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Judgment
O R D E R
Per : Justice Rakesh Kumar Jain: (Oral)
This appeal is directed against the order dated 28.04.2017 passed by the ‘Adjudicating Authority’ (National Company Law Tribunal, Allahabad Bench), by which a petition bearing C.P (IB) No. 36/ALD/2017 filed by the Appellant under Section 9 of the ‘Insolvency and Bankruptcy Code, 2016’ (in short ‘Code’), R/w Rule 6 of the ‘Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules 2016’, has been dismissed.
In the first round of litigation, the Appellant was nonsuited by this Tribunal vide its order dated 12.09.2017 on the ground of its locus standi. However, the order dated 12.09.2017 was challenged by the Appellant before the ‘Apex Court’ in ‘Civil Appeal No. 20978 of 2017’, which was allowed on 30.04.2019 reported as 2019 (11) SCC 332 and the matter was remanded back to this Tribunal for adjudication.
During the course of hearing, it was argued by counsel for the Appellant that there are two issues involved in this appeal for consideration of this Tribunal, namely, as to whether the Application filed under Section 9 of the Code was premature though it has not been filed after the expiry of 10 days from the date of offer of notice issued under Section 8 of the Code? and whether there was a pre-existing dispute on account of which the application was dismissed?
Counsel for the Appellant opened his argument to deal with the first issue which goes to the root of the case because if it is found that the application filed by the Appellant under Section 9 of the Code was premature, the other issue regarding as to whether there was a pre-existing dispute or not, need not to be answered.
Counsel for the Appellant has submitted that the notice under Section 8 of the Code was prepared on 14.03.2017 and posted on the same day through speed post and as per tracking report, the said notice was first offered to be delivered to the Respondent on 17.03.2017 at 05:30PM but could not delivered because the premises was found locked.
He has further submitted that since the address of the Respondent was correct and the notice was sent through registered post (speed post), therefore, as per Section 27 of the General Clauses, Act 1897 (for short ‘ the Act of 1897’) presumption of delivery of notice has to be drawn w.e.f. 17.03.2017 and since the petition under Section 9 of the Code was filed on 28.03.2017, therefore, it has to be presumed that the said petition was filed 10 days after delivery of notice and thus there was a complete compliance of the provisions of Section 8 & 9 of the code and the observations made by the Adjudicating Authority that “As the notice is received by Corporate Debtor only on 21st March it cannot be presumed concluded that 10 clear days were given enabling the Corporate Debtor for either making repayment of debts or to inform about the dispute in existence. Hence, we find that present application on this ground alone is not complete and found fit for admission.” is erroneous.
Counsel for the Appellant has relied upon a decision of the Hon’ble Supreme Court rendered in the case of C.C.Alavi Haji Vs. Palapetty Muhammed and Anr (2007) 6 SCC 555 to contend that in case where the notice is properly addressed and is posted through registered post, even if not delivered to the Recipient for the reason like refusal, not available in the house, house locked, shop closed or addressee not in station, it should be presumed as due service in view of Section 27 of the Act of 1897.
On the other hand, Counsel appearing on behalf of the Respondent has submitted that as per tracking report (Annexure-B), the demand notice dated 14.03.2017 was first offered for delivery on 17.03.2017 and when it was found that the door of the premises was locked, it was again offered for delivery on 18.03.2017 at 15:06 hours but it could not be delivered because the door of the premises was again found locked and then it was offered for delivery on 20.03.2017 at 10:35 hours but it could also not be delivered because the door of the premises was found locked but ultimately it was delivered on 21.03.2017 at 16:17 hours to Shashi Kant Jha. It is submitted that the notice was actually delivered on 21.03.2017 and the period of 10 days, counted from 21.03.2017 would have expired on 31.03.2017 whereas the petition under Section 9 of the Code was admittedly filed on 28.3.2017, before the expiry of period of 10 days as prescribed under Section 9 of the Code and thus it has rightly been found premature by the Adjudicating Authority. He has further submitted that the decision in the case of C.C.Alavi Haji (supra), is not applicable to the present case because the said decision has been rendered in a matter under Section 138 of the Negotiable Instruments Act, 1881 (the Act of 1881) and also in the said case, notice was not delivered at all and, therefore, presumption was drawn whereas in the present case, the notice was actually delivered on 21.03.2017, therefore, the presumption cannot take the place of proof. He has further submitted that the intention of the legislature has to be gathered from the language used in Section 8 & 9 of the Code in which “delivery of the demand notice” under Section 8 of the Code and “filed the petition after 10 days of delivery of notice” in Section 9 of the Code is stipulated. He has argued that the legislature has not used the word deemed delivery either in Section 8 or Section 9 of the Code. He has also relied upon a decision of this Tribunal rendered in Smart Timing Steel Ltd. Vs. National Steel and Agro Industries Ltd Company Appeal (AT) (Ins) No. 28 of 2017 decided on 19.05.2017 in which it has been held “On perusal of entire Section (3) along with sub-sections and clauses, inclusive of proviso, it would be crystal clear that, the entire provision of subclause (3) of Section 9 required to be mandatorily followed and it is not empty statutory formality”.
