Supreme Court of India
MACQUARIE BANK LIMITEDversusSHILPI CABLE TECHNOLOGIES LTD.
- Citation
- 2017 INSC 1241
- Decided
- 15 December 2017
- Disposal
- Appeal(s) allowed
- Bench
- R F NARIMAN
Holding
Section 9(3)(c) is a procedural, directory provision and a lawyer acting as an authorised agent may issue a demand notice under Section 8.
Summary
The Supreme Court examined two pivotal questions arising under the Insolvency and Bankruptcy Code, 2016: (i) whether the requirement in Section 9(3)(c) to attach a certificate from the financial institution confirming non‑payment of an operational debt is a mandatory condition precedent, and (ii) whether a demand notice under Section 8 may be issued by a lawyer on behalf of the operational creditor. The Court held that the certificate is merely evidential and the provision is directory, not a condition precedent, and that a lawyer, as an authorised agent, can validly deliver the demand notice. Consequently, the earlier orders of the NCLT and NCLAT dismissing the petition for non‑compliance were set aside and the appeals were allowed, remitting the matters back to the NCLAT for further consideration under the Code.
Issues considered
- Is the provision in Section 9(3)(c) of the Insolvency and Bankruptcy Code, 2016 mandatory or directory?
- Can a demand notice of an unpaid operational debt be issued by a lawyer on behalf of the operational creditor?
Legislation cited
- Advocates Act, 1961s. 30
- Companies Act, 1956s. 433, s. 434
- Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016s. Form 5, s. Rule 6
- Insolvency and Bankruptcy Code, 2016s. 12, s. 8, s. 9, s. 9(1), s. 9(2), s. 9(3)(c), s. 9(3)(d), s. 9(5)(ii)(d)
Subjects
InsolvencyOperational debtSection 9(3)(c)Directory provisionDemand noticeLawyer as authorised agentIBC 2016Advocates ActHarmonious constructionContemporanea expositio
Judgment
[2017] 13 S.C.R. 751
MACQUARIE BANK LIMITED A
v.
SHILPI CABLE TECHNOLOGIES LTD.
(Civi!Appea1No.15135of2017)
DECEMBER 15,2017 B
[R. F. NARIMAN AND NAVIN SINHA, JJ.]
Insolvency and Bankntptcy Code, 2016:
s.9(3)(c) - Provision in relation to operational debt, contained
in s.9(3)(c) of the Code if mandatory or directory - Held: Sub- C
clause (c) of s.9(3) makes it clear that a copy of the certificate from
the financial institution maintaining accounts of the operational
creditor confirming that .there is no payment of an unpaid operational
debt by the corporate debtor is certainly not a condition precedent
to trigger the insolvency process under the code - The expression D
"confirming" makes it clear that this is on~y a piece of evidence,
albeit a very important piece of evidence, which only "confirms"
that there is no payment of an unpaid operational debt - This
becomes clearer when one goes to sub-clause (d) of s.9(3) which
requires such other information as may be specified has also to be
furnished along with the application - Read with the Code, the E
Adjudicatory Authority Rules form a self-contained code being
contemporanea expositio by the Executive which is charged with
carrying out the provisions of the Code - The tnie constntction of
s. 9(3)(c) is that it is a procedural provision, which is directory in
nature, as the Adjudicatory Authority Rules read with the Code F
clearly demonstrate - The Insolvency and Bankntptcy (Application
to Adjudicating Authority) Rules, 2016 - r. 6 and Form 5 - Doctrines/
Principles - Principle of Contemporanea expositio.
ss.8 and 9 - Demand notice of an unpaid operational debt
issued by a lawyer on behalf of the operational creditor - Propriety
of - Held: Proper - s.8 of the Code speaks of an operational creditor G
delivering a demand notice -Intention of Legislature was not to
restrict such demand notite being sent by the operational creditor
himself. otherwise the expression used would perhaps have been
"issued" and not "delivered" - Delivery, therefore, would postulate
H
751
752 SUPREME COURT REPORTS [2017) 13 S.C.R.
A that such notice could be made by an authorized agent - Further,
Form of demand notice and Form of application by operational
creditor to initiate corporate insolvency resolution process, i.e.
Forms 3 and 5 require such authorized agent to state his "position
with" or "in relation" to the operational creditor - Expression "in
B relation to" is a very wide expression, which specifically includes a
position which is outside or indirectly related to the operational
creditor - Both expressions "authorize to act" and "position in
relation to the operational creditor" go to show that an authorized
agent or a lawyer acting on behalf of his client is included within
the aforesaid expression - Further, a conjoint reading of s.30 of
C the Advocates Act and ss.8, and 9 of the Code together with
Adjudicatory Authority Rules and Forms thereunder would yield
result that a notice sent on behalf of the operational creditor by a
lawyer would be in order - Advocates Act, 1961 - s.30 -
Interpretation of Statutes - Harmonious Construction - The
Insolvency and Bankruptcy (Application to Adjudicating Authority)
0
Rules, 2016 - Forms 3 and 5.
Allowing the appeals, the Court
HELD: Whether. in relation to an operational debt, the
provision contained in Section 9(3){c) of the Code is mandatory.
E 1.1 From sub-clause (c) of Section 9(3) of the Insolvency
and Bankruptcy Code, 2016, it is clear that a copy of the certificate
from the financial institution maintaining accounts of the
operational creditor confirming that there is no payment of an
unpaid operational debt by the corporate debtor is certainly not a
F condition precedent to triggering the insolvency process under
the Code. The expression "confirming" makes it clear that this
is only a piece of evidence, albeit a very important piece of
evidence, which only "confirms" that there is no payment of an
unpaid operational debt. This becomes clearer when one goes
to sub-clause (d) of Section 9(3) which requires such other
G information as may be specified has also to be furnished along
with the application. [Para 14] [774-F-G]
1.2 When Form 5 under Rule 6 of the Insolvency and
Bankruptcy (Application to Adjudicating Authority) Rules, 2016
is perused, it becomes clear that Part V thereof speaks of
H
MACQUARIE BANK LIMITED v. SHILPI CABLE 753
TECHNOLOGIES LTD.
particulars of the operational debt. There are 8 entries in Part V A
dealing with documents, records and evidence of default. Item 7
of Part V is only one of such documents and has to be read along
with Item 8, which speaks of other documents in order to prove
the existence of an operational debt and the amount in default.
Further, annexure III in the Form also speaks of copies of relevant B
accounts kept by banks/financial institutions maintaining accounts
of the operational creditor, confirming that there is no payment
of the unpaid operational debt, only "if available". This would
show that such accounts are not a pre-condition to trigger the
Code, and that if such accounts are not available, a certificate
based on such accounts cannot be given, if Section 9 is to be read C
the Adjudicating Authority Rules and the Forms therein, all of
which set out the statutory conditions necessary to invoke the
Code. [Para 15] [774-H; 775-A-C]
1.3 In the present case, the rules merely flesh out what is
already contained in the statute and must, therefore, be construed D
along with the statute. Read with the Code, they form a self-
contained code being contemporanea expositio by the Executive
which is charged with carrying out the provisions of the Code.
