Issuance of Demand Notice on Registered Email Address of Corporate Debtor is Sufficient u/s 8 of IBC: NCLAT [Read Order]

The National Company Law Appellate Tribunal's (NCLAT) New Delhi bench has ruled that the corporate debtor's registered email address, as shown in the Company Master Data, can be used to receive a demand notice under Section 8 of the Insolvency and Bankruptcy Code, 2016 (Code), which is adequate to satisfy the Code's requirements.

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The appellant, Vinita Pramod Devkar, argued that the Adjudicating Authority had violated the principles of natural justice by admitting the Section 9 application ex-parte without providing the appellant with a meaningful opportunity to be heard.

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The Uttar Pradesh government and S.R. Garments signed a deal for the supply of socks. AOV Clever Knit LLP was hired as a subcontractor by Sadhna Dye Chem, an operational creditor, who was hired by M/s Rameshwar Textiles Mills Pvt. Ltd., a corporate debtor.

The Corporate Debtor received socks from the Operational Creditor, who also generated six bills totaling Rs. 1,65,97,750. A Section 8 demand letter was mailed on April 24, 2023, in response to nonpayment, but delivery was unsuccessful. The Corporate Debtor stated that they did not get a follow-up email notice that was sent on 02.05.2023.

The Corporate Debtor received socks from the Operational Creditor, who also generated six bills totaling Rs. 1,65,97,750.  A Section 8 demand letter was mailed on April 24, 2023, in response to nonpayment, but delivery was unsuccessful.  The Corporate Debtor stated that they did not get a follow-up email notice that was sent on 02.05.2023.

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Additionally, it was argued that, in violation of Section 8(1) of the Code, the Operational Creditor had not properly served and delivered the Demand Notice. The contested order should be overturned since this resulted in the ex-parte admission of the Section 9 petition without the Corporate Debtor receiving a fair hearing before the Adjudicating Authority.

In contrast, the Respondent argued that the six bills that were the focus of the current Section 9 petition had nothing to do with the alleged disagreement brought up by the Corporate Debtor regarding the provision of faulty socks.

It was also argued that emails sent to the Corporate Debtor's registered email address notified it of the Section 8 Demand Notice's issue and the hearing dates. The Corporate Debtor had kept using the same email account after November 2021, therefore the appellant's argument that the email address was non-operational is flimsy and weak.

The Tribunal comprising of Justice Ashok Bhushan (Judicial Member), Mr. Arun Baroka (Technical Member) and Mr. Barun Mitra (Technical Member) observed that the Operational Creditor is required to deliver a demand notice on the occurrence of default on the Corporate Debtor and that a demand notice under Section 8 is a forerunner to the commencement of insolvency proceedings against a Corporate Debtor.

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Furthermore, it was decided that the registered email address that was used to contact the corporate debtor was identical to the one that was revealed in the company master data. The appellant's assertion that the email was non-operational because the person in charge of it left after July 2021 is untrue.

It was evident that the demand notice was properly served on the corporate debtor's registered email address following the postal delivery's failure, so satisfying the legal requirement.

In dismissing the appeal, the Tribunal found that there was insufficient evidence to establish a pre-existing disagreement. It is unclear why payments of ₹40,000,000 were issued to the Operational Creditor in December 2021 if the Corporate Debtor genuinely thought there was a dispute based on the letter dated 05.07.2018. Furthermore, the assertion of a legitimate disagreement is further undermined by the lack of any debit notes or follow-up proceedings.

To Read the full text of the Order CLICK HERE

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