Section 9 Petition Is Not Maintainable If Demand Notice Was Not In Prescribed Format: NCLT Hyderabad

The National Company Law Tribunal, Hyderabad Bench, comprising Smt. Telaprolu Rajani (Judicial Member) and Shri Charan Singh (Technical Member), while adjudicating an application under Section 9 of Insolvency and Bankruptcy Code, 2016 (“IBC, 2016”) in M/s. Ven Infra Projects vs M/s. Valentis Laboratories Private Limited has held that mandate of Section 8 IBC, 2016 need to be fulfilled before an application under Section 9 IBC, 2016 is filed. Thus Section 9 IBC, 2016 application is not maintainable if the Demand Notice is not in the prescribed format. Background Facts M/s. Valentis Laboratories Private Limited (“Corporate Debtor”) approached M/s. Ven Infra Projects (“Operational Creditor”) for availing their construction services. The Operational Creditor completed the construction and raised 7 invoices amounting to Rs. 94,99,247/-. The Operational Creditor requested the Corporate Debtor to clear the outstanding debt on several occasions. When the Corporate Debtor failed to clear the same, the Operational Creditor sent a Demand Notice dated 29.09.2014 to the Corporate Debtor. It was contended by the Corporate Debtor that the Demand Notice sent to them was in running word printed format without following the specified form prescribed under IBC, 2016. Further an Advance Amount of Rs. 32,96,754 was paid against the quotation submitted by the Operational Creditor. It was further contended that the Corporate Debtor was not satisfied with the work of the Operational Creditor and even the Telangana State Industrial Infrastructure Corporation (TSIIC) addressed a letter dated 20.06.2019 to the Corporate Debtor highlighting certain defects in the construction. Findings of the Tribunal The Tribunal observed that the Demand Notice was issued in Form-3 but Form-4 was not attached to the Form-3 notice. Although the Demand Notice was sent as mandated by Section 8 but it was not in the prescribed format. It is mandatory to fulfill the requirements of Section 8, IBC, 2016 before a Section 9, IBC application is filed. Since there is non-compliance Rule 5 of the Insolvency & Bankruptcy Code (Application for Adjudicating Authority) Rules, 2016, the application is not maintainable. Reliance was placed on the NCLAT judgment of Uttam Galva Steels Vs. DF Deutsche Forfait AG and Ors. Company Appeal (AT) (Insolvency) No.39 of 2017 wherein it was held that the requirements of Section 8 IBC, 2016 need to be fulfilled before filing an application under Section 9 IBC, 2016. It was further observed that an E-mail dated 28.09.2019 was sent by the Corporate Debtor in which various defects were pointed out by the Corporate Debtor and the Operational Creditor was asked to repair the same but there was no action from the Corporate Debtor. Thus there was also a pre-existing dispute with respect to the issue. With the aforesaid observations, the Tribunal rejected the petition. Case:M/s. Ven Infra Projects vs M/s. Valentis Laboratories Private Limited Case No. CP (IB) No. 54/9/HDB/2020 Counsels for the Applicants; Adv. P. Vikram Counsel for the Respondent ;Adv. V. Pandu Ranga Reddy a/w Adv. Parameswara Reddy Click Here To Read/Download Order

Section 9 Petition Is Not Maintainable If Demand Notice Was Not In Prescribed Format: NCLT Hyderabad

Udai Yashvir Singh

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