NCLT Hyderabad Rejects Insolvency Petition Over Procedural Lapse in Serving Demand Notice
Pranav B Prem
The Hyderabad Bench of the National Company Law Tribunal (NCLT) has dismissed a petition filed under Section 9 of the Insolvency and Bankruptcy Code, 2016, citing failure to comply with the mandatory requirement of serving a demand notice to the correct address of the corporate debtor. The Bench comprised of Shri Rajeev Bhardwaj (Judicial Member) and Shri Sanjay Puri (Technical Member).
Background of the Case
The petition was filed by M/s Anurada Chemicals, a chemical manufacturing company and operational creditor, seeking initiation of the Corporate Insolvency Resolution Process (CIRP) against M/s Synaptics Labs Pvt. Ltd., a company engaged in the manufacturing of Active Pharmaceutical Ingredients (APIs), under Section 9 of the Code. The operational debt claimed was ₹1,25,12,394.
According to the operational creditor, chemicals were supplied to the corporate debtor as per valid purchase orders, with tax invoices and e-way bills substantiating the transactions. Despite receipt of goods, the corporate debtor failed to pay the outstanding dues. As part of an effort to clear the pending amount, the corporate debtor issued two post-dated cheques dated 10.11.2023 and 25.11.2023, totaling ₹38,12,750. However, both cheques were dishonoured on 02.01.2024 with the endorsement “Payment Stopped by Drawer.”
On 06.02.2024, the operational creditor issued a confirmation of accounts for the period from 01.04.2023 to 31.12.2023, reflecting a balance of ₹1,32,97,094. This was acknowledged by the corporate debtor. Thereafter, a statutory demand notice under Section 8 of the Code was sent by the operational creditor on 21.02.2024 through speed post and via email dated 23.02.2024. The postal delivery was claimed to be completed on 26.02.2024. No reply was received from the corporate debtor, leading the operational creditor to initiate a petition under Section 9.
Tribunal’s Observations
The Tribunal first examined whether there existed a valid operational debt. It noted that the operational creditor had placed on record sufficient documentary evidence, including purchase orders, tax invoices, and e-way bills. These documents demonstrated a valid contractual relationship and supply of goods by the operational creditor. The Tribunal held that the unpaid dues therefore constituted an “operational debt” under Section 5(21) of the IBC.
The NeSL records showed that while the corporate debtor disputed the quantum of the debt, it had admitted a liability of ₹1,15,23,010 as on 27.04.2024. Since this amount exceeded the minimum threshold of ₹1 crore under Section 4(1) of the IBC, the Tribunal held that the threshold requirement was met. However, the Tribunal stressed that establishing debt and default alone is not sufficient under Section 9. The statutory pre-condition under Section 8 — proper service of a demand notice — is a mandatory procedural requirement.
Defect in Service of Demand Notice
The Tribunal scrutinised the method of service employed by the operational creditor and found serious defects. The notice was sent via speed post to the address: Flat No. S-404, SVSS Nivas, Street No.1, Czech Colony, Sanathnagar, Hyderabad. However, the postal receipt revealed that the notice was dispatched to a pincode of 500084, whereas the registered address of the corporate debtor listed in the Ministry of Corporate Affairs (MCA) records bears the pincode 500018. The Bench held that this discrepancy in the pincode rendered the service defective.
Citing the decision in Shri Bijay Pratap Singh v. Unimax International, [2020] ibclaw.in 165 NCLAT, the Tribunal reiterated that a demand notice sent to the wrong address does not fulfill the mandatory requirements of law and that improper service invalidates the petition.
Email Service and Additional Lapses
The operational creditor also claimed to have served the demand notice via email. However, the Tribunal pointed out that no material was placed on record to show that the email was addressed specifically to a whole-time director, key managerial personnel, or designated partner of the corporate debtor as mandated under Rule 5(2)(b) of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016. Moreover, there was no proof that the email was actually received.
The Bench further noted that Section 9(3)(a) of the Code requires the filing of a copy of the delivered demand notice along with the petition. In the present case, the operational creditor failed to submit such a document. The absence of a delivered copy of the notice, the Tribunal held, went to the root of the maintainability of the petition. Under Section 9(5)(ii)(c), a petition must be rejected if the operational creditor has not delivered the demand notice to the corporate debtor.
Verdict
In light of the above findings, the NCLT held that although the operational creditor had successfully established the existence of an operational debt and a default exceeding the statutory threshold, the non-compliance with Section 8(1) of the Code rendered the petition defective. The Tribunal ruled that the statutory demand notice was neither sent to the correct registered address nor was valid email service established in accordance with Rule 5(2)(b). Furthermore, the required documents were not filed along with the petition under Section 9(3). Accordingly, Company Petition IB/134/9/2024 was dismissed by the Tribunal.
Appearance
For the Petitioner: Mr.Y.Suryanarayana, Advocate
Cause Title: Anurada Chemicals v/s Synaptics Labs Pvt. Ltd.
Case No: Company Petition IB/134/9/2024
Coram: Shri Rajeev Bhardwaj [Hon’ble Member (Judicial)], Shri Sanjay Puri [Hon’ble Member (Technical)]
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