Nitin Singh vs Waves Bio-Tech Pvt. Ltd

Abni Ranjan Kumar Sinha, J

The present petition is filed under Section 9 of Insolvency and Bankruptcy Code, 2016 read with Rule 6 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rule, 2016 by the Applicant/operational creditor, i.e. "Nitin Singh, Proprietor of Shri Shyam Printers" for initiation of Corporate Insolvency Resolution Process against the Respondent/Corporate Debtor Company "Waves Bio-Tech Pvt. Ltd.".

The Applicant is a supplier of Printing and Packaging material.

The Respondent/Corporate Debtor is incorporated on 27.07.2001, bearing CIN No. U2423DL2010PTC111836. It is a private limited company and the authorised Share Capital of Corporate Debtor company is Rs. 10, 00,000/- and Paid-up Share Capital is 9, 65,000/-.

Brief Facts of the petition are:

i. The learned counsel for the petitioner stated that the Corporate Debtor have been in business relation with the Operational Creditor for past many years and have been procuring the Printing and Packaging material for its business purposes from 28.09.2018 to 30.12.2018 at various organizations and companies.

ii. Further stated that the material received by the Corporate Debtor were of impeccable quality and same were delivered to the Corporate Debtor within the stipulated time frame alongwith invoices amounting to Rs. 1,31,471/- in aggregate (excluding Interest) that the Corporate debtor has made no payment to the Operational creditor.

iii. Further stated by the counsel of the Applicant that the demand notice dated 08.06.2019 was sent by the applicant under Section 8 of Insolvency and Bankruptcy Code, 2016 read with Rule 5 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 vide Speed post and e-mail. The notice was sent through speed post on 10.06.2019. The service could not be made effective through speed post as the demand notice was returned back with the remarks "No Such Person Found". As a consequence of that Operational Creditor sent demand notice through e-mail on 15.06.2019 at the e-mail id mentioned on the Master data of the Company and the e-mail was not bound back.

iv. Further stated that the Corporate debtor have raised objections vide its notice of dispute dated 25.06.2019 regarding the quality of material supplied by the Petitioner. The Corporate debtor further added in his notice of dispute that they have suffered losses for approximately Rs. 10,00,000/- due to poor quality of goods supplied by the Operational creditor. The Corporate Debtor had not raised any dispute prior to the issuance of the Demand notice.

We have heard the learned counsel appearing for Applicant/Operational Creditor.

The present case has been filed on behalf of Operational Creditor against the Corporate Debtor U/s 9 of the I & B Code and before filing the present petition, the Operational Creditor had sent the demand notice as required U/s 8 of the IBC, which is enclosed at page No. 24-29 (Annexure-B).

He further submitted that the said statutory demand notice was sent by speed post on 10.06.2019 to the Corporate Debtor but the same was returned with noting "No Such Person Found".

But before considering the submissions of the learned counsel for the applicant, we would like to refer the provision, under which the notice is required to be sent. Rule 5 of the Insolvency & Bankruptcy (Application to Adjudicating Authority) Rules, 2016, lays down that provision, how the notice would be delivered U/s 8 of the IBC. Rule 5 of the Insolvency & Bankruptcy (Application to Adjudicating Authority) Rules, 2016 is quoted below :-

(1) An operational creditor shall deliver to the corporate debtor, the following documents, namely.-

(a) a demand notice in Form 3; or

(b) a copy of an invoice attached with a notice in Form 4.

(2) The demand notice or the copy of the invoice demanding payment referred to in subsection (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.

(3) A copy of demand notice or invoice demanding payment served under this rule by an operational creditor shall also be filed with an information utility, if any.

It is a settled principle of law that there is a difference between the procedure for initiation of CIRP by the Financial Creditors U/s 7 of the IBC and the Operational Creditors U/s 9 of the IBC. So far as the Financial Creditor is concerned, as per Section 7 of the IBC, there is no need to deliver the notice before the initiation of CIRP and that has been decided by the Hon'ble Apex Court in Innoventive Industries Ltd. v. ICICI Bank, (2017)205 Comp Cas 57(SC) held:

"The scheme of Sec 7 stands in contrast with the scheme under Sec 8 where an operational creditor is, on the occurrence of a default, to first deliver a demand notice of the unpaid debt to the operational debtor in the manner provided in sec 8(1) of the Code. Under Sec 8(2), the corporate debtor can, within a period of 10 days of receipt of the demand notice or copy of the invoice mentioned in Sub Section (1), bring to the notice of the operational creditor the existence of a dispute or the record of the pendency of a suit or arbitration proceedings, which is pre-existing -i.e., before such notice or invoice was received by the corporate debtor. The moment there is existence of such a dispute, the operational creditor goes out of the clutches of the Court.

Therefore, for the initiation of CIRP U/s 9 of the IBC by the Operational Creditor, the Operational Creditor is required to deliver the demand notice upon the Corporate Debtor U/s 8 of the IBC. The main object of the inception of provision of Section 8 is, "This ensures that operational creditors, whose debt claims are usually smaller, are not able to put the corporate debtor into the insolvency resolution process prematurely or initiate the process for extraneous considerations. It may also facilitate informal negotiations between such creditors and the corporate debtor, which may result in a restructuring of the debt outside the formal proceedings", and that is the reason in Section 8 of the IBC, the word, 'deliver a demand notice of unpaid operational creditor' is mentioned.

In the light of the aforesaid provision and the submissions made by the learned Counsel, when we shall consider the case of the applicant, then this Adjudicating Authority is of the considered view that under Rule 5 of the Insolvency & Bankruptcy (Application to Adjudicating Authority) Rules, 2016, there are two modes for sending demand notice, one is, either at the registered office by hand, registered post or speed post with acknowledgement due, or second one, by electronic mail service to a whole time director or designated partner or key managerial personnel, if any, of the corporate debtor, and on the basis of the facts stated in the application, we find, the applicant had sent the demand notice through the registered post, which was returned as "no such person found", so, Rule 5(2)(a) has not been complied with. As far as Rule 5(2) (b) is concerned, the applicant has sent the demand notice through electronic mail but the corporate debtor has nowhere mention in the application, whether it is sent on the email id of the whole time director, designated partner or key managerial personnel of the corporate debtor. Therefore, it can be said that the applicant has not delivered notice under Section 8 of Insolvency and Bankruptcy Code, 2016, in accordance with the provision of Rule 5(2)(b) of Insolvency and Bankruptcy (Application to Adjudicating Authority) Rule, 2016.

So, under such circumstances, in our opinion, the applicant has not complied the provision contained under Rule 5 of the Insolvency & Bankruptcy (Application to Adjudicating Authority) Rules, 2016, therefore, this Adjudicating Authority is of the considered view that the applicant has not delivered the demand notice as required U/s 8 of the IBC, which is the mandatory provision of law and so on this ground in the absence of delivery of demand notice as required U/s 8 of IBC, the present CP No. (IB)2827/ND/2019 filed by the applicant/operational creditor is not complete and not maintainable and liable to be dismissed. Accordingly, it is therefore,

ORDERED

The present CP No. (IB)2827/ND/2019 is hereby dismissed, because the applicant has not complied the provision of Section 8 read with rule 5 of Adjudicating Authority Rules. However, the applicant/operational creditor is at liberty to file a fresh case in accordance with the provision of law after delivery of demand notice upon the corporate debtor as per Rule 5 of the Insolvency & Bankruptcy (Application to Adjudicating Authority) Rules, 2016.