The true construction of Section 9(3)(c) is that it is a procedural
provision, which is directory in nature, as the Adjudicatory
Authority Rules read with the Code clearly demonstrate. [Para E
16] (776-G-H; 777-A]
1.4 It is true that the expression "initiation" contained in
the marginal note to Section 9 does indicate the drift of the
provision, but from such drift, to build an argument that the
expression "initiation" would lead to the conclusion that Section F
9(3) contains mandatory conditions precedent before which the
Code can be triggered is a long shot. Equally, the expression
"shall" in Section 9(3) does not take us much further when it is
clear that Section 9(3)(c) becomes impossible of compliance in
cases like the present. It would amount to a situation wherein G
serious general inconvenience would be caused to innocent
persons, such as the appellant, without very much furthering the
object of the Act. Obviously, therefore, section 9(3)(c) would have
to be construed as being directory in nature. [Para 19] [778-B-
D)
H
754 SUPREME COURT REPORTS [2017] 13 S.C.R.
A Whether a demand notice of an unpaid operational debt can
be issued by a lawyer on behalf of the operational creditor.
2.1 Insofar as demand notice of an unpaid operational debt
issued by a lawyer on behalf of the operational creditor is
concerned, the first thing that is to be noticed is that Section 8 of
B the Code speaks of an operational creditor delivering a demand
notice. It is clear that had the legislature wished to restrict such
demand notice being sent by the operational creditor himself,
the expression used would perhaps have been "issued" and not
"delivered". Delivery, therefore, would postulate that such notice
could be made by an authorized agent. In fact, in Form 3 (Form
c of demand notice/Invoice demanding payment under the Code)
and Form S(Application by operational creditor to initiate
corporate insolvency resolution process under the Code), it is
clear that this is the understanding of the draftsman of the
Adjudicatory Authority Rules, because the signature of the person
D "authorized to act" on behalf of the operational creditor must be
appended to both the demand notice as well as the application
under Section 9 of the Code. The position further becomes clear
that both forms require such authorized agent to state his position
with or in relation to the operational creditor. A position with the
operational creditor would perhaps be a position in the company
E or firm of the operational creditor, but the expression "in relation
to" is significant, It is a very wide expression which specifically
includes a position which is outside or indirectly related to the
operational creditor. It is clear, therefore, that both expressions
"authorized to act" and "position in relation to the operational
F
creditor" go to show that an authorized agent or a lawyer acting
on behalf of his client is included within the aforesaid expression.
[Para 331[790-B-F]
2.2 The expression "practise" in s.30 Advocates Act, 1961
is an expression of extremely wide import, and would include all
preparatory steps leading to the filing of an application before a
G Tribunal. Since there is no clear disharmony between the two
Parliamentary statutes in the present case i.e. Advocates Act,
1961 and the Code which cannot be resolved by harmonious
interpretation, it is clear that both statutes must be read together.
Also Section 30 of the Advocates Act deals with the fundamental
H right under Article 19(1)(g) of the Constitution to practice one's
MACQUARIE BANK LIMITED v. SHILPI CABLE 755
TECHNOLOGIES LTD.
profession. Therefore, a conjoint reading of Section 30 of the A
Advocates Act and Sections 8 and 9 of the Code together with
the Adjudicatory Authority Rules and Forms thereunder would
yield the result that a notice sent on behalf of an operational
creditor by a lawyer would be in order. [Paras 34, 36][791-B-C;
796-G-H; 797-A]
B
2.3 The expression "an operational creditor may on the
occurrence of a default deliver a demand notice ....." under Section
8 of the Code must be read as including an operational creditor's
authorized agent and lawyer, as has been fleshed out in Forms 3
and 5 appended to the Adjudicatory Authority Rules. [Para
38)(799-E] c
State of Haryana v. Raghubir Dayal (1995) 1 SCC 133
: [1994] 5 Suppl. SCR 448; Harish Uppal (Ex-Capt.)
v. Union of India (2003) 2 SCC 45 : [2002] 5 Suppl.
SCR 186; Harshad S. Mehta v. State of Maharashtra
(2001) 8 sec 257 : [2001] 2 Suppl. SCR 577; CTO D
v. Binani Cements Ltd. (2014) 8 SCC 319 : [2014] 3
SCR 1 ; Binoy Viswam v. Union of India (2017) 7 SCC
59; Balchand Jain v. State of MP. (1976) 4 SCC 572 :
[1977] 2 SCR 52 ; R.S. Raghunath v. State of Karna/aka
(1992) 1 SCC 335: [1991] 1 Suppl. SCR 387; Central
Bank of India v. State of Kera/a (2009) 4 SCC 94 : E
[2009] 3 SCR 735; Byram Pes/onji Gariwala v. Union
Banko/India (1992) 1SCC31: [1991] 1 Suppl. SCR
187; Renusagar Power Co. Ltd. v. General Electric Co.
(1984) 4 SCC 679 : [1985] 1 SCR 432; State of
Karna/aka v. Azad Coach Builders (P) Ltd. (2010) 9 F
SCC 524 : [2010] 12 SCR 895 - relied on.
Taylor v. Taylor (1875) 1 Ch. D. 426; Smar/ Timing Steel
Ltd. v. National Steel and Agro Industries Ltd. decided
on 19.5.2017; Mobilox Innovations Private Limited v.
Kirusa Software Private Limited2017(11) SCALE 754;
G
State of U.P. v. Babu Ram [1961] 2 SCR 679; Desh
Bandhu Gupta v. Delhi Stock Exchange (1979) 4 SCC
565 : [1979] 3 SCR 373; D. T. U. v. B.B.L. Hajelay
(1972) 2 SCC 744 : [1973] 2 SCR 114; ADM (Rev.)
Delhi Admn. v. Siri Ram (2000) 5 SCC 451 : [2000]
3 SCR 1019; !spat Industries Ltd. v. Commissioner of H
756 SUPREME COURT REPORTS (2017] 13 S.C.R.
A Customs (2006) 12 SCC 583 : (2006] 6 Suppl.
SCR 733; Innoventive Industries Ltd. v. ICICI Bank &
Anr. (2017] 11 SCALE 4; Ms. Eera through D1: Manjula
Krippendorf v. State (Govt. of NCT of Delhi) & Anr.
(2017] 8 SCALE 112; Raghunath Rai Bareja v. Punjab
National Bank (2007) 2 SCC 230 : [2006] 10 Suppl.
B
SCR 287; Nazir Ahmad v. King Emperor 63 IA 372
(1936); Ukha Ko/he v. State of Maharashtra (1964) 1
SCR 926; Madan & Co. v. Wazir Jaivir Chand (1989)
1 SCC 264 : [1988] 3 Suppl. SCR 983; Kunhayammed
v. State oj Kera/a (2000) 6 SCC 359 : [2000] 1 Suppl.
c SCR 53$; Surendra Trading Company v. Juggi/al
Kam/apat Jute Mills Company Limited and Others
(2017] 11 SCALE 634; Mahanth Ram Das v. Ganga
Das [1961] 3 SCR 763 - referred to.
