Ashok Agarwal Versus Amitex Polymers Private Limited

Court / Forum : National Company Law Tribunal, New Delhi
Citation : (IB) No. 1895/ND/2019
Coram : Mr. Abni Ranjan Kumar Sinha, Hon’ble Member (Judicial), Mr. Kapal Kumar Vohra, Hon’ble Member (Technical)
Subject : Section 9 of the Insolvency and Bankruptcy Code, 2016 (“IBC”)
Date of Decision : June 8, 2020

Brief Facts

• In February 2011, the Respondent approached the Applicant for supply of materials. It was agreed that Respondent would make payments within 30 days of receipt of invoice. The Respondent paid only for few invoices and failed to clear the outstanding dues.
• In 2014, the Applicant had filed a case in Saket District Court for recovery of the outstanding amount. The learned Judge passed a consent decree dated October 25, 2018 as per the settlement agreement executed between the parties on August 16, 2018. As per the decree total dues amounted to Rs. 8,85,000/- (Rupees Eight Lacs Eighty-Five Thousand Only).
• The Applicant vide letter dated March 11, 2019 issued a demand notice under section 8 of the IBC to the Respondent and served the demand notice vide email dated April 1, 2019 at the e-mail address of the Respondent as available with the master data of the Respondent.
• Thereafter, the Applicant filed an application under section 9 of the IBC.

Issues

1. Whether the Applicant has complied with section 8(1) of the IBC?
2. Whether decree comes under the definition of operational debt or not?

Decision

• With respect to first issue, the Hon’ble National Company Law Tribunal (“Tribunal”) perused the tracking report, it was found that notice was sent on November 13, 2019 but it was not delivered to the registered office of the Corporate Debtor. The notice was returned to the Applicant. Further, the tracking report shows that the address provided by the Applicant was insufficient.
• Thereafter, the Hon’ble Tribunal referred to the e-mail dated April 1, 2019. On perusal of master data of the Respondent, it was found that the e-mail ids of the directors of the Respondent were not provided but the email id of Respondent was available, which being the email id wherein the Applicant had sent the mail. However, this e-mail id is not of one of the persons as required under rule 5(2) of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016. As per the said rule, if demand notice is sent through e-mail, then it can be mailed only to whole time director or designated partner or key managerial person of the Corporate Debtor.
• Therefore, demand notice required under section 8(1) of the IBC has not been delivered.
• With respect to second issue, the Hon’ble Tribunal referred to definition of creditor as provided under section 3(10) of the IBC which provides that even a decree holder is a creditor. Thereafter, the Hon’ble Tribunal referred to definitions of financial creditor [section 5(7) of the IBC], operational creditor [section 5(20) of the IBC], financial debt [section 5(8) of the IBC] and operational debt [section 5(21) of the IBC].
• In the present case, the Applicant has filed the application under section 9 of the IBC on the basis of consent decree claiming that an operational debt is due. But decree is not covered within the definition of operational debt as provided in section 5(21) of the IBC. The definition of creditor includes a decree holder, but definition of operational creditor does not include a decree holder.
• The Hon’ble Tribunal also referred to judgment of Hon’ble National Company Law Appellate Tribunal passed in the case of Digamber Bhondwe vs. JM Financial Asset Reconstruction Company Ltd. [Company Appeal (AT) (Insolvency) No. 1379 of 2019, decided on March 5, 2020], wherein it was held that decree holder does not come within the definition of operational creditor.
• Section 3 is in Part I of the IBC and Insolvency Resolution and Liquidation of Corporate Persons is dealt in Part II of the IBC which has its own set of definitions under section 5 of the IBC. The definitions of financial creditor and operational creditor does not include a decree holder for the purpose of initiating insolvency resolution process under the IBC. As the decree holder does not come within the definition of operational creditor, therefore, the present petition is not maintainable.