Popular Agro Products vs Citly Foods Limited

(Hybrid Mode)

[ORAL JUDGMENT: Justice Sharad Kumar Sharma, Member (Judicial)]

The Appellant, who happens to be the Operational Creditor of M/s. Citly Foods Limited, had initiated the proceedings by invoking the provisions contained under Section 9 of the I & B Code, 2016. By virtue of the impugned under challenge, i.e., 18.11.2024, as it was rendered in C.P.(I.B.) No. 6/9/AMR/2024, said Section 9 application has been rejected. Being aggrieved against the said order, the Appellant is before this Appellate Tribunal. When the company appeal was instituted before this Appellate Tribunal on 18.12.2024, by an order passed by this Appellate Tribunal on 07.03.2025, the Respondents were noticed. And ever since the proceedings were taken up after 07.03.2025, the Respondent had not put an appearance nor had controverted the pleadings raised in the company appeal. Hence, they are directed to proceeded ex-parte.

Even otherwise also, in the proceedings before the Ld. Tribunal, too the Respondents didn't appear and the matter had proceeded ex-parte, as against the Respondent, resulting into the passing of the impugned order of dismissal of the proceeding under Section 9 of the I & B Code.

A very limited issue that engages consideration in the instant company appeal, and as argued by the Ld. Counsel for the Appellant is, that as to whether the delivery of demand notice as required under Section 9 (5)(ii)(c) of the Code, which is a condition precedent for the purposes of initiation of proceedings under Section 9, stood satisfied at the behest of the Appellant by delivering the same as per the manner prescribed under Section 8 of the Code, in order to enable the Ld. Tribunal to pass an order of admitting the application under Section 9 of the Code, and if not, since the Ld. Tribunal had come to a conclusion based upon the appreciation of evidence on record that the Appellant had not been able to succeed in establishing the fact of having made an effective service of notice on the Respondent, what would have been the effective steps that was procedurally expected to be adopted by the Appellant, for the Tribunal to record a finding of satisfactory service of the demand notice.

The inference drawn by the Ld. Tribunal, while rejecting the application, was that the notice of demand on the Respondent was not effectively and properly served, in the light of the conclusion, which has been derived by the Ld. Tribunal in the impugned order, particularly that as contained in Para 5 (L), that the Operational Creditor had not been able to show and prove the delivery of the statutory demand notice as contemplated under Section 9 (5)(ii)(c) of the I & B Code and that, due to inability of the Appellant to supply the prerequisites of proof to establish the service of notice under Section 8 of the I & B Code, the application preferred by the Appellant under Section 9 of the I & B Code, is being dismissed.

The Ld. Counsel for the Appellant, while extending his argument as against the aforesaid finding, which has been recorded by the Ld. Tribunal, deriving it as to be the basis for rejecting the application under Section 9 of the I & B Code, has submitted before this Appellate Tribunal, the steps that have been taken by the him for serving the demand notice upon the Respondent, by effecting services by a registered speed post bearing number viz, EW407467819IN IVR: 6987407467819 dated 02.11.2023.

He submits that as per the report of the Postal Department dated 08.11.2023, the registered post which was sent by him has been shown to have been returned on account of the fact that, the addressee was not found to be located at the given address. He submits that, even if it is considered that the service resorted to by the Appellant by the mode of registered speed post is not an effective service, he had served the demand notice on the Respondent vide the email communication of 15.11.2023, which was made on the reckoned email address of the Respondent, being “[email protected]”, which can be considered as an effective service of the demand notice. He has placed the said email communication dated 15.11.2023, on record before this Appellate Tribunal.

The Appellant, in order to fortify his argument pertaining to having carried the effective service of demand notice by email communication, dated 15.11.2023, has submitted that the aforesaid email communication ought to be treated as to be a sufficient service on the Respondent's because, the reason being that in accordance with the portal of the Ministry of Corporate Affairs, the said email address to which he had sent the email communication, was the official email address, as reflected against the address of the Respondent and in that eventuality, the presumption would be that the Respondents was effectively served with the notices under Section 8 of the I & B Code.

But however, if the finding that has been recorded by the Ld. Tribunal in Para 5 (L) is taken into consideration, the dismissal of Section 9 application, has been on account of the fact that, the Appellant had not been able to place sufficient material on record to show the effective services on the Respondent and thus has come to a conclusion there was a non-compliance of the provisions contained on Section 9 (5)(ii)(c) of the I & B Code.

The Ld. Counsel for the Appellant submits that, since the proceedings before the Ld. Tribunal was directed to be proceeded ex parte due non-appearance of the Respondent, and when the arguments were being held before Ld. NCLT, no such question regarding the mode of service and the effective service could not be raised and debated which could have enabled the Appellant to place the aforesaid two documents on record, that is the email communication, as well as the particulars as available on the portal of the Ministry of Corporate Affairs, on their master data, with regards to the official email address of the Respondent, on which the Appellant has taken steps to deliver the demand notice by email dated 15.11.2023.