Case Law Reference
D (1875) 1 Ch. D. 426 referred to Para 7
2017(11) SCALE 754 referred to Para 11
(1961] 2 SCR 679 referred to Para 16
[1979] 3 SCR 373 referred to Para 16
(1973] 2 SCR 114 referred to Para 16
[2000] 3 SCR .019 referred to Para 16
E
[2006] 6 Suppl. SCR 733 referred to Para 16
(1994) 5 Suppl. SCR 448 relied on Para 19
[2017] 11 SCALE 4 referred to Para 21
(2017) 8 SCALE 112 referred to Para 23
[2006] 10 Suppl. SCR 287 referred to Para 24
F 63 IA 372 (1936) referred to Para 25
(1964] 1 SCR 926 referred to Para 25
(1988] 3 Suppl. SCR 983 referred to Para 27
[2000) 1 Suppl. SCR 538 referred to Para 28
[2017) 11 SCALE 634 referred to Para 32
(1961] 3 SCR 763 referred to Para32
G
I1985] I SCR 432 relied on Para 33
(2010] 12 SCR 895 relied on Para 33
(2002] 5 Suppl. SCR 186 relied on Para 34
[2001] 2 Suppl. SCR 577 relied on Para 35
[2014) 3 SCR I relied on Para 35
H (2017) 1 sec 59 relied on Para 35
MACQUARIE BANK LIMITED v. SHILPJ CABLE 757
TECHNOLOGIES LTD.
[1977] 2 SCR 52 relied on Para 36 A
[1991) l Suppl. SCR 387 relkd on Para 36
(2009) 3 SCR 735 relied on Pam 36
(1991) 1 Suppl. SCR 187 relied on Para 37
CIVIL APPELLATE JURISDJCTION: Civil Appeal No.15135
of2017. B
From the Judgment and Order dated 01.08.20 I 7 of the National
Company Law Appellate Tribunal, New Delhi in Company Appeals (AT)
(INS) No.JOI of2017. ,,.
WITH
C.A. Nos.l544iand 15481 of2017. c
Mukul Rohatgi, Arvind P. Datar, Sr. Advs., Rahul Chitnis, Mustafa
Motiwala, Shwetabh Sinha, Ms. Ashmi Mohan, Ms. Pragya Nalwa,
Ms. Misha Rohatgi, Ms. Palak Mahajan, Ujjal Banerjee, Advs. for the
Appellant./
Dr'. Abhishek Manu Singhvi, Shyam Diwan, Abhinav Vasisht, D
Sr. Advs., Arvind Kumar, Deeraj, Ms.Sada Puma, Gaurav Aggarwal,
C.S. Chauhan, Mrs. V.S. Lakshmi, A. Venayagam Balan, Sumit K. Batra,
Mohinder Jit Singh, Advs. for the Respondent.
The Judgment of the Court was delivered by
R. F. NARIMAN, J. I. The present appeals raise two important E
questions which arise under the Insolvency and Bankmptcy Code, 2016
(hereinafter referred to as the "Code"). The first question is whether, in
relation to an operational debt, the provision contained in Section 9(3)(c)
of the Code is mandatory; and secondly, whether a demand notice of an
unpaid operational debt can be issued by a lawyer on behalf of the F
operational creditor.
2. The facts contained in the three appeals are similar. For the
purpose of this judgment, the facts contained in Civil Appeal No.15481
of 2017 will now be set out. Hamera International Private Limited
executed an agreement with the appellant, Macquarie Bank Limited, G
Singapore, on 27. 7.2015, by which the appellant purchased the original
supplier's right, title and interest in a supply agreement in favour of the
respondent. The respondent entered into an agreement dated 2.12.2015
for supply of goods worth US$6,321,337.11 in accordance with the terms
and conditions contained in the said sales contract. The supplier issued
two invoices dated 21.12.2015 and 31.12.2015. Payment terms under H
758 SUPREME COURT REPORTS (2017] 13 S.C.R.
A the said invoices were 150 days from the date of bill of ladings dated
17.12.2015/19.12.2015. Since amounts under the said bills of lading
were due for payment, the appellant sent an email dated 3.5.2016 to the
contesting respondent for payment of the outstanding amounts. Several
such emails by way of reminders were sent, and it is alleged that the
contesting respondent stated that it will sort out pending matters.
B
Ultimately, the ~ppellant issued a statutory notice under Sections 433
and 434 of the Companies Act, 1956. A reply dated 5.10.2016 denied the
fact that there was any outstanding amount.
3. After the enactment of the Code, the appellant issued a demand
notice under Section 8 of the Code on 14.2.2017 at the registered office
c of the contesting respondent, calling upon it to pay the outstanding amount
of US$6,321,337.ll. By a reply dated 22.2.2017, the contesting
respondent stated that nothing was owed by them to the appellant. They
further went on to question the validity of the purchase agreement dated
27 .7.2015 in favour of the appellant. On 7.3.2017, the appellant initiated
D the insolvency proceedings by filing a petition under Section 9 of the
Code. On 1.6.2017, the NCLT rejected the petition holding that Section
9(3)(c) of the Code was not complied with, inasmuch as no certificate,
as required by the said provision, accompanied the application filed under
Section 9. It, therefore, held that there being non-compliance of the
mandatory provision of Section 9(3)(c) of the Code, the application would
E have to be dismissed at the threshold. However, the NCLT also went
into the question as to whether a dispute has been raised in relation to
the operational debt and found that such dispute was in fact raised by
the reply to the statutory notice sent under Sections 433 and 434 of the
Companies Act, 1956 and that, therefore, under Section 9(5)(ii)(d), the
F application would have to be dismissed.
4. By the impugned judgment dated 17.7.2017, the NCLATagreed
with the NCLT holding that the application would have to be dismissed
for non compliance of the mandatory provision contained in Section 9(3)(c)
of the Code. It further went on to hold that an advocate/lawyer cannot
G issue a notice under Section 8 on behalf of the operational creditor in the
following terms:
"In the present case, as the notice has been given by an advocate/
lawyer and there is nothing on the record to suggest that the lawyer
was authorized by the appellant, and as there is nothing on the
record to suggest that the said lawyer/ advocate hold any position
H
MACQUARIE BANK LIMITED v. SHILPI CABLE 759
TECHNOLOGIES LTD. [R. F. NARIMAN, J.]
with or in relation to the appellant company, we hold that the notice A
issued by the advocate/ lawyer on behalf of the appellant cannot
be treated as notice under Section 8 of the 'I & B Code'. And for
the said reason also the petition under Section 9 at the instance of
the appellant against the respondent was not maintainable."
5. Shri Mukul Rohatgi, learned senior advocate appearing on behalf B
of the appellant, referred us to various provisions of the Code. According
to learned senior counsel, on a conjoint reading of Section 9(3)( c), Rule
6 and Form 5 of the Insolvency and Bankruptcy (Application to
Adjudicating Authority) Rules, 2016 ("Adjudicating Authority Rules"), it
is clearthat Section 9(3)(c) is not mandatory, but only directory and that,
in the said section, "shall" should be read as "may". He cited a number c
ofjudgments for the proposition that when serious general inconvenience
is caused to innocent persons or the general public without really
furthering the object of the particular Act, the said provision should not
be read as mandatory, but as directory only. Further, according to learned
senior counsel, Section 9(3)(c) is a procedural section, which is not a D
condition precedent to the allowing of an application filed under Section
9( 1). This is further clear from the fact that under Section 9( 5), if there
is no such certificate, the application does not need to be rejected. He
also stressed the fact that at the end of Form 5, what has to be attached
to the application, by way of Annexure III, is a copy of the relevant
accounts from banks/financial institutions maintaining accounts of the E
operational creditor confirming that there is no payment of the operational
debt only "if available". Also, according to learned counsel, this is only
an additional document, which along with other documents that are
mentioned in Item 8 of Part V, would go to prove the existence of the
operational debt. The word "confirming" in Section 9(3)( c) would also
F
show that this is only one more document that can be relied upon by the
operational creditor, apart from other documents, which may well prove
the existence of the operational debt. According to learned senior counsel,
on the second ground as well it is clear, on a perusal of Form 5, that a
"person authorised to act on behalf of the operational creditor" is a person
who can sign Form 5 on behalf of the operational creditor. Also, the G
expression "position with or in relation to the operational creditor" shows
that a lawyer, who is authorized by the operational creditor, is certainly
within the said expression. He also referred us to Section 30 of the
Advocates Act, 1961 and judgments on the effect of the expression
"practise" when it applies to lawyers, vis-a-vis Tribunals such as the
H
NCLT and NCLAT.