We have heard counsel for the parties and perused the material available on record. Since, we have to decide the issue as to whether the application filed by the Appellant, was premature because notice prescribed under Section 8 of the Code was served on 21.03.2017 and the application was filed on 28.03.2017 or the application filed by the Appellant was maintainable because the date of delivery is to be presumed from 17.03.2017 when the first attempt was made to deliver the notice but it could not delivered because the premises was locked and since the application under Section 9 of the Code, was filed on 28.03.2017, therefore, it was in accordance with law. In order to answer this question, it would be relevant to refer to the provisions of Section 8 & 9 of the Code which are reproduced as under:
“Section 8: Insolvency resolution by operational creditor.
8.(1) An operational creditor may, on the occurrence of a default, deliver a demand notice of unpaid operational debt or copy of an invoice demanding payment of the amount involved in the default to the corporate debtor in such form and manner as may be prescribed.
(2)The corporate debtor shall, within a period of ten days of the receipt of the demand notice or copy of the invoice mentioned in sub-section (1) bring to the notice of the operational creditor— (a) existence of a dispute, [if any, or] record of the pendency of the suit or arbitration proceedings filed before the receipt of such notice or invoice in relation to such dispute;
(b)the [payment] of unpaid operational debt—
(i)by sending an attested copy of the record of electronic transfer of the unpaid amount from the bank account of the corporate debtor; or
(ii)by sending an attested copy of record that the operational creditor has encashed a cheque issued by the corporate debtor.
Explanation.—For the purposes of this section, a “demand notice” means a notice served by an operational creditor to the corporate debtor demanding [payment] of the operational debt in respect of which the default has occurred.”
Section 9: Application for initiation of corporate insolvency resolution process by operational creditor.
9.(1) After the expiry of the period of ten days from the date of delivery of the notice or invoice demanding payment under sub-section (1) of section 8, if the operational creditor does not receive payment from the corporate debtor or notice of the dispute under sub-section (2) of section 8, the operational creditor may file an application before the Adjudicating Authority for initiating a corporate insolvency resolution process.
(2)The application under sub-section (1) shall be filed in such form and manner and accompanied with such fee as may be prescribed.
(3)The operational creditor shall, along with the application furnish—
(a)a copy of the invoice demanding payment or demand notice delivered by the operational creditor to the corporate debtor;
(b)an affidavit to the effect that there is no notice given by the corporate debtor relating to a dispute of the unpaid operational debt;
(c)a copy of the certificate from the financial institutions maintaining accounts of the operational creditor confirming that there is no payment of an unpaid operational debt 1 [by the corporate debtor, if available;]
(d)a copy of any record with information utility confirming that there is no payment of an unpaid operational debt by the corporate debtor, if available; and (e) any other proof confirming that there is no payment of any unpaid operational debt by the corporate debtor or such other information, as may be prescribed.]
(4)An operational creditor initiating a corporate insolvency resolution process under this section, may propose a resolution professional to act as an interim resolution professional.
(5)The Adjudicating Authority shallJ1, within fourteen days of the receipt of the application under sub-section (2), by an order—
(i)admit the application and communicate such decision to the operational creditor and the corporate debtor if,—
(a)the application made under sub-section (2) is complete;
(b)there is no [payment] of the unpaid operational debt;
(c)the invoice or notice for payment to the corporate debtor has been delivered by the operational creditor;
(d)no notice of dispute has been received by the operational creditor or there is no record of dispute in the information utility; and
(e)there is no disciplinary proceeding pending against any resolution professional proposed under sub-section (4), if any. (ii) reject the application and communicate such decision to the operational creditor and the corporate debtor, if—
(a)the application made under sub-section (2) is incomplete; (b) there has been [payment] of the unpaid operational debt; (c) the creditor has not delivered the invoice or notice for payment to the corporate debtor;
(d)notice of dispute has been received by the operational creditor or there is a record of dispute in the information utility; or
(e)any disciplinary proceeding is pending4 against any proposed resolution professional:
Provided that Adjudicating Authority, shall before rejecting an application under sub-clause (a) of clause (ii) give a notice to the applicant to rectify the defect in his application within seven days(i) of the date of receipt of such notice from the adjudicating Authority.
