Issuance Of Second Demand Notice U/S 8 Of IBC With Significant Changes Amounts To Fresh Notice: NCLAT

The National Company Law Appellate Tribunal (NCLAT) New Delhi bench of Justice Ashok Bhushan (Judicial Member) and Mr. Barun Mitra (Technical Member) has held that issuance of a fresh demand notice with significant changes like claimed amount, date of default etc. triggers a time line therefore if any dispute is pending between the parties before the demand notice is issued, an application under section 9 of the Insolvency and Bankruptcy Code, 2016 (IBC) cannot be admitted. The present appeal has been filed against an order passed by National Company Law Tribunal (NCLT) by which an application filed under section 9 of the IBC was rejected. The Operational Creditor and the Corporate Debtor entered into an agreement by which the Operational Creditor was engaged for design built services in a commercial cum hotel project Biwonder via a letter of intent dated 09.07.2019 worth Rs. 10.68 crore. The Operational Creditor started working on the same day and raised the 19th Running Account Bill of Rs. 4.68 crore on 15.03.2016. Despite repeated reminders, the Bill remained unpaid.A demand notice was issued on 12.02.2019 which was later withdrawn due to typographical errors. Meanwhile, the corporate debtor terminated the contract and filed a civil suit on 16.04.2019. A revised demand notice for Rs. 4.75 crore was issued on 25.04.2019 which was disputed by the Corporate Debtor. The Operational Creditor filed an application under section 9 of the Code which was dismissed by the Adjudicating Authority. The Appellant submitted that this civil suit could not be treated as pre-existing dispute since it was filed after the first demand notice was issued on 12.02.2019 and the second demand notice was a continuation of the first demand notice. It was further submitted that Amendment of the demand notice on account of clerical error and subsequent issue of a corrected demand notice cannot be viewed as a fresh demand notice. Since the second demand notice for all legal purposes was a continuation of the first demand notice, the Civil Suit cannot be treated as a pre-existing dispute as it had been filed after the receipt of the first demand notice by the Corporate Debtor. Per contra, the Respondent submitted that the Title Suit No. 371 of 2019 which had been filed by the Corporate Debtor on 16.04.2019 was prior to the issue of the demand notice of 25.04.2019 which clearly demonstrates pre-existing disputes. The Tribunal observed that it is true that the first demand notice was issued by the Operational Creditor before filing of the Civil Suit. However, this demand notice was later withdrawn. The second demand notice was later issued which was referred to as a fresh notice. Therefore, it cannot be said that the second demand notice was a continuation of the first one. The Adjudicating Authority rightly held that the second demand triggered a new timeline due to introduction of significant changes in it like the amount claimed, date of default and last payment received thereby leading to the novation of the original claim. It further held that since in the present case, the civil suit was filed prior to the issuance of the second demand notice, the Adjudicating Authority was right in holding that the application was barred by the pre-existing dispute. The Tribunal concluded that both termination of contract and filing of the civil suit in the present case were done before the issuance of the demand notice under section 8 of the IBC. In addition to this, disputes regarding quality of work, delays, imposition of new commercial and financial terms etc. were consistently raised and communicated via e-mails. These communications clearly amounted to a pre-existing dispute between the parties under section 8 of the IBC. Accordingly, the present appeal was dismissed. Case Title:Innovators Cleantech Private Limited Versus Pasari Multi Projects Private Limited. Case Number: Company Appeal (AT) (Insolvency) No. 115 of 2024 Judgment Date: 09/07/2025 For Appellant: Mr. Anuj Bhandari, Advocate. For Respondent : Mr. Abhijeet Sinha, Sr. Advocate with Mr. Ashok Kumar Jain and Mr. Amit Kasera, Advocates.Click Here To Read/Download The Order

Issuance Of Second Demand Notice U/S 8 Of IBC With Significant Changes Amounts To Fresh Notice: NCLAT

Mohd Malik Chauhan

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Issuance Of Second Demand Notice U/S 8 Of IBC With Significant Changes Amounts To Fresh Notice: NCLAT

Mohd Malik Chauhan

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