760 SUPREME COURT REPORTS (2017] 13 S.C.R.
A 6. Shri Arvind Datar, learned senior advocate, supported the
arguments of Shri Rohatgi and went on to add that the definition of
··perscm" contain ex! tn Section 2(23) of the Code includes a person resident
outside India. and when read with the definition of .. operational creditor"
m Section 5(20) of the Code would make it clear that persons, such as
the appellant, are certainly operational creditors within the meaning of
B
the Code. He sttessed the fact that if a copy of the certificate under
Section 9(3)( c) can only be from a "financial institution" as defined under
Section 3( 14) of the Code, and if a non resident bank or financial institution,
such as the appellant, may not be included either as a scheduled bank
under Section 3(14)(a) or as such other institution as the Central
c Government may by notification specify as a financial institution under
Section 3(14)(d), it is clear that Section 9(3)(c) cannot operate to non
suit the appellant, as it would be impossible to get a certificate from a
financial institution as defined. This being the case, he argued that the
Court should add words into the expression "financial institution", as it
D would otherwise lead to absurdity and that if Section 9(3)(c) is held to be
mandatory; then a certificate from a foreign bank, who is not a "financial
institution" as defined under the Code, should be read into Section 9(3 )(c ).
Otherwise, the learned senior counsel supported Shri Rohatgi 's argument
that Section 9(3)(c) is a directory provision which need not mandatorily
be complied with. A further argument was made that the definition in
E Section 3( 14 ), though exhaustive, is subject to context to the contrary
and that, therefore, it is clear that a financial institution would include a
bank outside the categories mentioned in Section 3( 14) when it comes to
an operational creditor who is a resident outside India.
7. All these arguments were countered by Dr. A.M. Singhvi,
F learned senior counsel appearing on behalf of the respondent. First and
foremost, according to learned senior counsel, the object of the Code is
not that persons may use the Code as a means of recovering debts. The
Code is an extremely draconian piece of legislation and must, therefore,
be construed strictly. If this is kept in mind, it is clear that Section 9(3)(c)
is mandatorv and requires to be complied with strictly or else the
G application should be dismissed at the threshold. He stated that in the
context of it being recognized by our judgments that a financial creditor
and operational creditor are completely, differently and separately dealt
with in the Code, and that so far as an operational creditor is concerned,
it is important to bear in mind that a very low threshold is required in
H
MACQUARIE BANK LIMITED v SHlLPI CABLE 761
TECHNOLOGIES LTD. [R. F. NARIMAN, J.]
order that an operational creditor's application be rejected, namely, there A
being a pre-existing dispute between the parties. Acctirding to learned
senior counsel Section 9(3)(c) is a jurisdictional con' \1 ti on precedent, which
is clear from the expression "initiation" and the expression "shall'', both
showing that the Section is a mandatory condition precedent which has
to be satisfied before the adjudicating authority can proceed further.
B
According to learned senior counsel, a copy of the certificate from a
financial institution is a very important document which makes it clear,
almost conclusively, that there is an unpaid operational debt. According
to him, the principle contained in Taylorv. Taylor (1875) I Ch. D. 426,
has been followed by a number ofjudgments and is applicable inasmuch
as when a statute requires a particular thing to be done in a particular c
manner, it must be done in that manner or not at all. He also referred us
to various Sections of the Code, the Insolvency and the Adjudicating
Authority Rules, Form 5 in particular, together with the Viswanathan
Committee and report Joint Committee report of the Parliament.
According to the learned senior counsel, it is clear from the definition of D
"financial institution" contained in Section 3( 14) that certain foreign banks
are included within the expression "scheduled banks" under Section
3( l 4)(a) and that, under Section 3(14)( d), the Central Government may,
by notification, specify other foreign banks as financial institutions. It is
only where operational creditors have dealings with banks which fall
within Section 3(14), that they can avail the opportunity of declaring a E
corporate debtor as insolvent under Sections 8 and 9 of the Code. Persons
who may be residents outside India and who bank with entities that are
not contained within the definition of Section 3 (14) would, therefore, be
outside the Code.
8. According to the learned senior counsel, the consequence of F
not furnishing a copy of the certificate under Section 9(3 )( c) is that,
under Section 9(5)(ii)(a), the application that is made would be incomplete
and, subject to the proviso, would have to be dismissed on that score.
Also, according to the learned senior counsel, the NCLAT was right in
following the judgment contained in Smart Timing Steel Ltd. v.
National Steel and Agro Industries Ltd decided on 19.5.2017, which, G
according to the learned senior counsel, has merged in an order of this
Court dismissing an appeal from the said judgment.
9. According to the learned senior counsel, a lawyer's notice
cannot be given under Section 8, read with the Adjudicating Authority
H
762 SUPREME COURT REPORTS [2017] 13 S.C.R.
A Rules and Form 5 therein. Either the operational creditor himself must
send the requisite notice, or a duly authorized agent on his behalf should
do so, and such authorized agent can only be an "insider", namely, a
person who is authorized by the operational creditor, being an employee,
director or other person from within who alone can send the notice under
Section 8 and sign the application under Section 9. Dr. Singhvi also
B
stated that it is clear, from Forms 3 and 5, that only a person authorized
to act on beqalf of the operational creditor can send the notice and/or
sign the appllcation. He stressed the word "position" with or in relation
to the operational creditor and stated that this would also indicate that it
is only an insider who can be so authorized by the operational creditor
c and not a lawyer. According to learned senior counsel, the provisions
contained in certain statutes such as Section 434(2) of the Companies
Act, 1956 and Rule 4 of the Debts Recovery Tribunal (Procedure) Rules,
1993 under the Recovery of Debts Due to Banks and Financial Institutions
Act, 1993 ("Debts Recovery Rules") would also make it clear that where
a lawyer can do things on behalf of a party, it is expressly so mentioned
D
unlike the present case.
10. Having heard learned counsel for the parties, it is necessary
to set out the relevant Sections of the Code and the AdjudicatingAuthority
Rules.
