learned Counsel for both the parties and perused the records carefully. The short point for consideration is whether there was any genuine pre-existing dispute surrounding the debt claimed by the Operational Creditor to be due and payable to them by the Corporate Debtor. 

# 11. A look at the relevant statutory construct of IBC at this juncture would be useful. Section 8 of the IBC requires the Operational Creditor, on occurrence of a default by the Corporate Debtor, to deliver a Demand Notice in respect of the outstanding Operational Debt. Section 8(2) lays down that the Corporate Debtor within a period of 10 days of the receipt of the Demand Notice would have to bring to the notice of the Operational Creditor, the existence of dispute, if any. After issue of demand notice by the Operational Creditor, if the Operational Creditor does not receive payment from the Corporate Debtor or notice of the dispute under Section 8(2), he may file an Application under Section 9(1) of IBC. From a plain reading of the above provisions, it is clear that the existence of dispute and its communication to the Operational Creditor is therefore statutorily provided for in Section 8. It is an undisputed fact in the present matter that the Operational Creditor did not receive any payment from the Corporate Debtor and had therefore proceeded to file an application under Section 9 of IBC. 

# 12. It is also a well settled proposition of law that for a pre-existing dispute to be a ground to nullify an application under Section 9, the dispute raised must be truly existing at the time of filing a reply to notice of demand as contemplated by Section 8(2) of IBC or at the time of filing the Section 9 application. In the present case, the pre-existing dispute has been predicated on notice invoking arbitration dated 19.01.2023 prior to the issue of Section 8 Demand Notice on 25.02.2023 as was highlighted by in the Notice of dispute of the Corporate Debtor dated 17.03.2023, the relevant paragraphs of which are as reproduced below: 

• “Subject: Response to your Demand Notice dated 25.02.2023 issued by you under section 8 of the Insolvency and Bankruptcy Code, 2016 for and on behalf of R.A.J. 

• 2. That being counsel for a client you are also well aware of the fact that on account of willful inactions on the part of your clients, your client failed to discharge its contractual obligations, and on account of such failure and/ or inactions, our client has already raised dispute and invoked the arbitration clause i.e. clause 52 of the Work Order No. H&S/P-3/18-19/14 dated 12.10.2018 on 19.1.2023. This invocation of arbitration clause and notice is duly responded by you for an on behalf of your client on 10.02.2023 raising frivolous grounds. The copy of the notice dated 19.01.2023 issued by our client invoking the arbitration clause and reply thereto by you on 10.02.2023 for and on behalf of your client are marked and annexed herewith as Annexure-1 and Annexure-2 of this response, and be read and parcel of this reply and not repeated for the sake of brevity. 

• 3. That owing to the pre-existence of disputes in relation to the alleged dues forming part of the demand notice under reply, please note that the adjudication of the dispute and/ or amount due and payable, if any, either by our client and/ or by your client, can only be adjudicated in the arbitration proceedings as contemplated in the agreement read with the notice of invocation of arbitration clause dated 19.1.2023 by the Ld. Arbitrator to be appointed for adjudication of such disputes. Also please note that no such demand of can ever be made and/or proceedings can be filed under the Insolvency and Bankruptcy Code, 2016 for a ‘disputed debt’, and therefore the notice under reply issued by for and on behalf of your client is nothing more than the abuse of process of law.” (Emphasis supplied) 

# 13. The above reply to the Section 8 Demand Notice clearly articulates the ongoing arbitration between the two parties which predated the Section 8 demand notice. 

# 14. Given this backdrop, it will be useful to find out how the Adjudicating Authority has considered the facts at hand to infer whether there existed pre- existing disputes. The relevant portions of the impugned order are as extracted hereunder: 

• “12. As can be seen from Section 5 (6) (b) of the IBC 2016, the dispute includes a suit or arbitration proceedings relating the quality of goods or service. It does not provide that the same should be between the OC and the CD only. It is not the case of the OC that the amount of defaulted operational debt referred to by him pertain to any work other than the one involved in work order dated 12.10.2018 referred to in the arbitral notice dated 19.01.2023. We can also see from the Section 8 (2) of IBC 2016 that the dispute should exist before the receipt of notice or invoice in relation to such dispute. Even the said provision also does not talk of the dispute being raised by CD only. The construction of Section 8 (2) (a) of IBC 2016 can only be that the dispute needs to be qua the work/ service/ goods, with reference to which the demand is raised in terms of the provisions of Section 8 (1) of IBC or the invoices. 

