Demand Notice u/s 8 of IBC Sent to Wrong Address Invalidates Insolvency Petition: NCLT [Read Order]

The National Company Law Tribunal (NCLT) held that if a demand notice under section 8 of the code is not sent to the correct address, it does not meet the mandatory requirements of law and invalidates the insolvency petition.

The Operational Creditor, M/s Anurada Chemicals, is a chemical manufacturing business that specializes in producing basic chemicals, with the exception of nitrogen compounds and fertilizers. M/s. Synaptics Labs Private Limited, often known as the "Corporate Debtor," is a company that manufactures active pharmaceutical ingredients and other related goods.

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The Corporate Debtor received chemicals from the operational creditor. Nevertheless, the Corporate Debtor did not pay for the same. Two postdated checks that the Corporate Debtor sent to the Operational Creditor in an effort to pay the debt were later returned.

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Following that, the Corporate Debtor acknowledged the payment of the outstanding sum of Rs. 1,32,97,094/-in a confirmation of accounts for the relevant period given by the Operational Creditor. The Corporate Debtor was then served with a demand notice under Section 8 by the Operational Creditor because it had yet to make the payment. Despite properly delivering the notice, the Corporate Debtor did not respond.

The Tribunal noted that the Operational Creditor's tax invoices, the purchase orders issued by the Corporate Debtor, and the related e-way bills all provided evidence of a contractual connection and the Operational Creditor's execution of its duties. The tribunal held that insolvency procedures under Section 9 of the Code cannot be started by simply demonstrating the existence of a debt and default.

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The bench of Shri. Rajeev Bhardwaj (Judicial Member) and Shri Sanjay Puri (Technical Member) held that Section 8(1) requires that a demand notice be properly delivered to the Corporate Debtor before filing a petition under Section 9 of the Code. In this case, although the Operational Creditor attempted service via registered post and email, the notice was sent to an incorrect address and the pin code mentioned was inaccurate. This discrepancy cast doubt on the validity of the service.

Although the Operational Creditor has stated that it served the Demand Notice via email, the Tribunal noted that there is no evidence in the file to support the claim that the email was sent to a full-time director, designated partner, or important management staff of the Corporate Debtor, as required by Rule 5(2)(b) of the Insolvency and Bankruptcy Rules, 2016. Furthermore, no proof was found to prove that the email was truly received.

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Despite the Operational Creditor's successful demonstration of an operational debt and a delinquency that above the specified threshold, the Tribunal came to the conclusion that the demand notice's mandatory requirement of valid service under Section 8(1) was not met.

The email was not properly served, nor was the notice delivered to the correct registration address. The petition dismissed the Section 9 petition as a result.

To Read the full text of the Order CLICK HERE

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