- (1.) The Virtuous Urja Limited ('Operational Creditor') filed a petition under Sections 433(e) & (f), 434(i)(a) and 439(i)(b) of the Companies Act, 1956, before the Hon'ble High Court of Madras against Nandha Energy Limited ('Corporate Debtor'). The said case was transferred before the Adjudicating Authority (National Company Law Tribunal), Chennai Bench, pursuant to Rule 5 of "the Companies (Transfer of Pending Proceedings) Rules, 2016". The Adjudicating Authority treated the petition under Section 9 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as 'I & B Code') and by impugned order dated 29th August, 2017 admitted the appeal, passed order of 'Moratorium' and appointed 'Insolvency Resolution Professional' with certain observations and directions.
(2.) The Appellant Mr. M. Nandagopal, Managing Director of 'Corporate Debtor' has preferred these appeals against the aforesaid orders dated 31st July, 2017 and 29th August, 2017 on the ground that provisions of Rule 5 have not been followed, as no demand notice under sub-section (1) of Section 8 of the 'I & B Code' was issued, nor relevant information in terms of Part IV of Form 5 were provided by the 'Financial Creditor' (Respondent herein). Reliance has been placed on the decision of this Appellate Tribunal in "M/s. Sabari Inn Pvt. Ltd. Vs. M/s. Rameesh Associates Pvt. Ltd.--Company Appeal (AT) (Insolvency) No. 117 of 2017" and "Mosmetrostroy (FZE) Vs. BASF India Ltd. & Anr.--Company Appeals (AT) (Insolvency) Nos. 229 & 230 of 2017".
(3.) Similar issue fell for consideration before this Appellate Tribunal in "M/s. Sabari Inn Pvt. Ltd. ", wherein this Appellate Tribunal by judgment dated 17th November, 2017, noticed Rule 5 and held as follows: "9. Learned counsel for the Appellant has enclosed the Central Government notification dated 7th December, 2016 issued from the Ministry of Corporate Affairs. By the said notification, in exercise of the powers conferred under sub-sections (1) and (2) of Section 434 of the Companies Act, 2013 read with sub-section (1) of Section 239 of the 'I & B Code', the Central Government framed "The Companies (Transfer of Pending Proceedings) Rules, 2016". 10. Rule 5 relates to transfer of pending proceedings of winding up on the ground of inability to pay debts which are to be transferred from the Hon'ble High Court's to the respective Tribunal and reads as follows:- "5. Transfer of pending proceedings of Winding up on the ground of inability to pay debts.-(1) All petitions relating to winding up under clause (e) of section 433 of the Act on the ground of inability to pay its debts pending before a High Court, and where the petition has not been served on the respondent as required under rule 26 of the Companies (Court) Rules, 1959 shall be transferred to the Bench of the Tribunal established under sub-section (4) of section 419 of the Act, exercising territorial jurisdiction and such petitions shall be treated as applications under sections 7, 8 or 9 of the Code, as the case may be, and dealt with in accordance with Part II of the Code: Provided that the petitioner shall submit all information, other than information forming part of the records transferred in accordance with Rule 7, required for admission of the petition under sections 7, 8 or 9 of the Code, as the case may be, including details of the proposed insolvency professional to the Tribunal within sixty days from date of this notification, failing which the petition shall abate. 2. All cases where opinion has been forwarded by Board for Industrial and Financial Reconstruction, for winding up of a company to a High Court and where no appeal is pending, the proceedings for winding up initiated under the Act, pursuant to section 20 of the Sick Industrial Companies (Special Provisions) Act, 1985 shall continue to be dealt with by such High Court in accordance with the provisions of the Act." 11. From the aforesaid Rule 5, it is clear after transfer of the case the Applicant (Respondent herein) was required to submit all information, other than in formation forming part of the records transferred from the High Court, for admission of the petition under Sections 7, 8 or 9 of the 'I & B Code', including details of the proposed 'Insolvency Professional' within sixty days, failing which, the petition shall stand abated. 12. As per Section 9 of the 'I & B Code', before admission of application and its filing, a demand notice under sub-section (1) of Section 8 is required to be issued on the 'Corporate Debtor', as quoted below: "8. Insolvency resolution by operational creditor.--(1) An operational creditor may, on the occurrence of a default, deliver a demand notice of unpaid operational debtor copy of an invoice demanding payment of the amount involved in the default to the corporate debtor in such form and manner as may be prescribed." 13. It is only on receipt of such notice under sub-section (1) of Section 8 of the 'I & B Code', the 'Corporate Debtor' may either pay the amount or may dispute the claim in terms of sub-section (2) of Section 8 of the 'I & B Code'. 14. Clause (a) and (b) of sub-rule (1) of Rule 5 of the 'Adjudicating Authority Rules' provides the format in which the demand notice/invoice demanding payment in respect of unpaid 'Operational Debt' is to be issued by 'Operational Creditor'. As per Rule 5(1)(a) & (b), the following person (s) are authorised to act on behalf of operational creditor, as apparent from the last portion of Form-3 and 4 which reads as follows:- "6. The undersigned request you to unconditionally repay the unpaid operational debt (in default) in full within ten days from the receipt of this letter failing which we shall initiate a corporate insolvency resolution process in respect of [name of corporate debtor]. Yours sincerely, 16. Form-5 is the format for filing application under section 9, as per which the following details are to be provided:- "Part I - particulars of applicant Part II - particulars of corporate debtor Part III - particulars of the proposed interim resolution professional (if proposed) Part IV - particulars of operational debt Part V - particulars of operational debt [documents, records and evidence of default] As per the instructions, the following documents are required to be attached: Annex I Copy of the invoice/demand notice as in Form 3 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 served on the Corporate debtor. Annex II Copies of all documents referred to in this application. Annex III Copy of the relevant accounts from the banks/financial institutions maintaining accounts of the operational creditor confirming that there is no payment of the relevant unpaid operational debt by the operational debtor, if available. Annex IV Affidavit in support of the application in accordance with the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016. Annex VI Written communication by the proposed interim resolution professional as set out in Form 2 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016. Annex VI Proof that the specified application fee has been paid." 17. Admittedly, no notice was issued under sub-section (1) of Section 8 of the 'I & B Code'. In terms with Rule 5, other informations were also not placed before the Adjudicating Authority. 18. The Respondent having failed to provide all the details as required under Form-5 as noticed above, the application under sections 433 and 434 of the Companies Act, 1956 cannot be treated to be an application under section 9 of the 'I & B Code' in terms of Rule 5 of Transfer Rules, 2016. In such circumstances, in view of proviso to Rule 5 of the Transfer Rules, the application under Sections 433 and 434 of the Companies Act, 1956 stands abated.";