E "3. In this Code, unless the context otherwise requires,----
( 10) "creditor" means any person to whom a debt is owed and
includes a financial creditor, an operational creditor, a secured
creditor, an unsecured creditor and a decree-holder;
( 14) "financial institution" means-
F
( a) a scheduled bank;
(b) financial institution as defined in section 45-1 of the Reserve
Bank of India Act, 1934;
(c) public financial institution as defined in clause (72) of section
G 2 of the Companies Act, 2013; and
( d) such other institution as the Central Government may by
notification specify as a financial institution;
(23) ·'person" includes-
H
MACQUARIE BANK LIMITED v. SHILPI CABLE 763
TECHNOLOGIES LTD. [R. F. NARIMAN, J.]
(a) an individual; A
(b) a Hindu Undivided Family;
(c) a company;
(d) a trust;
( e) a partnership;
B
(f) a limited liability partnership; and
(g) any other entity established under a statute, and includes a
person resident outside India;
(25) "person resident outside India" means a person other than a
person resident in India; c
xxxxxxxxx
5. In this Part, unless the context otherwise requires,-
(20) "operational creditor" means a person to whom an operational
debt is owed and includes any person to whom such debt has
been legally assigned or transferred; D
(21) "operational debt" means a claim in respect of the provision
of goods or services including employment or a debt in respect of
the repayment of dues arising under any law for the time being in
force and payable to the Central Government, any State
Government or any local authority; E
xxxxxxxxx
8. Insolvency resolution by operational creditor-
( 1) An operational creditor may, on the occurrence of a default,
deliver a demand notice of unpaid operational debtor copy of an
invoice demanding payment of the amount involved in the default F
to the corporate debtor in such form and manner as may be
prescribed.
(2) The corporate debtor shall, within a period often days of the
receipt of the demand notice or copy of the invoice mentioned in
sub-section (I) bring to the notice of the operational creditor- G
(a) existence of a dispute, if any, and record of the pendency of
the suit or arbitration proceedings filed before the receipt of such
notice or invoice in relation to such dispute;
H
764 SUPREME COURT REPORTS [2017] 13 S.C.R.
A (b) the repayment of unpaid operationol 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
B creditor has encashed a cheque issued by the corporate debtor.
Explanation_ --For the purposes of this section, a "'demand notke"
means a notice served by an operational creditor to the corporate
debtor demanding repayment of the operational debt in respect of
which the default has occurred.
c
xxx xxxxxx
9. Application for initiation of corporate insolvency resolution
process by operational creditor-
(!) After the expiry of the period of ten days from the date of
D delivery of the notice or invoice demanding payment under sub-
section (l) 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.
E
(2) The application under sub-section (I) 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
F 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
G 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 by the corporate
debtor; and ( d) such other information as may be specified.
H
MACQUARIE BANK LIMITED v. SHILPI CABLE 765
TECHNOLOGIES LTD. [R. F. NARIMAN, J.]
(4) An operational creditor initiating a corporate insolvency A
resolution process under this section, may propose a resolution
professional to act as an interim resolution professional.
(5) The Adjudicating Authority shall, within fourteen days of the
receipt of the application under sub-section (2), by an order-
B
(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 repayment of the unpaid operational debt;
( c) the invoice or notice for payment to the corporate debtor has
c
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 D
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;
E
(b) there has been repayment of the unpaid operational debt;
( c) the creditor has not delivered the invoice ornotice for payment
to the corporate debtor;
(d) notice of dispute has been received by the operational creditor
F
or there is a record of dispute in the information utility; or
( e) any disciplinary proceeding is pending 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 G
applicant to rectify the defect in his application within seven days
of the date of receipt of such notice from the adjudicating
Authority.
H
766 SUPREME COURT REPORTS [2017) 13 S.C.R.
A (6) The corporate insolvency resolution process shall commence
from the date of admission of the application under sub-section
(5) of this section.
xxx xxx xxx
The Insolvency and Bankruptcy (Application to Adjudicating
B Authority) Rules, 2016
5. Demaf!d notice by operational creditor.-
( I) An olJerational creditor shall deliver to the corporate debtor,
the following documents, namely.-
(a) a demand notice in Form 3; or
c
(b) a copy of an invoice attached with a notice in Form 4.
(2) The demand notice or the copy of the invoice demanding
payment referred to in sub-section (2) of section 8 of the Code,
may be delivered to the corporate debtor,
o (a) at the registered office by hand, registered post or speed post
with acknowledgement due; or
(b) by electronic mail service to a whole time director or designated
partner or key managerial personnel, if any, of the corporate debtor.
(3) A copy of demand notice or invoice demanding payment served
E under this rule by an operational creditor shall also be filed with
an information utility, if any.
6. Applioation by operational creditor.-
( 1) An operational creditor, shall make an application for initiating
the corporate insolvency resolution process against a corporate
F debtor under section 9 of the Code in Form 5, accompanied with
documents and records required therein and as specified in the
Insolvency and Bankruptcy Board of India (Insolvency Resolution
Process for Corporate Persons) Regulations, 2016.
(2) The applicant under sub-rule {I) shall dispatch forthwith, a
G copy of the application filed with the Adjudicating Authority, by
registered post or speed post to the registered office of the
corporate debtor.
H
MACQUARIE BANK LIMITED v. SHILPI CABLE 767
TECHNOLOGIES LTD. [R. F. NARIMAN, J.]
FORM 3 A
(See clause (a) of sub-rule (I) of rule 5)
FORM OF DEMAND NOTICE I INVOICE DEMANDING
PAYMENT UNDER THE INSOLVENCY AND
BANKRUPTCY CODE, 2016
(Under rule 5 of the Insolvency and Bankruptcy (Application to B
AdjudicatingAuthority) Rules, 2016) [Date]
To,
[Name and address of the registered office of the corporate
debtor]
From, C
[Name and address of the registered office of the operational
creditor]
Subject: Demand notice/invoice demanding payment in
respect of unpaid operational debt due from [corporate
debtor] under the Code. D
Madam/Sir,
I. This letter is a demand notice/invoice demanding payment of
an unpaid operational debt due from [name ofcorporate debtor].
2. Please find particulars of the unpaid operational debt below:
PARTICULARS OF OPERATIONAL DEBT E
I. TOTAL AMOUNT OF DEBT, DETAILS
OF TRANSACTIONS ON ACCOUNT OF
WHICH DEBT FEIL DUE, AND THE
DATE FROM WHICH SUCH DEBT
FELL DUE
2. AMOUNT CLAIMED TO BE IN F
DEFAULT AND THE DATE ON WHICH
THE DEFAULT OCCURRED (ATTACH
THE WORKINGS FOR COMPUTATION
OF DEFAULT IN TABULAR FORM)
3. PARTICULARS OF SECURITY HELD,
IF ANY, THE DATE OF ITS CREATION,
G
ITS ESTIMATED VALUE AS PER THE
CREDITOR. ATTACH A COPY OF A
CERTIFICATE OF REGISTRATION OF
CHARGE ISSUED BY THE REGISTRAR
OF COMPANIES (IF THE CORPORATE
DEBTOR IS A COMPANY)
H
768 SUPREME COURT REPORTS [2017] 13 S.C.R.
A
4. DETAILS OF RETENTION OF TITIE
ARRANJEMENTS (IF ANY) IN RESPECT
OF GOODS TO WHICH TIIE
OPERATIONAL DFBT REFERS
5. RECORD OF DEFAULT WITII TIIE
B INFORMATION lJilLITY (IF ANYl
6. PROVISION OF LAW, CONlRACT OR
OTIIER DOCUMENT UNIER WHICH
DEBT HA5 BOCOME DUE
7. LIST OF OOCUMENTS ATTACHED TO
THIS APPLICATION IN ORDER TO
c PROVE THE EXISTENCE OF
OPERATIONAL DEBT AND TIIE
AMOUNT IN DEFAULT
3. lfyou dispute the existence or amount of unpaid operational
debt (in default) please provide the undersigned, within ten days
D of the receipt of this letter, ofthe pendency of the suit or arbitration
proceedings in relation to such dispute filed before the receipt of
this letter/notice.
