IBC Laws Blog

ONE PAGE #13 – In the matter of D Srinivasa Rao V Vaishnovi Infratech Ltd

ONE PAGE #13 – In the matter of D Srinivasa Rao V Vaishnovi Infratech Ltd
Refusal to accept delivery of Statutory Demand Notice by CD is not its Non-Delivery
#Courts:  NCLT Hyderabad & NCLAT Chairman Bench AT# 880/2020 Dt 05.01.2021

1. Facts of the Case:

  1. Appellant is Sec 9 Applicant and the Respondent is CD. No appearance was there on behalf of Respondent despite awaiting appearance, hence proceeded to hear ex-parte.
  2. Application rejected by NCLT on the ground that the demand notice (u/s 8) was not served on CD and the same got returned unserved.
  3. Appellant with the proof of postal endorsement “addressee refused service” averred that the CD refused to accept delivery of the demand notice being aware of the contents of the notice, and such refusal to accept the demand notice would not amount to non-delivery of the same.

2. Analysis by NCLAT:

  1. Sec 9 application can be filed by OC only after expiry of 10 days of delivery of notice as per Sec 8(1) of the Code. Delivery of demand notice is sine-qua-non for filing Sec 9 application.  
  2. Delivery of demand notice is intended to put the CD on notice so that in the event there is any pre-existing dispute in respect to the default alleged, CD can bring such pre-existing dispute to the notice of the OC.
  3. Also, it is aimed at providing an opportunity to the CD to clear the liability in case he does not dispute the claim.
  4. Delivery of demand notice is sine-qua-non (essential) for filing Sec 9 application but the Speed post receipt, copy of the postal article bearing endorsement of postal authority to the effect that the ‘addressee refused service” prove that it is not a case of non-issuance/non-delivery of demand notice, but a case of refusal on part of the CD.  Also, a notice sent by NCLT got delivered to CD on 14.11.2019 at the same address in response whereof the CD had appeared before NCLT which means, CD deliberately refused to acknowledge the notice and NCLT would not be justified coming to conclusion that notice has not been served on the CD

3. Judgment:

  1. NCLT has erred in arriving at the finding that the demand notice was not served on CD as the same was returned unserved.
  2. Hence, impugned order is set aside and matter is remanded back to NCLT who may after providing the CD an opportunity of settling the claim, pass an order for admission or otherwise.

MS Mano Ranjani

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All about Indian Insolvency Laws.

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