(6)The corporate insolvency resolution process shall commence from the date of admission of the application under sub-section (5) of this section.”
It is provided in Section 8 of the Code that the Operational Creditor, on occurrence of a default, may deliver a demand notice of the unpaid operational debt and the Corporate Debtor has to react to the notice within a period of ten days from the receipt by bringing it to the notice of the operational creditor— (a) about existence of a dispute (b) payment of unpaid operational debt. Section 9 of the code provides that the Operational Creditor is eligible to file application under Section 9 only after the expiry of the period of ten days from the date of delivery of the notice prescribed under sub-section (1) of section 8. A careful reading of the aforesaid two provisions, thus, shows that the demand notice of unpaid operational debt is a sine qua non to invoke the provision of Section 9 of the Code. The Corporate Debtor has to react within 10 days from the receipt of demand notice to set up a defence and the application under Section 9 could only be filed by the Operational Creditor after the expiry of 10 days from the date of delivery meaning thereby the application under Section 9, in no case, can be filed before the expiry of 10 days from the date of delivery.
In the present case, the dispute travels in a narrow compass, as to whether the date of offer of delivery of notice i.e. 17.03.2017 has to be presumed as the date of delivery in view of Section 27 of the Act of 1897 or the date of delivery i.e. 21.03.2017 has to be considered when the notice was actually delivered to the Recipient/ Corporate Debtor. The Appellant has relied upon Section 27 of the Act of 1897 and the decision of the Hon’ble Supreme Court in C.C.Alavi Haji (supra). It would be relevant to refer to Section 27 of the Act of 1897 which reads as under:
“14.Section 27 gives rise to a presumption that service of notice has been effected when it is sent to the correct address by registered post. In view of the said presumption, when stating that a notice has been sent by registered post to the address of the drawer, it is unnecessary to further aver in the complaint that in spite of the return of the notice unserved, it is deemed to have been served or that the addressee is deemed to have knowledge of the notice. Unless and until the contrary is proved by the addressee, service of notice is deemed to have been effected at the time at which the letter would have been delivered in the ordinary course of business. This Court has already held that when a notice is sent by registered post and is returned with a postal endorsement refused or not available in the house or house locked or shop closed or addressee not in station, due service has to be presumed. [Vide Jagdish Singh Vs. Natthu Singh ; State of M.P. Vs. Hiralal & Ors. and V.Raja Kumari Vs. P.Subbarama Naidu & Anr. ] It is, therefore, manifest that in view of the presumption available under Section 27 of the Act, it is not necessary to aver in the complaint under Section 138 of the Act that service of notice was evaded by the accused or that the accused had a role to play in the return of the notice unserved.”
Insofar as, the decision of the Hon’ble Supreme Court C.C.Alavi Haji (supra) is concerned, it was relating to the proceedings under Section 138 of the Act of 1881. Section 138 of the Act of 1881 read as under:
“138 Dishonour of cheque for insufficiency, etc., of funds in the account. —
Where any cheque drawn by a person on an account maintained by him with a banker for payment of any amount of money to another person from out of that account for the discharge, in whole or in part, of any debt or other liability, is returned by the bank unpaid, either because of the amount of money standing to the credit of that account is insufficient to honour the cheque or that it exceeds the amount arranged to be paid from that account by an agreement made with that bank, such person shall be deemed to have committed an offence and shall, without prejudice to any other provisions of this Act, be punished with imprisonment for [a term which may be extended to two years], or with fine which may extend to twice the amount of the cheque, or with both: Provided that nothing contained in this section shall apply unless—
(a)the cheque has been presented to the bank within a period of six months from the date on which it is drawn or within the period of its validity, whichever is earlier;
(b)the payee or the holder in due course of the cheque, as the case may be, makes a demand for the payment of the said amount of money by giving a notice in writing, to the drawer of the cheque, [within thirty days] of the receipt of information by him from the bank regarding the return of the cheque as unpaid; and
(c)the drawer of such cheque fails to make the payment of the said amount of money to the payee or, as the case may be, to the holder in due course of the cheque, within fifteen days of the receipt of the said notice.
Explanation.— For the purposes of this section, “debt or other liability” means a legally enforceable debt or other liability.]”
