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Advocate can issue demand notice on behalf of operational creditor: NCLAT

Once an advocate was duly instructed to issue the demand notice, there was no room for holding that the notice delivered by the advocate was not a notice delivered by an authorized person. The order passed by the NCLAT New Delhi (principle bench), in its decision in   Mohit Minerals Ltd v. Nidhi Impotrade Pvt Ltd (Company Appeal (AT) (Insolvency) No. 905 of 2020) by Hon’ble Shri Justice Bansi Lal Bhat and Justice Anant Bijay Singh.

The facts of the case were such that – the application filed by the  Operational Creditor under Section 9 of the Insolvency and Bankruptcy Code, 2016 (“I&B Code” for short) came to be excused because of the Adjudicating Authority (National Company Law Tribunal), Ahmedabad Bench, as far as the denounced request dated  September 4, 2020, holding something very similar to be not viable for the reasons that the interest notice was given with no authority.

(Nobody has turned up to defend the appeal on behalf of Respondent).

It is all around settled at this point that conveyance of an interest notice of the neglected operational obligation by the Operational Creditor upon the Corporate Debtor under Section 8(1) of the ‘I&B Code’ is a sine-qua-non for inception of Corporate Insolvency Resolution Process (CIRP) by Operational Creditor under Section 9 of the ‘I&B Code’. Organization in which the interest notice is to be given by the Operational Creditor as far as the ‘Indebtedness and Bankruptcy (Application to Adjudicating Authority) Rules, 2016’ is endorsed in Form-3. The conveyance of notice is to be affected in the endorsed structure which should radiate from the Operational Creditor or any approved individual for its benefit. For the situation close by, it isn’t in a debate that the interest notice in the endorsed structure has been given by the legal advisor of the Operational Creditor and conveyed to the Corporate Debtor.

And there was a pronouncement of the Apex Court in the case of Macquaire Bank Limited v. Shilpi Cable Technologies Limited that a demand notice conveyed by an Advocate properly educated by the Operational Creditor would be a legitimate interest notice for motivations behind inception of CIRP. Taking into account something very similar, notice conveyed could not be held to be awful in law except if it was shown that the legal advisor was not appropriately directed.

In the case of “SVG Fashion Limited v. Arpita Filaments Pvt. Ltd. it was held –

“ with regard to the issue of demand notice issued through advocate is also not sustainable as it is already settled by the Hon’ble Supreme Court that the Advocate can issue demand notice on behalf of his client i.e. operational creditor.”

It is clear the AA had taken the right view which is reflected in the aforementioned order. Legal consistency would request that a similar view, which depended on the judgment of the Hon’ble Apex Court, should have been taken in the last case also.

Once an Advocate was duly instructed to issue the demand notice, there was no room for holding that the notice delivered by the Advocate was not a notice delivered by an authorized person.

 Hence, the finding recorded by the Adjudicating Authority concerning the shortcoming of administration of obligatory interest notice under Section 8(1) of the ‘I&B Code’ can’t be supported. The upbraided request is saved and the matter is dispatched back to the Adjudicating Authority with the bearing that in case of the application being finished in all regards, it might, having respect to the critical elements of obligation and default, pass a request for affirmation or in any case as justified under law. Nonetheless, prior to passing such a request, it might give a chance to the Corporate Debtor to settle the case of Appellant Operational Creditor.

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