• 13. The petitioner itself has enclosed the arbitration notice dated 19.01.2023 as Annexure-I to the petition. 

• 14. As can be seen from the Section 21 of the Arbitration and Conciliation Act 1996, unless otherwise agreed by the parties, the arbitral proceedings in respect of a particular dispute commences on the date on which a request for the dispute to be referred to arbitration is received. In the wake, the dispute qua the quality of service in question could arise on 19.01.2023. The demand notice being dated 25.02.2023, there was apparently a pre-existing dispute qua the quality of service rendered by the OC, for which the defaulted amount of debt was demanded. It may be so that the reply to the demand notice was given after expiry of ten days, but by now it is stair decisis that irrespective of the reply being given by the CD in terms of Section 8(2) of IBC, 2016, the Adjudicating Authority while considering an application filed under Section 9 of the IBC 2016 for admission, need to see the material available on record to ascertain as to whether there was pre-existing dispute or not. In the present case it is not so that the CD did not give any reply to the demand notice. Indubitably, the OC had received the reply to demand notice on 17.03.2023. 

• 15. In terms of the provisions of Section 9 (5) (d) of IBC 2016, the Adjudicating Authority should admit the application only if there is no record of dispute or no notice of dispute has been received by the OC. In the present case, apparently the arbitral proceedings commenced on 19.01.2023 i.e., prior to issuance of demand notice 25.02.2023, by the OC. The petitioner itself has enclosed the arbitration notice as Annexure-J to the petition.” (Emphasis supplied) 

# 15. In the present case, it is an undisputed fact that the demand notice was issued by the Operational Creditor on 25.02.2023 and a notice of dispute raised by the Corporate Debtor on 17.03.2023 wherein the issue of invocation of notice of arbitration of 19.01.2023 on was articulated as a ground of pre-existing dispute. 

# 16. To conclude whether commencement of such arbitral proceedings constitutes pre-existing disputes, we may fall back upon the landmark judgement in the Mobilox Innovations Pvt. Ltd. vs. Kirusa Software Pvt. Ltd. in Civil Appeal No. 9405 of 2017, wherein the Supreme Court clarified the scope of pre-existing disputes in paragraph 40 which reads as follows: 

• “It is clear, therefore, that once the operational creditor has filed an application, which is otherwise complete, the adjudicating authority must reject the application under Section 9(5)(2)(d) if notice of dispute has been received by the operational creditor or there is a record of dispute in the information utility. It is clear that such notice must bring to the notice of the operational creditor the “existence” of a dispute or the fact that a suit or arbitration proceeding relating to a dispute is pending between the parties. Therefore, all that the adjudicating authority is to see at this stage is whether there is a plausible contention which requires further investigation and that the “dispute” is not a patently feeble legal argument or an assertion of fact unsupported by evidence. It is important to separate the grain from the chaff and to reject a spurious defence which is mere bluster. However, in doing so, the Court does not need to be satisfied that the defence is likely to succeed. The Court does not at this stage examine the merits of the dispute except to the extent indicated above. So long as a dispute truly exists in fact and is not spurious, hypothetical or illusory, the adjudicating authority has to reject the application.” 

# 17. The pre-existing dispute must relate to the transaction or debt that forms the basis of the Section 9 application. Clearly the debt in this case arises out of RA Bills relating to the original work order of 12.10.2018. When an arbitration notice is served in respect of disputes stemming from the original work order and the arbitration notice was issued before the Section 8 demand notice, clearly it signifies that a dispute already existed between the parties. As an arbitration notice is a formal communication from one party to the other, initiating arbitration proceedings, the arbitration notice evidences a pre-existing dispute. This therefore constitutes sufficient ground for rejection of a Section 9 application. 