He submits that since this was not a question, which was posed by the Ld. Tribunal during the course of arguments, he could not place his submissions in this regard before Ld. Tribunal with regards to the compliance of Section 9 (5) of the I & B Code, and was unable to substantiate that he, in fact, has carried an effective service by the email communication of 15.11.2023. He further submits that in view of the above, the conclusion drawn by the Ld. Tribunal that the Appellant had not complied with the provisions contained under Section 9 (5)(ii)(c) of the I & B Code, which has been derived as to be the basis for dismissal of Section 9 application, is per se erroneous, as the same has been observed suo motu without calling the Appellant to answer the said reasoning before rejecting the application under Section 9 of the Code.

In relation thereto the Ld. Counsel the Appellant has submitted in his pleadings as it has been raised in the memorandum of appeal, particularly that as contained in para 7.6, contending thereof that, owing to the fact, that during the course of hearing of the application under Section 9 of the Code, there was no specific query raised by the Ld. Tribunal, pertaining to placement of the proof of service of the demand notice on the Respondent. Hence, even if it is taken for granted that the mode of service adopted by the Appellant was not in consonance to law, then too he ought to have been given an opportunity to place his case and evidence, if that was being derived by the Ld. Tribunal, as to be a reason for rejecting of an application under Section 9 of the Code.

He submits that exclusively recording a finding as regards to the non-service of notice and the finding recorded by the Ld. Tribunal would be bad because the Appellant had been deprived with the effective opportunity to raise his defence before the Ld. Tribunal regarding the non-service of the notice of demand under Section 8 of the Code on the Respondent.

In that eventuality, and in accordance with the document, which has been placed on record before this Appellate Tribunal, it could be said that the grounds taken by the Appellant in the instant company appeal, remain uncontroverted because the Respondent, despite of the notices having been issued by this Appellate Tribunal, has not appeared to oppose the company appeal. Therefore, we are constrained to accept the pleading raised by the Appellant in the Memorandum of Appeal as that contained in para 7.6, where he strives to substantiate his argument to controvert the finding recorded by the Ld. Tribunal in the impugned order for rejecting application filed by him under Section 9 of the Code.

The ground has been taken by the Appellant in the Memorandum of Appeal, has been specific and reasonable and there is no reason for this Appellate Tribunal to disbelieve the same. Further, during the course of hearing of the application by the Ld. NCLT, no specific query was raised therein, which will lead us to disbelieve the stand taken by the Appellant, with regards to the service of notice of demand under Section 8 of the Code on the Respondent. Moreover, the Appellant contends that he had proceeded to contest the proceeding under Section 9 of the Code, on the premise that there would be a deeming presumption on part of the Tribunal that it has proceeded to hear the application in the absence of Respondent in ex-parte proceedings, on a premise that the notices under Section 8 of the Code has already been served.

If at all the Ld. Tribunal had any doubt with regards to there being absence of proof of service of the demand notice on the Respondents on record, Ld. NCLT ought to have given an opportunity to the Appellant to substantiate his contention qua the stand taken by it with regards to the service of notice by enabling him to place on record the email communication dated 15.11.2023, sent to the email on the basis of the address of the Respondent which corresponds to the email address as per the master data portal of the Ministry of corporate Affairs.

This Appellate Tribunal, is of the view that the purpose of delivery of the demand notice as contemplated under Section 8 of the Code to be read with Section 9, is to make the Respondent conscious of the proceedings which is likely to be drawn against him for the reasons of the default, which was sought to be invoked by filing of an application under Section 9. Therefore, the said purpose of making the Respondent conscious of the amount defaulted, by him and of the steps contemplated to initiate the proceedings under Section 9, stood satisfied when the Appellant took steps for serving the notice of demand on the Respondent on the email address, as it was notified on the portal of the Ministry of Corporate Affairs, which will be taken as to be an effective service. But, having said so, the conclusion, since it has been derived by the Ld. Tribunal, without giving an opportunity to the Appellant to take his defence for having taken an effective steps for serving the Respondent with the notice of demand, we feel that the finding would be perverse on account of an effective opportunity having been given to the Appellant to substantiate his stand, and that of deriving the conclusion on its own without such stand having been taken by the Respondent, who was proceeded ex-parte.

As per the arguments of the Ld. Counsel for the Appellant, the lacuna of proof of service of notice of demand on the Respondent have been derived in itself by the Ld. Tribunal on its own, and that too at the stage when the judgment was being dictated. He submits that in these eventualities, the Ld. Tribunal ought not to have identified itself with any of the litigant who was before it, until and unless the reason thus taken by the Ld. Tribunal is being permitted to be controverted by the party, i.e., the Appellant herein, because he was likely to be affected by said reasoning being derived by the Ld. Tribunal for rejecting the application under Section 9.

Thus, the impugned order for the aforesaid reason would stand quashed. The matter is remitted back to the Ld. Tribunal to decide the company petition afresh on merits only after providing an opportunity to the Appellant to place and substantiate his stand pertaining to the steps taken by him for the purposes of satisfying the conditions of issuance of notice of demand under Section 8 of the Code to be read in Section 9 (5)(ii)(c) of the I & B Code.

Subject to the aforesaid, the company appeal stands allowed, the impugned order would stand quashed.