Case Note & Summary
The Appellant, M/s. Metals and Metal Electric Private Limited, an operational creditor, filed an application under Section 9 of the Insolvency and Bankruptcy Code, 2016 (I&B Code) against the Respondent, M/s. Prince Foundations Limited, for an alleged operational debt. The application was filed in Form 5 under Rule 6(1) of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016, showing the date of default as 22.02.2022. The Respondent contested the application, and the Adjudicating Authority (National Company Law Tribunal, Chennai) dismissed it by an impugned order dated 21.02.2023 in CP(IB)/100/CHE/2022. The grounds for dismissal were: (i) the date of default mentioned in the application was later than the date of the demand notice (18.02.2022), (ii) most of the invoices were barred by limitation, (iii) the demand notice did not mention any date of default, which is not in consonance with Section 8, and (iv) the affidavit under Section 9(3)(b) was not attached with the application. The Appellant contended that the demand notice dated 18.02.2022 contained full particulars of unpaid invoices and that the format used did not have a specific space for the date of default, arguing that Section 8 does not prescribe for specific mention of the date of default. The Appellant also argued that the demand notice was in Form 4 under Rule 5(1)(b). The legal issues considered were whether the demand notice must specify the date of default and whether the application was maintainable given the limitation bar. The court analyzed that the demand notice under Section 8 must contain the date of default to enable the corporate debtor to respond, and the absence of such date renders the notice defective. Additionally, the application under Section 9 must be accompanied by an affidavit under Section 9(3)(b), and failure to attach it is a fatal defect. The court also noted that the date of default (22.02.2022) being later than the demand notice (18.02.2022) indicated that the invoices were barred by limitation. The court dismissed the appeal, upholding the Adjudicating Authority's order.
Headnote
A) Insolvency and Bankruptcy Code - Operational Creditor - Demand Notice - Section 8, I&B Code, 2016 - Requirement of Date of Default - The demand notice under Section 8 must contain the date of default to enable the corporate debtor to respond; absence of date of default renders the notice defective. (Paras 1-2) B) Insolvency and Bankruptcy Code - Operational Creditor - Application under Section 9 - Affidavit under Section 9(3)(b) - Mandatory Requirement - The application under Section 9 must be accompanied by an affidavit as per Section 9(3)(b); failure to attach the affidavit is a fatal defect. (Para 1) C) Limitation - Operational Debt - Date of Default - Limitation Act, 1963, Article 137 - Limitation for filing Section 9 application runs from the date of default; if the date of default mentioned in the application is later than the demand notice, the invoices are barred by limitation. (Para 1)
Issue of Consideration
Whether the demand notice under Section 8 of I&B Code must specify the date of default, and whether the Section 9 application is maintainable when the date of default is later than the demand notice and invoices are barred by limitation.
Final Decision
The appeal is dismissed, upholding the impugned order of the Adjudicating Authority dated 21.02.2023 dismissing the Section 9 application.
Law Points
- Section 8 demand notice must contain date of default
- Section 9 application must be accompanied by affidavit under Section 9(3)(b)
- limitation for operational debt runs from date of default
- date of default cannot be later than date of demand notice