4. If you believe that the debt has been repaid before the receipt
of this letter, please demonstrate such repayment by sending to
E us, within ten days ofreceipt of this letter, the following:
(a) an attested copy of the record of electronic transfer of the
unpaid amount from the bank account of the corporate debtor; or
(b) an attested copy of any record that [name of the operational
creditor] has received the payment.
F
5. The undersigned, hereby, attaches a certificate from an
information utility confirming that no record of a dispute raised in
relation to the relevant operational debt has been filed by any
person at any information utility. (if applicable)
6. The undersigned request you to unconditionally repay the unpaid
G operational debt (in default) in full within ten days from the receipt
of this letter failing which we shall initiate a corporate insolvency
resolution process in respect of [name of corporate debtor].
Yours sincerely,
H
MACQUARIE BANK LIMITED v. SHILPI CABLE 769
TECHNOLOGIES LTD. [R. F. NARIMAN, J.)
A
Signature of person authorised to act on
behalf of the ooerational creditor
Name in block letters
Position with or in relation to the operational
creditor
Address of nerson sil!lling B
Instructions
I. Please serve a copy of this form on the corporate debtor, ten
days in advance of filing an application under section 9 of the
Code. c
2. Please append a copy of such served notice to the application
made by the operational creditor to the Adjudicating Authority.
Forms
(See sub-rule (I) of rule 6)
APPLICATION BY OPERATIONAL CREDITOR TO D
INITIATE CORPORATE INSOLVENCY RESOLUTION
PROCESS UNDER THE CODE.
(Under rule 6 of the Insolvency and Bankruptcy (Application to
Adjudicating Authority) Rules, 2016)
[Date) E
To,
The National Company Law Tribunal
[Address]
F
From,
[Name and address for correspondence of the operational
creditor]
In the matter of [name of the corporate debtor]
G
Subject: Application to initiate corporate insolvency
resolution process in respect of [name of the corporate
debtor) under the Insolvency and Bankruptcy Code, 2016.
H
770 SlJPREME COURT REPORTS [2017] 13 S.C.R.
A Madam/Sir,
[Name of the operational creditor], hereby submits this
application to initiate a corporate insolvency resolution process in
the case of [name of corporate debtor]. The details for the
purpose of this application are set out below:
B Part-I
PARTICULARS OF APPLICANT
I. NAME OF a>FRATIONAL CREDITOR
2. IDENTIFICATION NUMBER OF
OPFRATIONAL CREDITOR
c (IF ANY)
3. ADDRESS FOR CORRESPONDENCE OF THE
OPERATIONAL CREDITOR
Part- II
D PARTICULARS OF CORPORATE
DEBTOR
I. NAME OF THE CORPORA TE DEBTOR
2. IDENTIFICATION NUMBER OF
CORPORATE DEBTOR
3. DATE OF INCORPORATION OF
E . CORPORATE DEBTOR
4. NOMINAL SHARE CAPITAL AND THE
PAID-UP SHARE CAPITAL OF THE
CORPORA TE DEBTOR AND'OR DETAILS
OF GUARANTEE CLAUSE AS PER
MEMORANDUM OF ASSOCIATION (AS
F APPLICABLE)
5. ADDRESS OF THE REGISTERED OFFICE
OF THE CORPORATE DEBTOR
6. NAME, ADDRESS AND AUTHORITY OF
PERSON SUBMITTING APPLICATION ON
G BEHALF OF OPERATIONAL CREDITOR
(ENCLOSE AUTHORISATION)
7. NAME AND ADDRESS OF PERSON
RESIDENT IN INDIA AUTHORISED TO
ACCEPT THE SERVICE OF PROCESS ON
ITS BEHALF (ENCLOSE AUTHORISATION)
H .,
MACQUARIE BANK LIMITED v. SHILPI CABLE 771
TECHNOLOGIES LTD. [R. F. NARIMAN, J.]
PARTICULARS OF THE PROPOSED.
INTERIM RESOLUTION
PROFESSIONAL IIF PROPOSED!
I. NAME, ADDRESS, EMAIL ADDRESS
AND THE REGISTRATION NUMBER OF
1HE PROPOSED INSOLVENCY B
PROFESSIONAL
Part-IV
PARTICULARS OF OPERATIONAL DEBT
I. TOTAL AMOUNT OF DEBT,
DETAILS OF TRANSACTIONS ON
c
•. ACCOUNT OF WHICH DEBT FELL DUE,
AND THEDATEFROMWHICHSUCH
DEB'!' FELL DUE
2. AMOUNT CLAIMED TO BE IN DEFAULT
AND THE DATE QN WHICH THE DEFAULT
OCCURRED (ATTACH THE WORKINGS D
FOR COMPUTATION OF AMOUNT AND
DATES OF DEFAULT IN TABULAR FORM\
Part-V
PARTICULARS OF OPERATIONAL DEBT
(DOCUMENTS, RECORDS AND EVIDENCE OF E
DEFAULT]
I. PARTICULARS OF SECURITY HELD, IF ANY, THE
DATE OF ITS CREATION, ITS ESTIMATED VALUE AS
PER THE CREDITOR
ATTACH A COPY OF A CERTIFICATE OF
REGISTRATION OF CHARGE ISSUED BY THE F
REGISTRAR OF COMPANIES (IF THE CORPORATE
DEBTOR IS A COMPANY)
2. DETAILS OF RESERVATION I RETENTION OF TITLE
ARRANGEMENTS (IF ANY) IN RESPECT OF GOODS TO
WHICH THE OPERATIONAL DEBT REFERS
3. PARTICULARS OF AN ORDER OF A COURT, G
TRIBUNAL OR ARBITRAL PANEL ADJUDICATING ON
THE DEFAULT, IF ANY
'ATTACH A COPY OF THE ORDER)
4. RECORD OF DEFAULT WITH THE INFORMATION
UTILITY, IF ANY
<ATTACH A COPY OF SUCH RECORD\ H
772 SUPREME COURT REPORTS [2017] 13 S.C.R.
A 5. DETAILS OF SUCCESSION CERTIFICATE, OR
PROBATE OF A WILL, OR LETTER OF
ADMINIS'fRATION, OR COURT DECREE (AS MAY
BE APPLICABLE), . UNDER THE INDIAN
SUCCESSION ACT, 1925 (10OF1925)
B (ATTACH A COPY) .
