The National Company Law Appellate Tribunal ("NCLAT"), New Delhi Bench, has ruled that a Corporate Debtor is not precluded from contesting an application filed under Section 9 of the Insolvency and Bankruptcy Code, 2016 ("IBC"), merely because it did not reply to the demand notice issued under Section 8 of the Code.
The appeal challenged an order of the Adjudicating Authority dismissing an application under Section 9 of the IBC on the ground that the claimed amount did not meet the statutory threshold limit. Spik Enviro Management Pvt. Ltd. ("Appellant") filed the application under Section 9 on 18.08.2020, seeking recovery of Rs. 2,77,68,000/- from Vision Earthcare Pvt. Ltd. ("Corporate Debtor"). The Corporate Debtor had received three work orders from Gujarat-based companies through the Operational Creditor but failed to make the requisite payments. Instead, on 18.07.2020, the Corporate Debtor issued a notice asking Mr. Iyengar, Director of the Operational Creditor, to resign from its board. Consequently, the Operational Creditor served a demand notice under Section 8 of the Code.
The Corporate Debtor did not reply to the demand notice but later contested the Section 9 application on 01.04.2021, arguing that the amount claimed arose under an Agreement dated 25.11.2018, which it had not executed with the Appellant.
The Tribunal emphasized that while issuing a demand notice under Section 8 is a prerequisite for maintaining a Section 9 application, a Corporate Debtor is not barred from contesting the application if it did not respond to the notice. The Tribunal noted that an Operational Creditor must serve a demand notice upon default, and the Corporate Debtor is given ten days to dispute or settle the claim. However, the absence of a response does not automatically imply admission of the debt.
The NCLAT rejected the Appellant’s argument that the Corporate Debtor was barred from raising a defense and held that failure to respond to a Section 8 notice does not prevent the Corporate Debtor from contesting a Section 9 application. Consequently, the appeal was dismissed.
Case Title: Spik Enviro Management Pvt. Ltd. Versus Vision Earthcare Pvt. Ltd. Case Number
Company Appeal (AT) (Ins) No. 1507 of 2023
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