Operational Creditor’s CIRP Petition Was to Be Rejected Due to Non-Compliance With Demand Notice Rules | NCLT

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Operational Creditor's CIRP Petition

Case Details: Tata International Ltd. v. Trident Sugars Ltd. - [2024] 158 taxmann.com 287 (NCLT - Hyd.)[31-08-2023]

Judiciary and Counsel Details

    • Dr. Venkata Ramakrishna Badarinath Nandula, Judicial Member & Charan Singh, Technical Member
    • Y. Suryanarayana Ld. Counsel & Mrs Mano Ranjani, Adv. for the Petitioner.
    • Sri. P. Sri Raghuram, Ld. Sr. Counsel & P. Sastry, Adv. for the Respondent.

Facts of the Case

In the instant case, the Respondent Corporate Debtor (CD) had entered into a trade agreement dated 30.9.2023, with the Petitioner Operational Creditor (OC) for the supply of sugar wherein the OC had paid an advance of Rs. 15 crores to CD with a commitment to perform the entire contract on or before 31.3.2020.

However, CD breached the said contract and did not supply sugar at all. Despite several requests payments were not received and consequently, the OC issued a demand notice claiming the outstanding amount.

Thereafter, an instant petition was filed by the OC for initiating CIRP against CD u/s 9 of the IBC, 2016. In response to the petition, CD alleged that notice had not been received/nor delivered to it since its office was closed due to the pandemic Covid-19 (2nd phase), and even notice by way of mail was not received.

It was noted that the OC was relying on a postal track report, which was not ‘acknowledgment due’ as mandated under sub-rule (2)(a) of rule 5 of Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016, and, thus, service was invalid.

NCLT Held

The NCLT noted that consequent upon entering into MOU dated 18.2.2022, whereunder repayment of dues under the Trade Agreement dated 30.9.2023 had been rescheduled, the date of default relied on for instant proceeds was factually incorrect and a deliberate factual misquote by the OC.

Also, the NCLT held that since the first rescheduled payment was to commence from February 2022, the demand notice dated 15.11.2020 being before February 2022, could not be treated as the date of occurrence of default for notice demanding payment of the operational debt in terms of Explanation provided in section 8.

Since the OC had failed to place any record to show that the demand notice which was claimed to have been sent to the CD by speed post was, with ‘acknowledgement due’ and also, there was non-compliance of Rule specified above, the NCLT held that the instant petition filed by the OC was not maintainable either under law or on facts and same was liable to be rejected.

List of Cases Reviewed

    • T Surva Satish v. State of Telangana [Crl. Petition No. 2461 of 2020, dated 9-11-2020] (para 24)
    • Taylor v. Taylor I.L.R. [1960] 2 All. 488 (para 28) followed.

List of Cases Referred to

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