Banker's Certificate Not Mandatorily Required To Trigger CIRP Under Section 9 Of IBC: NCLAT Delhi

Background Facts

Quippo Infrastructure Ltd. ("Appellant") had filed a petition under Section 9 of the IBC, seeking initiation of CIRP against M.R. Nirman Pvt. Ltd. ("Respondent"). On 30.09.2019 the NCLT Kolkata Bench ("Adjudicating Authority") had rejected the petition over the premise that the Demand Notice was not served upon the Respondent as there was no proof of delivery; and the claim of receipt of money in May 2016 was not evidenced by Banker's Certificate or details of cheques or any DD Note details.

The Appellant filed an appeal before the NCLAT against the order dated 30.09.2019.

Contentions Of The Appellant

Appellant contended that the Demand Notice under Section 8 of IBC was served upon the Respondent on 12.12.2017, demanding payment of Rs. 43,00,510/- which is inclusive of the principal amount of Rs. 19,50,000/-. The address of delivery was of the Respondent's registered office and no specific denial was made by the Respondent in its Affidavit of Reply pertaining to the delivery of the Demand Notice. It was further submitted that proof for the receipt of payment in May 2016 was duly placed on record and was also reflected in the certificate of the financial institution and therefore, the Adjudicating Authority erroneously observed that the Application was not accompanied by any documentary evidence and Banker's Certificate. The entry in the statement provided by the financial institution clearly specified the receipt of Rs.50,000/- on 23.05.2016 through cheque.

Contentions Of The Respondent

The Respondent submitted that in the absence of any proof of delivery of the Demand Notice, it cannot be said that the Respondent was in the knowledge of the said Demand Notice. In compliance of the General Clauses Act, 1897 the Appellant ought to have submitted the copy of the proof of delivery of the Demand Notice.

Decision Of The NCLAT

The Bench observed that a Speed Post receipt and tracking consignment report evidencing that the Demand Notice was indeed duly served on the Corporate Debtor on 20.12.2017 was on record. Further, the Appellant had filed the Bank Statement which clearly depicts the receipt of Rs. 50,000/- vide cheque dated 23.05.2016. The proof of receipt of this payment was placed on record by the Appellant in the petition, showing an entry in the statement of the Appellant, provided by Axis Bank. Reliance was placed on the Supreme Court judgment in Macquarie Bank Limited v. Shilpi Cable Technologies Ltd. wherein it was held that:

"30. Item 2 in Box 5.2 does show that for the corporate debtor to trigger the IRP, it must be able to submit all the documentation that is defined in the Code and that different documentation is required insofar as financial creditors and operational creditors are concerned, as is evident from Item 4 in Box 5.2. The sentence which is after Box 5.2 is significant. It reads, "therefore, the Code requires that the creditor can only trigger the IRP on clear evidence of default." Nowhere does the report state that such "clear evidence" can only be in the shape of the certificate, referred to in Section 9(3)(c), as a condition precedent to triggering the Code. In fact, in Item 2(c) in Box 5.3, the Committee, by way of drafting instructions for how the IRP can be triggered, states:"

"If an operational creditor has applied, the application contains: i. Record of an undisputed bill against the entity, and where applicable, information of such undisputed as filed at a registered information utility."

The Bench held it is clear that a Banker's Certificate is not mandatorily required to trigger CIRP under Section 9 of IBC. Accordingly, the Order dated 30.09.2019 was set aside the matter has been remanded back to the Adjudicating Authority to decide the petition on merits.

Case Title: M/s Quippo Infrastructure Limited v M.R. Nirman Private Limited, Company Appeal (AT) (Insolvency) No. 1516 of 2019.

Counsel For Appellant: Mr. Nikhil Jain, Advocate.

Counsel For Respondent: Mr. Abhijit Kumar Chattopadhyay, Sr. Advocate with Mr. Abhilash Chatterjee, Ms. Arina Bhattacharya, Mr. Sandeep Lamba, Advocates.

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