In the case of C.C.Alavi Haji (supra) the question was “whether in absence of any averments in the complaint to the effect that the accused had a role to play in the matter of non-receipt of legal notice; or that the accused deliberately avoided service of notice, the same could have been entertained keeping in view the decision of this Court in Vinod Shivappa’s case”. The Hon’ble Supreme Court has made the following observations in para 14:
“14.Section 27 gives rise to a presumption that service of notice has been effected when it is sent to the correct address by registered post. In view of the said presumption, when stating that a notice has been sent by registered post to the address of the drawer, it is unnecessary to further aver in the complaint that in spite of the return of the notice unserved, it is deemed to have been served or that the addressee is deemed to have knowledge of the notice. Unless and until the contrary is proved by the addressee, service of notice is deemed to have been effected at the time at which the letter would have been delivered in the ordinary course of business. This Court has already held that when a notice is sent by registered post and is returned with a postal endorsement refused or not available in the house or house locked or shop closed or addressee not in station, due service has to be presumed. [Vide Jagdish Singh Vs. Natthu Singh ; State of M.P. Vs. Hiralal & Ors. and V.Raja Kumari Vs. P.Subbarama Naidu & Anr. ] It is, therefore, manifest that in view of the presumption available under Section 27 of the Act, it is not necessary to aver in the complaint under Section 138 of the Act that service of notice was evaded by the accused or that the accused had a role to play in the return of the notice unserved.”
Certain observations have also been by the Hon’ble Supreme Court in C.C.Alavi Haji (supra) which reads as under:
“15.……..It is well settled that at the time of taking cognizance of the complaint under Section 138 of the Act, the Court is required to be prima facie satisfied that a case under the said Section is made out and the aforenoted mandatory statutory procedural requirements have been complied with. It is then for the drawer to rebut the presumption about the service of notice and show that he had no knowledge that the notice was brought to his address or that the address mentioned on the cover was incorrect or that the letter was never tendered or that the report of the postman was incorrect. In our opinion, this interpretation of the provision would effectuate the object and purpose for which proviso to Section 138 was enacted, namely, to avoid unnecessary hardship to an honest drawer of a cheque and to provide him an opportunity to make amends.”
As the matter of fact, the aforesaid quoted case is about presumption of delivery of notice in the absence of actual delivery. Needless to mention that presumption is rebuttal whereas in the summary proceedings like the one in hand, there is no scope for oral evidence to rebut the said presumption drawn by calling the postman in the witness box to challenge his veracity about the alleged attempt of delivery and alleged act of the Recipient not taking the notice for various reasons. At this stage, we would also refer to the Track report which is the basis of this controversy:
Counsel for the Appellant has failed to cite any judgment on the issue that in case, delivery has actually been effected after 3 days of the first offer of delivery then the court should rely upon the presumption and not actual date of delivery. Had it been a case where the notice is not delivered at all for various reasons and ultimately it is returned back then perhaps the provisions of Section 27 the Act of 1897 and Section 114 of the Evidence Act, 1872 which also talks of presumption of a fact, could come into play but in the present case, the notice was actually delivered just after 3 days i.e. 21.03.2017, therefore, the date of delivery has to be taken into consideration which is an accomplished fact and not presumption of the delivery is to be seen. In the case of C.C.Alavi Haji (supra) , the Hon’ble Supreme Court has also observed that “Giving notice” in the context is not the same as “receipt of notice”. Giving is a process of which receipt is the accomplishment.”
Keeping in view, the aforesaid facts and circumstances of the case, we are of the concerned opinion, that the presumption of delivery of notice cannot be drawn in the present case w.e.f.17.03.2017 when it was first offered for delivery but could not be delivered because the premises was found locked as the notice was ultimately delivered on 21.03.2017. Therefore, the date of delivery has to be taken as 21.03.2017 when it was actually delivered and not the date when it was firstly offered to be delivered on 17.03.2017. The question posed in the beginning has, thus, been decided accordingly, in favour of the Respondent and against the Appellant.
Since, we have decided the aforesaid issues and found that the date of delivery was 21.03.2017 and the petition was filed on 28.03.2017, therefore, the said petition was totally premature because it is stipulated in Section 9 of the Code that the application under Section 9 could be filed only after the expiry of 10 days of the delivery of demand notice and not before the expiry of 10 days, therefore, the application filed by the Appellant, was premature and not maintainable and has rightly been dismissed by the Adjudicating Authority.
In view thereof, we are not going into the other issue of pre-existing dispute. In view of the aforesaid discussions, the present appeal fails and the same is hereby dismissed. No costs.