# 18. Considering the overall facts and circumstance of the present case, we are satisfied that the Adjudicating Authority did not commit any error in rejecting the Section 9 Application filed by the Appellant. There is no merit in the Appeal. Appeal is dismissed. It will remain open to the Appellant to resort to other remedies that may be available to it under any other law. No order as to costs

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Rashtriya Polymers & Solvents. Vs. Kanodia Technoplast Ltd. - Notice under Section 8 has nothing to do with the invoices which fall within the period of Section 10A and beyond the period of Section 10A as notice under Section 8 is given by Operational Creditor to the Corporate Debtor so that the Corporate Debtor may either make the payment or raise the issue of pre-existing dispute.

 NCLAT (2024.07.09) in Rashtriya Polymers & Solvents. Vs. Kanodia Technoplast Ltd.  [Company Appeal (AT) (Ins) No. 1140 of 2023] held that; 

• Notice under Section 8 has nothing to do with the invoices which fall within the period of Section 10A and beyond the period of Section 10A as notice under Section 8 is given by Operational Creditor to the Corporate Debtor so that the Corporate Debtor may either make the payment or raise the issue of pre-existing dispute.

Excerpts of the order;

This order shall dispose of two appeals bearing Company Appeal (AT) (Ins) No. 1680 of 2023 titled as Chemical Suppliers India Pvt. Ltd. Vs. Kanodia Technoplast Ltd. (hereinafter referred to as the first appeal) filed against the order dated 16.10.2023 by which the National Company Law Tribunal, New Delhi, Bench-IV has dismissed the application filed by the appellant under Section 9 of the Insolvency & Bankruptcy Code, 2016 (in short ‘Code’) bearing CP No. (IB)-734 (ND)/2021, inter alia, on the ground that the application is filed under Section 9 for resolution of the amount based upon invoices some of which fall within the period from 23.03.2020 - 24.03.2021 is hit by Section 10A of the code and even if of some invoices which crosses the threshold, provided under Section 4, are beyond the aforesaid period, the segregation is not allowed and the application as a whole has to be dismissed. Company Appeal (AT) (Ins) No. 1140 of 2023 has been filed by Rashtriya Polymers & Solvents vs. Kanodia Technoplast Ltd. (hereinafter referred to as second appeal) against the order dated 12.07.2023 by which application filed by the said appellant under Section 9 of the Code, has been dismissed. 

# 2. Both these matters are being taken up together because in both the cases, the Corporate Debtor is the same and in case anyone of the appeal is allowed then the second appeal would become redundant or infructuous because two CIRPs cannot be initiated against the same CD. 

# 3. For the sake of convenience, we are taking up the first appeal. The brief facts of this case are that the appellant issued a demand notice dated 30.09.2021 to the respondent demanding payment of outstanding debt of Rs. 6,13,26,856/- along with interest of Rs. 1,71,67,229/- calculated @ 24%, based upon 60 invoices starting from 01.07.2020 to 03.06.2021. The demand notice was replied by the respondent on 08.10.2021. 

# 4. Since the amount claimed by the appellant was not resolved by the respondent, therefore, the appellant filed the application under Section 9 of the Code on 02.11.2021 for resolution of the amount of Rs. 7,84,94,085/-. 

# 5. This application has been dismissed by the Tribunal on the ground that out of the 60 invoices, 53 invoices are of the period between 01.07.2020 till 23.03.2021 which falls within the period between 23.03.2020-24.03.2021 i.e. the period prescribed under Section 10A of the Code during which if the default is committed, the application under Section 7, 9 & 10 cannot be filed at all. 

# 6. The Tribunal has held, relying upon the decision of Hon’ble Supreme Court in the case of Ramesh Kymal Vs. Siemens Gamesa Renewable Power Private Limited (Civil Appeal No. 4050 of 2020) decided on 09.02.2021 and the decision of this Court in Company Appeal (AT) (Ins) No. 387 of 2023 Yatra Online limited Vs Ezeego One Travel & Tours Limited decided on 31.03.2023 that the application under Section 9 was not maintainable because the segregation of the amount of the period falling under Section 10A was not possible. 