6. PROVISION OF IA W, CONTRACT OR OTHER
DOCUMENT UNDER WHICH OPERATIONAL
DEB[ HAS BECOME DUE
7. A STATEMENT OF BANK ACCOUNf WHERE
DEPOSITS ARE MADE OR CREDITS. RECEIVED
c NORMALLY BY THE OPERATIONAL CREDITOR
IN RESPECT OF THE DEBT OF. THE CORPORATE
. DEBTOR (ATTACH A COPY)
8. LIST OF OTHER DOCUMENTS ATTACHED TO
THIS APPLICATION IN ORDER TO PROVE THE
EXISTENCE OF OPERATIONAL DEBT AND THE
D AMOUNT IN .DEFAULT
I, [Name of the operational creditor I person authorised to
act on behalf of the operational creditor] hereby certify that,
to the best of my knowledge, [name of proposed insolvency
professional], is fully qµalified and permitted to act as an
E
insolvency professional in accordanGe with the Code and the rules
and regulations nlade thereunder. [WHERE APPLICABLE]
[Name of the operational creditor] has paid the requisite fee
for this application through [state means ofpayment] on [date].
F
Yours sincerely,
Signature of person authorised to act on behalf
of the operational creditor .
G Name in block letters
Position with or in relation to the operational
creditor
Address of person si!!Iling
H
MACQUARIE BANK LIMITED v. SHILPI CABLE 773
TECHNOLOGIES LTD. [R. F. NARIMAN, J.)
Instructions - A
Please attachthe following to this application:
Annex I Copy of the invoice I demand notice as in Form 3 of the
Insolvency and Bankruptcy (Application to Adjudicating Authority)
Rules, 2016 served on the corporate debtor.
B
Annex II Copies of all documents referred to in this application.
Annex III Copy of the relevant accounts from the banks/financial
institutions maintaining accounts of the operational creditor
confirming that there is no payment of the relevant unpaid
operational debt by the operational debtor, if available. C
Annex IV Affidavit in support of the application in accordance
with the Insolvency and Bankruptcy (Application to Adjudicating
Authority) Rules, 2016.
Annex V Written communication by the proposed frtterim
resolution professional as set out in Form 2 of the Insolvency and D
Bankruptcy (Application to Adjudicating Authority) Rules, 2016.
[WHERE APPLICABLE]
Annex VI Proof that the specified application fee has been paid.
Note: Where workmen/employees are operational creditors, the
application may be made either in an individual capacity or in a E
joint capacity by one of them who is duly authorised for the
purpose."
11. The first thing to be noticed on a conjoint reading of Sections
8 and 9 of the Code, as explained iii Mobilox Innovations Private
Limited v. Kirusa Software Private Limited, Civil Appeal No. 9405 F
of 2017 decided on 21.9.2017, at paragraphs 33 to 36, is that Section
9( I) contains the conditions precedent for triggering the Code insofar as
an operational creditor is concerned. The requisite elements necessary
to trigger the Code are:
i. occurrence of a default; G
ii.delivery of a demand notice of an unpaid operational debt or
invoice demanding payment of the amount involved; and
iii. the fact that the operational creditor has not received payment
from the corporate debtor within a period of I 0 days of receipt H
774 SUPREME COURT REPORTS (2017] 13 S.C.R.
•
A of the demand notice or copy of invoice demanding payment, or
received a reply from the corporate debtor which does not
indicate the existence ofa pre-existing dispute or repayment of
the unpaid operational debt.
12. It is only when these conditions are mcl that an application
B may then be filed under Section 9(2) of the Code in the prescribed manner,
accompanied with such fee as has been prescribed. Under Section
9(3), what is clear is that, along with the application, certain other
information is also to be furnished. Obviously, under Section 9(3 )(a), a
copy of the invoice demanding payment or demand notice delivered by
the operational creditor to the corporate debtor is to be furnished. We
C may only indicate that under Rules 5 and 6 of the Adjudicating Authority
Rules, read with Forms 3 and 5, it is clear that, as Annexure I thereto,
the application in any case must have a copy of the invoice/demand
notice attached to the application. That this is a mandatory condition
precedent to the filing of an application is clear from a conjoint reading
D of sections 8 and 9( I) of the Code.
13. When we come to Section 9(3)(b), it is obvious that an affidavit
to the effect that there is no notice given by the corporate debtor relating
to a dispute of the unpaid operational debt can only be in a situation
where the corporate debtor has not, within the period of 10 days, sent
E the requisite notice by way ofreply to the operational creditor. In a case
where such notice has, in fact, been sent in reply by the corporate debtor,
obviously an affidavit to that effect cannot be given.
14. When we come to sub-clause (c) of Section 9(3), it is equally
clear that a copy of the certificate from the financial institution maintaining
F accounts of the operational creditor confirming that there is no payment
of an unpaid operational debt by the corporate debtor is certainly not a
condition precedent to triggering the insolvency process under the Code.
The expression "confirming" makes it clear that this is only a piece of
evidC11ce, albeit a very important piece of evidence, which only "confirms"
that there is no payment of an unpaid operational debt. This becomes
G clearer when we go to sub-clause (d) of Section 9(3) which requires
such other information as may be specified has also to be furnished
along with the application.
15. When Form 5 under Rule 6 is perused, it becomes clear that
Part V thereof speaks of particulars of the operational debt. There are
H
MACQUARIE BANK LIMITED v. SHILPI CABLE 775
TECHNOLOGIES LTD. [R. F. NARIMAN, J.]
8 entries in Part V dealing with documents, records and evidence of A
default. Item 7 of Part V is only one of such documents and has to be .
read along with Item 8, which speaks of other documents in order to
prove the existence of an operational debt and the amount in default.
Further, annexure III in the Form also speaks of copies of relevant
accounts kept by banks/financial institutions maintaining accounts of the B
operational creditor, confirming that there is no payment of the unpaid
operational debt, only "if available". This would show that such accounts
arc not a pre-condition to trigger the Code, and that if such accounts are
not available, a certificate based on such accounts cannot be given. if
Section 9 is to be read the Adjudicating Authority Rules and the Forms
therein, all of which set out the statutory conditions necessary to invoke C
the Code. ·
16. In State ofU.P. v. Babu Ram 19612SCR679 at 701-702,
this Court dealt with the position of rules made under a statute as follows:
"What then is the effect of the said propositions in their application
to the provisions of the Police Act and the rules made thereunder? D
The Police Act of 1861 continues to be good law under the
Constitution. Para 477 of the Police Regulations shows that the
rules in Chapter XXXII thereof have been framed under Section
7 of the Police Act. Presumably, they were nlso made by the
Government in exercise of its power under Section 46(2) of the E
Police Act. Under para 479(a) the Governor's power of
punishment with reference to all officers is preserved; that is to
say, this provision expressly saves the power of the Governor
under Article 310 of the Constitution. "Rules made under a statute
must be treated for all purposes of constmction or obi igation exactly
as if they were in the Act and are to be of the same effect as if F
contained in the Act, and are to be judicially noticed for all purposes
of construction or obligation": see Maxwell "On the Interpretation
of Statutes", 10th edn., pp. 50-51. The statutory rules cannot be
described as, or equated with, administrative directions. If so, the
Police Act and the rules made thereunder constitute a self- G
contained code providing for the appointment of police officers
and prescribing the procedure for their removal.
