Mr. Sudalagunta Jayaram Chowdary vs Southern Power Distribution Company of A.P. Limited & Anr.

Heard the Learned Counsel for the parties at length. The Appellant (One of Suspended Director of Corporate Debtor) herein questions the propriety of the Impugned Order dated 20.09.2024 as it has been rendered by the Learned NCLT, Amaravathi Bench allowing Section 9 Petition in CP(IB) No.130/09/AMR/2022, wherein the Appellant has been described in the array of parties by the address which has been given therein as to be “M/s.Sudalangunta Sugars Limited, Mayura Nagar, Katur Post, B.N.Kandrika Mandal, Andhra Pradesh – 517 644”. The resultant effect of the proceedings had been that the Application under Section 9 of the I & B Code, 2016, was allowed and the Corporate Debtor, M/s. Sudalagunta Sugars Limited was admitted to face the CIRP Proceedings. The Appellant herein has questioned the propriety of the Impugned Order on a very short legal premise that, as to whether at all the proceedings under Section 9 of the I & B Code, 2016, could be said to have been validly held as against him, which mandatorily contemplates a compliance of provisions contained under Section 8 of the I & B Code, 2016, for the purposes of issuance of notice of demand on the Corporate Debtor was not established to be satisfied in the instant case.

He submits that the notice of demand itself was not served upon the Corporate Debtor and as such, it would vitiate the proceedings. In order to elaborate his argument, the Learned Counsel for the Appellant while supporting his arguments from description of array of parties, as it has been given in the proceedings under Section 9 of I & B Code, 2016, has also referred to the provisions contained under Rule 5 of Insolvency and Bankruptcy (Application to the Adjudicating Authority Rules of 2016), the provisions contained under Rule 5 are extracted hereunder:-

The Learned Counsel for the Appellant has submitted that the parameters, that has been prescribed for ensuring service of notice on the Corporate Debtor, prior to initiations of proceedings under Section 9 of I & B Code, 2016, requires a satisfaction of service as per Clause (b) of Sub-Rule (2) of Rule 5, which contemplates the service of notice to be effected upon the Registered Office by hand, the Registered Post, or the Speed Post, or, under Clause (b), the notice has to be sent by electronic mail service to a “whole time Director”, or designated partners and such other authorities as prescribed under Clause (b) of Sub-Rule (2) of Rule 5.

The Learned Counsel for the Appellant submits that, service of notice by Registered Post could not be effected, which has been admitted by the Respondent and also the notice which has been sent on 22.10.2022 by e-mail under Section 8 to be read with Rule 5 (2)(b) of the Rules as extracted above dated 20.10.2022, was sent to a email address as given therein which is not the email address of that of the Whole time Director of the Corporate Debtor which is a condition precedent as per Clause (b) of Sub-Rule (2) of Rule 5. In fact, the email address in which the notice was sent was the email address of Corporate Debtor as per MCA Master Data. He submits that when the notice itself has not been satisfactorily served in accordance with law, the entire proceedings would fall to be bad in the eyes of law.

The Learned Counsel for the Respondent argues that sub-Rule (2) of Rule 5, which provides for the mode of service of notice prescribed therein, had been duly complied with and an effective service of notice of demand on 20.10.2022, has been made upon the Appellant and hence, it cannot be said that the Appellant has not been served with the notice.

But, on the comparative scrutiny of the addresses of the Appellant as detailed in the proceedings under Section 9 which is to be read also with email addresses, as given in the notice, both runs contrary to the actual email address of the “whole time Director” of the Appellant, as well as there has been a marginal difference in the address of the Registered Office of the Corporate Debtor.

Since the notice was not validly served, that itself would make the entire proceedings defective and vitiated because, it curtails an opportunity to contest, the demand notice, at the hands of the Appellant before the Learned Adjudicating Authority. On this limited count itself, the Impugned Order dated 20.09.2024, would hereby stand quashed, leaving all the liberties open to the Respondent to ensure an effective service of notice under Section 8 of I & B Code, 2016, to be read with as per Rule 5 of I & B Code, on the Appellant and then proceed in accordance with law.

At this juncture, it is made clear that, we have not ventured upon the merits of the claim of either of the parties. All contentions are left open to be raised at the stage of revival of the proceedings.

Be that as it may, as of now, whatever defects which have been argued by the Appellant with regards to the service of Notice under Section 8 of I & B Code, though, apparently under Rule 5, stand established for the purposes of instant Company Appeal and taking the same into consideration, the Impugned Order is quashed. The proceedings of the Company Petition being CP(IB) No.130/09/AMR/2022, would revive back from the corresponding stage before the Tribunal.