# 7. Learned Counsel for the appellant has argued that the finding recorded by the Tribunal that the amount cannot be segregated is contrary to the facts noticed by the Tribunal. In this regard, he has referred to paragraph 11 of the impugned order in which the Tribunal itself has made the segregation of the amount based upon Invoices No. 1 to 53, which falls within the period provided under Section 10A and Invoices No. 54 to 60 falls after the period provided under Section 10A. The said chart is reproduced for a quick glance which read as under:  . . . . . . 

# 8. It is further submitted that the amount arising out of the invoices from 54 to 60 is Rs. 1,65,89,311/- which is more than the amount of threshold provided under Section 4 of Rs. 1 crore, therefore, the application could not have been dismissed by the Ld. Tribunal and deserves to be admitted. In support of his submissions, he has relied upon a decision of this Court in Company Appeal (AT) (Ins) No. 39 of 2023 titled as Naresh Choudhary Vs. Sterling Enamelled Wires Pvt. Ltd. decided on 16.08.2023. It is submitted that in the decided case, notice under Section 8 was given on 14.08.2021 claiming total amount of Rs.2,07,11,209/- which included the amount based upon the NonLC and the LC amount. 

# 9. It is further submitted that the Non-LC amount which falls within the period between 23.03.2020-24.03.2021 (as prescribed under Section 10A) do not have any effect on the maintainability of the application under Section 9 if the non LC amount is above the threshold and the application can be maintained on the said amount. In this regard, the observations made by this Tribunal are reproduced as under: 

• “15. This brings us to the second issue for determination as to whether the debt arising out of the invoices fell during the period which attracts the bar of Section 10A of IBC. It is the case of the Appellant that the Operational Creditor has not provided the date of default either in the Section 8 demand notice or in the Section 9 application. Further, it has been stated that payments were to be made by the Corporate Debtor by way of LC which was to be created within 90 days from each invoice and hence the date of default would be 90 days post the date of each such invoice. Since the Appellant had not created any LC within a period of 90 days the default occurred on the 90th day from the day of invoice. After calculating the 90th day of these invoices, it has been contended that the date of default arises between 01.05.2020 to 29.05.2020 which clearly falls in the ambit of Section 10A and hence barred from being subject to IBC proceedings. 

• 16. Refuting the above, it has been submitted by the Learned Counsel for the Respondent No.1 that the Corporate Debtor had placed four purchase orders which find place at pages 272-275 of APB. Of the four purchase orders, only two purchase orders (3rd and 4th purchase orders) make reference to the creation of LC of 90 days. As regards the other two purchase orders (1st and 2nd purchase orders), there was no such stipulation of 90-day LC. Hence in respect of these two purchase orders, the date of default was the date of invoice. It was stated that the invoices raised under the 4th purchase order were anyways already excluded. It was further submitted that even if the 3rd and 4th purchase orders are excluded, the first two purchase orders cumulatively amount to default which is above the threshold limit of Rs.1 crore necessary for filing an insolvency application. We are satisfied with the reasoning offered by the Operational Creditor and do not find any force in the contention of the Appellant. 

• 17. We have no hesitation in observing that in the present case, all requisite conditions necessary to trigger CIRP under Section 9 stands fulfilled with operational debt having been acknowledged and default committed thereto and there being no real pre-existing disputes discernible from given facts. For the foregoing reasons, we are of the view that the Adjudicating Authority has rightly admitted the application of the Operational Creditor filed under Section 9 of IBC. We are satisfied that the impugned order does not warrant any interference. There is no merit in the Appeal. The Appeal is dismissed. No order as to costs.” 

