The company petition filed by M/s Cloudwalker Streaming Technologies Pvt. Ltd., under Section 9 of Insolvency & Bankruptcy Code, 2016 against the Corporate Debtor on the ground that it has committed default for a sum of Rs.26,95,00,000/-

The Operational Creditor contacted the Corporate debtor for importing and supplying LED TVs to the Corporate debtor. Both parties were entered into the Supply agreement on 29th December 2016. The Operational Creditor had been importing and supplying LED TVs to the Corporate Debtor from time to time, under purchase orders as per Clause 2(a) of the Supply Agreement placed by the Corporate Debtor which provides for the manner of order placement. The Corporate Debtor used to place purchase orders through e-mails which were duly recognized by the Operational Creditor. After receiving the said purchase order, the Operational Creditor used to import and procure the required quantities of LED TVs and deliver the same to the Corporate Debtor at its desired locality.

The Operational Creditor demanded the payment of the LED TV procured and imported for the Corporate Debtor, from 11th October 2017 to 1st December 2017, based on the import and the purchase order issued by the Corporate Debtor. The Corporate Debtor had failed to collect more than seventy percent of the stock as ordered by them till March 2018. The Operational Creditor has issued a demand notice under Form three dated 08th June 2019, under Section 8 of the Insolvency and Bankruptcy Code, 2016 which was received by the Corporate Debtor on 13th June 2019. However, there has been no reply to the same. The Corporate Debtor has not raised any dispute about the sum outstanding to the Operational Creditor at any point in time.

The Adjudicating Authority has dismissed the contention of the Corporate Debtor‘ and held that there was no pre-existing or post existing dispute, and the petition is complete, in accordance with the second proviso to Section 9 of the Code. It is further noted that despite service of demand notice, neither any payment was made by the Corporate Debtor, nor any notice of dispute was raised. Thus petition got admitted by the Impugned Order.

Issues

The primary issues in the present case were the following as under :

1. Whether it is the discretion of the Operational Creditor, or the nature of the Operational Debt, that determines the issuance of notice in Form 3 or Form 4 under Section 8 (1) of the Insolvency and Bankruptcy Code 2016?
2. Whether or not, copy of the invoice is a mandatory requirement for issuance of demand notice Under section 8(1) of the Insolvency and Bankruptcy Code 2016, in Form 3 of the Insolvency and Bankruptcy (Adjudicating to Authority) Rules 2016?
3. Whether or not for filing an application, under section 9 of the Code in Form 5 under [sub-rule (1) of Rule 6] Insolvency and Bankruptcy (Adjudicating to Authority )Rules 2016, the submission of a copy of the invoice is a mandatory requirement, although the demand notice is served in Form 3?

Judgment

National Company Law Appellate Tribunal (NCLAT) set aside the impugned order dated 24th October 2019 passed by the Adjudicating Authority and the application filed under Section 9 by the Operational Creditor is dismissed. The Corporate Debtor is released from the Corporate Insolvency Resolution Process. Interim Resolution Professional will handover the assets and records of the Corporate Debtor to the Promoter immediately, who will manage the Corporate Debtor. The Appeal is permitted with the aforesaid directions and observations. The Adjudicating Authority is ordered to pass an order for payment of CIRP cost.

National Company Law Appellate Tribunal (NCLAT) further held that the choice of issuance of demand notice under section 8(1) of the Insolvency and Bankruptcy Code 2016, either in Form 4 or Form 3, under the Insolvency and Bankruptcy Code Application to Adjudicating Authority Rules 2016, depends on the nature of Operational Debt. Section 8(1) does not provide the Operational Creditor, with the discretion to send the demand notice either Form 4 or Form 3, according to its convenience.

The applicability of Form 4 or Form 3 depends on whether the invoices were generated during the course of the transaction or not. It is also made clear that the copy of the invoice is not compulsory if the demand notice is issued in Form 3 of the Insolvency and Bankruptcy Code Application to Adjudicating Authority Rules 2016 provided the documents to prove the existence of operational debt and the sum in default is attached with the application.