S. 8 IBC | Service Of Demand Notice On Corporate Debtor's Key Managerial Personnel Is Valid To Trigger Insolvency Process : Supreme Court

The Supreme Court on Tuesday (April 29) upheld the delivery of a demand notice under Section 8 of the Insolvency and Bankruptcy Code, 2016 (“IBC”) to the corporate debtor's Key Managerial Personnel (KMP), stating that the delivery of the notice to the KMP substantially complies with the requirement of Section 8 of IBC. Setting aside the National Company Law Appellate Tribunal (NCLAT) ruling, the bench of Justices JB Pardiwala and R Mahadevan allowed the Operational Creditor's appeal, stating that delivery of the demand notice to the corporate debtor's KMP constitutes deemed service of the notice. The judgment authored by Justice Mahadevan observed that, since the Respondent-Corporate Debtor failed to demonstrate any prejudice resulting from the notice being served on its Key Managerial Personnel (KMP), the Court held that a substantive right should not be defeated on a mere technicality. Accordingly, it treated the delivery of the notice as valid and constituted deemed service of the demand notice. “In the instant case, the respondent was unable to show any substantial prejudice being caused to them on account of such procedural irregularity. Therefore, in our opinion, the notice dated 31.03.2021 issued by the appellant to the KMP of the Corporate Debtor and delivered at the registered office of the Corporate Debtor, can be construed as a deemed service of demand notice as required under section 8 of the IBC. In such view of the matter, the approach of the NCLT and the NCLAT rejecting the section 9 petition on the technical ground that no notice was sent to the corporate debtor and the notice sent by the appellant to the KMP of the corporate debtor cannot be taken to be a notice issued under section 8 of the IBC, is incorrect and is unsustainable in law.”, the court observed. “Undoubtedly, the purpose of sending a demand notice is to give the corporate debtor an opportunity to either repay the outstanding debt, or dispute the debt if there are genuine reasons. In the present case, the notice dated 31.03.2021 sent by the appellant to the KMP of the corporate debtor at the registered office address in the capacity of their official position, explicitly demonstrates that the same was issued to the corporate debtor demanding the operational debt due and payable by them. However, it is not the case of the respondent that no notice was sent by the appellant calling upon the respondent - Corporate Debtor to pay the operational debt. Further, it is pertinent to point out that during the pendency of the section 9 petition, the Corporate Debtor approached the Operational Creditor for settlement, which was not fructified.”, the court added. Reference was drawn to the case of Rajneesh Aggarwal v. Amit J. Bhalla, (2001) 1 SCC 631, where, while dealing with the requirement of notice under Section 138 of the Negotiable Instruments Act, 1881, the Court held that a notice issued upon the Director of the Company amounts to notice to the Company. Also, the Court approved the NCLAT's decision in K.B. Polychem (India) Ltd. v. Kaygee Shoetech Pvt. Ltd., where service on a Director of a Company was deemed sufficient for triggering insolvency. In terms of the aforesaid, the Court allowed the appeal and remanded the matter to the NCLT for fresh consideration on merits. Case Title: VISA COKE LIMITED VERSUS M/S MESCO KALINGA STEEL LIMITEDCitation : 2025 LiveLaw (SC) 505Click here to read/download the judgmentAppearance: For Appellant(s) : Mr. Rajiv Shakdher, Sr. Adv. Mr. Diwakar Maheshwari, Adv. Ms. Pratiksha Mishra, AOR Mr. Karan Bhootra, Adv. Mr. Karan Khetani, Adv. Mr. Jonathan Ivan Rajan, Adv. For Respondent(s) : Mr. Ramji Srinivasan, Sr. Adv. Mr. Saswat Kumar Acharya, Adv. Mr. Dhananjay Bhaskar Ray, AOR Mr. Arjun Bhatia, Adv.

S. 8 IBC | Service Of Demand Notice On Corporate Debtor's Key Managerial Personnel Is Valid To Trigger Insolvency Process : Supreme Court

Yash Mittal

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