# 10. In reply, counsel appearing for the respondent has vehemently argued that the issuance of notice under Section 8 of the Code is sine qua non for the purpose of maintainability of an application under Section 9. He has further submitted that if the invoices falling between the dates 23.03.2020-24.03.2021 are also a part of the said notice then the application under Section 9 on that basis is not maintainable. He has relied upon the decision of Hon’ble Supreme Court in Ramesh Kymal Vs. Siemens Gamesa Renewable Power Private Limited (supra) and the decision of this Court in Yatra Online Limited Vs Ezeego One Travel & Tours Limited (supra) in support of his contention. 

# 11. We have heard both the counsel for the parties and perused the record with their able assistance. 

# 12. The issue involved in this case travels in a narrow compass, as to whether an application under Section 9, filed on the basis of invoices which fall within the period of Section 10A and also beyond the said period is maintainable in case the invoices of period beyond of Section 10A are sufficient to cross the threshold? 

# 13. The answer of this question lies in the decision by this Court in the case of Naresh Choudhary Vs. Sterling Enamelled Wires Pvt. Ltd. (supra) in which the same issue was involved. Notice under Section 8 has nothing to do with the invoices which fall within the period of Section 10A and beyond the period of Section 10A as notice under Section 8 is given by Operational Creditor to the Corporate Debtor so that the Corporate Debtor may either make the payment or raise the issue of pre-existing dispute. 

# 14. All that has to be seen by Ld. Tribunal is that the invoices relied upon by the Operational Creditor beyond the period of Section 10A crosses the threshold of Rs. 1 crore for the purpose of maintaining the application. The Judgment in the case of Ramesh Kymal Vs.Siemens Gamesa Renewable Power Private Limited (supra) of the Hon’ble Supreme Court as well as the decision of this Court in the case of Yatra Online Ltd Vs Ezeego One Travel & Tours Limited are not applicable to the facts of this case. The relevant para of Yatra Online Limited Vs Ezeego One Travel & Tours Limited which has been strongly relied upon by the respondent is reproduced as under: 

• “15. Admittedly, the application under Section 9 has to be filed after a notice under Section 8 of the Code is delivered. Meaning thereby notice under Section 8 of the Code is a sine qua non to maintain an application under Section 9 of the Code. Section 8 of the Code provides that the Operational Creditor shall deliver a demand notice upon the Corporate Debtor who may within a period of 10 days of the receipt of the demand notice either raise the issue of an existing dispute or bring to notice of the Operational Creditor that the payments have been made / paid of operational debt and an application under Section 9 of the Code could be filed only after the expiry of period of 10 days from the date of delivery of notice. The Resolution Professional who was appointed on 09.03.2021 and is familiar with the provisions of the Code mentioned the date of default as 30.10.2020 in the notice and after the notice, the application under Section 9 of the Code too contained the date of default as 30.10.2020. Thus, the positive case before the Adjudicating Authority, at the instance of the Resolution Professional, was that the date of default is 30.10.2020 and not July 2019 but while contesting the application filed under Section 10A the RP conveniently changed the date of default from 30.10.2020 to July, 2019 in order to wriggle out of the rigorus of Section 10A of the Code. 

• 16. In the background of the aforesaid facts and circumstances of the case, the question thus would arise as to whether the date of default, mentioned in the demand notice as well as in the application filed under Section 9 of the Code, which has not been amended even if it was allegedly wrongly mentioned, can be changed in the litigation which arises from a miscellaneous application?” 

# 15. In view of the aforesaid discussion, we find merit in the present appeal, therefore, the same is hereby allowed and the impugned order is set aside. The application bearing CP No. (IB) 734/ND/2021 is hereby restored. The matter is remanded back to the Ld. National Company Law Tribunal to proceed further in accordance with law. The Parties are directed to appear before the Tribunal on 26.07.2024. 

# 16. In so far as the second appeal is concerned, we have not gone into the merits of the said appeal because the first appeal has since been allowed. Therefore, the second appeal is hereby dismissed as redundant and infructuous. No Costs.

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DHL Supply Chain India Private Limited V. Eicher Motors Limited - Thus, in view of the above, we find no illegality or deficiency in the service of the Demand Notice, which has been duly served through the E-mail addressed to the Respondent with “Attention to its Managing Director”, who is a “Key Managerial Personnel” of the Respondent Company.

NCLT New Delhi-II (29.05.2023) In DHL Supply Chain India Private Limited V. Eicher Motors Limited [Company Petition No. (IB)-272(ND)2022] held that;

• Thus, in view of the above, we find no illegality or deficiency in the service of the Demand Notice, which has been duly served through the E-mail addressed to the Respondent with “Attention to its Managing Director”, who is a “Key Managerial Personnel” of the Respondent Company.

Excerpts of the order; 

# 8. We have heard the submission of the parties on 21.11.2022, 22.12.2022, and 01.02.2023 and perused the documents placed on the record including the written submissions filed by both parties. During the hearings on 21.11.2022, the Ld. Counsel appearing on behalf of the Applicant argued and reiterated almost all the points as stated in its application, written submission, and rejoinder. He stated that the Applicant has claimed an amount of Rs. 8.28 Crores, for which the Applicant had served the Demand Notice on the Respondent on 07.12.2021 at the email id mentioned in the master data of the Company. The Ld. Counsel appearing on behalf of the Respondent  contended that the present petition is not maintainable as the service of Section 8 Demand Notice was defective, three categories of claims have been bunched together and there were pre-existing disputes between the parties. Further, he argued that the Agreement dated 29.08.2019 was prematurely terminated in January 2021 and thereafter, no services were rendered by the Applicant to the Respondent. Therefore, all the invoices raised by the Applicant thereafter are not related to any services rendered by the Applicant.

9. The Respondent has argued that the Demand Notice issued by the Applicant is not in compliance with Rule 5 of Application to Adjudicating Authority Rules, 2016 as the Demand Notice is admittedly not served upon the Respondent at the registered office or by electronic mail service to a whole-time director or designated partner or key managerial personnel. Whereas the information/email-ids of its Directors are publicly available on the website of the Ministry of Corporate Affairs, the applicant had chosen to serve the demand notice via e-mail only at info@eicher.com which is not the email address of its whole-time director or key managerial personnel. 

9.1 Hence, before going into other aspects, we would like to examine Whether the service of Section 8 demand notice upon the Respondent was a valid one. From the record, it is observed that the Applicant had served the Section 8 Demand notice via email, which is reproduced below:

On perusal of the aforesaid email, it is seen that the Demand Notice was mailed to info@eichermotors.com with “Attention (to): The Managing Director”.

9.2 At this juncture, we refer to the Master Data of the Respondent Company, which reads thus:

On conjoint reading of the E-mail dated 07.12.2021 and the Master Data of the Respondent Company, it is seen that the Demand notice was sent to the official email id of the Respondent Company. Further, we notice that “Directors/Signatory Details” in the Master Data do not contain the e-mail ids of the individual Directors and on its perusal, one cannot determine who is the whole-time Director/Key Managerial Personnel of the Respondent, and moreover, a director may or may not be falling under the category of whole-time Director/KMP. 

9.3 At this juncture, we refer to Rule 5 of the Application to Adjudicating Authority Rules, 2016, which reads thus:

• “5. Demand notice by operational creditor. — (1) An operational creditor shall deliver to the corporate debtor, the following documents, namely -

• …..

• …..

• (2) The demand notice or the copy of the invoice demanding payment referred to in sub-section (2) of section 8 of the Code, may be delivered to the corporate debtor,

• (a) at the registered office by hand, registered post or speed post with acknowledgement due; or

• (b) by electronic mail service to a whole time director or designated partner or key managerial personnel, if any, of the corporate debtor.” (Emphasis supplied)

Thus, as per Rule 5(2)(b), an Operational Creditor shall deliver the Demand Notice to the Corporate Debtor -

• Either at the registered office by hand, registered post or speed post with acknowledgement due,

• Or by electronic mail service to a whole time director or designated partner or key managerial personnel, if any, of the corporate debtor.”

9.4 It is evident from the Master Data of the Respondent that the email ids of whole-time Directors and Key Managerial Personnel are not available in the public domain. However, the official email id of a Company is known to all. Further, Section 8 notice is a demand against the Corporate Debtor and not against its whole-time Director or Key Managerial Personnel, in their personal capacity. Even the Form 3 and Form 4 formats of issuing a Demand Notice do not stipulate that the Demand Notice shall be addressed to a whole-time Director or Key Managerial Personnel.

9.5 At this juncture, we refer to the Judgement of the Hon’ble Supreme Court dated 06.05.2015 passed, in the context of service of Demand Notice under Section 138 of Negotiable Instruments Act proceedings, in the matter of Kirshna Texport and Capital Markets Ltd. Vs Ila A. Agrawal and others in Criminal Appeal No.1220 of 2009, wherein the following was held:

• “14. Section 141 states that if the person committing an offence under Section 138 is a Company, every director of such Company who was in charge of and responsible to that Company for conduct of its business shall also be deemed to be guilty. The reason for creating vicarious liability is plainly that a juristic entity i.e. a Company would be run by living persons who are in charge of its affairs and who guide the actions of that Company and that if such juristic entity is guilty, those who were so responsible for its affairs and who guided actions of such juristic entity must be held responsible and ought to be proceeded against. Section 141 again does not lay down any requirement that in such eventuality the directors must individually be issued separate notices under Section 138. The persons who are in charge of the affairs of the Company and running its affairs must naturally be aware of the notice of demand under Section 138 of the Act issued to such Company. It is precisely for this reason that no notice is additionally contemplated to be given to such directors. The opportunity to the ‘drawer’ Company is considered good enough for those who are in charge of the affairs of such Company. If it is their case that the offence was committed without their knowledge or that they had exercised due diligence to prevent such commission, it would be a matter of defence to be considered at the appropriate stage in the trial and certainly not at the stage of notice under Section 138.”  (Emphasis supplied)

9.6 The ID mentioned in Master Data is the official id of the Corporate Debtor/Company and in terms of the judgment of the Apex Court (supra), the whole-time Directors or Key Managerial Personnel, who are in charge and running the affairs of the Company, are supposed to know what all is being received at the official/publicly notified email id of Company especially when “attention” is drawn to its Managing Director.

10. The Respondent has relied upon the Judgement of Hon’ble NCLAT dated 05.02.2021 in the matter of Jyoti Strips Pvt Ltd Jyoti Strips Pvt Ltd Vs Jsc Ispat Pvt Ltd, COMPANY APPEAL (AT) (Insolvency) No. 775 of 2020, wherein the following was held:

• “12. We have perused the 'Master Data' relied upon by the Appellant Counsel and also the subject email and note that there is no documentary evidence on record to establish that the email was sent as per the provisions mandated under Rule 5 of the Insolvency and Bankruptcy Rules, 2016. Hence, we concur with the findings given by the Learned Adjudicating Authority with respect to the fact that the Appellant herein had nowhere mentioned in the Application to whom the email was addressed to as it is clearly stipulated in Rule 5(1) of the Insolvency and Bankruptcy Rules 2016, that the notice shall be delivered by electronic mail service to a whole time Director or Designated Partner or Key Managerial Personnel, if any, of the Corporate Debtor. (Emphasis supplied) 

Per contra, in the instant case, as we have already noted that the email containing the demand notice was sent to the E-mail ID of the Respondent Company with “Attention to the Managing Director” of the Respondent, who is very well covered under the definition of a Key Managerial Personnel as defined under Section 2(51) of the Companies Act 2013, which reads thus -

• “2. Definitions — In this Act, unless the context otherwise requires-

• ----

• (51) “key managerial personnel”, in relation to a company, means –

• (i) the Chief Executive Officer or the managing director or the manager;

• (ii) the company secretary;

• (iii) the whole-time director;

• (iv) the Chief Financial Officer; and

• (v) such other officer as may be prescribed.”

Thus, in view of the above, we find no illegality or deficiency in the service of the Demand Notice, which has been duly served through the E-mail addressed to the Respondent with “Attention to its Managing Director”, who is a “Key Managerial Personnel” of the Respondent Company. Hence, we would like to proceed ahead in examining the application on its merits.

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