Equally, in Desh Bandhu Gupto v. Delhi Stock Exchange
(1979) 4 SCC 565 at 572, this Court laid down the principle of
conlemporonea exposilio as under: H
776 SUPREME COURT REPORTS (2017] 13 S.C.R.
A "The principle of contemporanea expositio (interpreting a statute
or any other document by reference to the exposition it has
received from contemporary authority) can be invoked though
the same will not always be decisive of the question of construction
(Maxwell 12th ed. p. 268). In Crawford on Statutory Construction
(1940 ed.) in para 219 (at pp. 393-395) it has been stated that
B
administrative construction (i.e. contemporaneous construction
placed by administrative or executive officers charged with
executing a,statute) generally should be clearly wrong before it is
overturned; such a construction, commonly referred to as practical
construction, although not controlling, is nevertheless entitled to
c considerable weight; it is highly persuasive. In Baleshwar
Bagarti v. Bhagirathi Dass [ILR35 Cal 701at713] the principle,
which was reiterated in Mathura Mohan Saha v. Ram Kumar
Saha [ILR 43 Cal 790 : AIR 1916 Cal 136] has been stated by
Mukerjee, J., thus:
D "It is a well settled principle of interpretation that courts in
construing a statute will give much weight to the interpretation
put upon it, at the time of its enactment and since, by those
whose duty it has been to construe, execute and apply it. I do
not suggest for a moment that such interpretation has by any
means a controlling effect upon the Courts; such interpretation
E may, if occasion arises, have to be disregarded for cogent and
persuasive reasons, and in a clear case of error, a court would
without hesitation refuse to follow such construction."
However, Dr. Singhvi referred to the following three jntigments
for the proposition that rules cannot override the substantive provisions
F of an Act: D.T.U. v. B.B.L. Hajelay (1972) 2 SCC 744 (para 13);
ADM (Rev.) Delhi Admn. v. Siri Ram (2000) 5 SCC 451(para16);
and Ispat Industries 1-td. v. Commissioner of Customs (2006) 12
SCC 583 (para 21 ). The aforesaid judgments only have application
when rules are ultra vires the parent statute. In the present case, the
G rules merely flesh out what is already contained in the statute and must,
therefore, be construed along with the statute. Read with the Code,
they form a self-contained code being contemporanea expositio by
the Executive which is charged with carrying out the provisions of the
Code. The true construction of Section 9(3)(c) is that it is a procedural
H
MACQUARIE BANK LIMITED v. SHILPI CABLE 777
TECHNOLOGIES LTD. [R. F. NARIMAN, J.]
provision, which is directory in nature, as the Adjudicatory Authority A
Rules read with the Code clearly demonstrate.
17. There may be situations of operational creditors who may
have dealings with a financial institution as defined in Section 3(14) of
the Code. There may also be situations where an operational creditor
may have as his banker a non-scheduled bank, for example, in which B
case, it would be impossible for him to fulfill the aforesaid condition. A
foreign supplier or assignee of such supplier may have a foreign banker
who is not within Section 3(14) of the Code. The fact that such foreign
supplier is an operational creditor is established from a reading of the
definition of "person" contained in section 3(23), as including persons
resident outside India, together with the definition of"operational creditor" C
contained in Section 5(20), which in tum is defined as "a person to whom
an operational debt is owed and includes any person to whom such debt
has been legally assigned or transferred". That such person may have
a bank/financial institution with whom it deals and which is not contained
within the definition of Section 3( 14) of the Code would show that Section D
9(3)(c) in such a case would, if Dr. Singhvi is right about the sub-section
being a condition precedent, amount to a threshold bar to proceeding
further under the Code. The Code cannot be construed in a discriminatory
fashion so as to include only those operational creditors who are residents
outside India who happen to bank with financial institutions which may
be included under Section 3(14) of the Code. It is no answer to state E
that such person can approach the Central Government to include its
foreign banker under Section 3(14) of the Code, for the Central
Government may never do so. Equally, Dr. Singhvi's other argument
that such persons ought to be left out of the triggering of the Code against
their corporate debtor, despite being operational creditors as defined, F
would not sound well with Article 14 of the Constitution, which applies
to all persons including foreigners. Therefore, as the facts of these cases
show, a so called condition precedent impossible of compliance cannot
be put as a threshold bar to the processing of an application under Section
9 of the Code.
G
18. However, it was argued that there are various other categories
of creditors who cannot file insolvency petitions, such as government
authorities who have pending tax dues. Such authorities have ample
powers under taxation statutes to coercively collect outstanding tax
arrears. Besides they form a class, as a whole, who are kept out of the
H
778 SUPREME COURT REPORTS (2017] 13 S.C.R.
A Code, unlike persons who are resident outside India who, though being
operational creditors, are artificially divided, if we are to accept Dr.
Singhvi 's argument, into two sub-classes, namely, those who bank with
an institution that is recognized by Section 3(14) of the Code and those
who do not. This argument also does not commend itself to us.
B 19. It is tme that the expression "initiation" contained in the marginal
note to Section 9 does indicate the drift of the provision, but from such
drift, to build an argument that the expression "initiation" would lead to
the conclusion !hat Section 9(3) contains mandatory conditions precedent
before which the Code can be triggered is a long shot. Equally, the
expression ''shall" in Section 9(3) does not take us much further when it
C is clear that Section 9(3)(c) becomes impossible of compliance in cases
like the present. It would amount to a situation wherein serious general
inconvenience would be caused to innocent persons, such as the appellant,
without very much furthering the object of the Act, as has been held in
the State of Haryana v. Ra&hublr Dayal ( 1995) I SCC 133 at paragraph
D 5 and obviously, therefore, Section 9(3)(c) would have to be construed
as being directory in nature.
20. Even otherwise, the important condition precedent is an
occurrence of a default, which can be proved, as has been stated
hereinabove, by mean~ of other documentary evidence. Take for example
E the case of an earlier letter written by the corporate debtor to the
operational creditor confirming that a particular operational debt is due
and payable. T~is piece of evidence would be sufficient to demonstrate
that such debt i~ due and that default has taken place, as may have been
admitted by thci corporate debtor. If Dr. Singhvi 's submissions were to
be accepted, despite the availability of such documentary evidence
F contained in the Section 9 application as other information as may be
specified, such application filed under Section 9 would yet have to be
rejected because there is no copy of the requisite certificate under Section
9(3)(c). Obviously, such an absurd result militates against such a provision
being construed as mandatory.
G 21. It is unnecessary to further refer to arguments made on the
footing that Section 7 qua financial creditors has a process which is
different from that of operational creditors under Sections 8 and 9 of the
Code. The fact that there is no requirement of a bank certificate under
Section 7 of the Code, as compared to Section 9, does not take us very
H much further. The difference between Sections 7 and 9 has already
MACQUARIE BANK LIMITED v. SHILPI CABLE 779
TECHNOLOGIES LTD. [R. F. NARIMAN, J.]
been noticed by this Court in lnnoventlve Industries Ltd. v. ICICI A
Bank & Anr., Civil Appeal Nos. 833 7-8338 of 2017 decided on August
31, 2017, as follows:-
"29. The scheme of Section 7 stands in contrast with the scheme
under Section 8 where an operational creditor is, on the occurrence
ofa default, to first deliver a demand notice of the unpaid debt to B
the operational debtor in the manner provided in Section 8(1) of
the Code. Under Section 8(2), the corporate debtor can, within a
period of 10 days of receipt of the demand notice or copy of the
invoice mentioned in subsection (I), bring to the notice of the
operational creditor the existence of a dispute or the record of the C
pendency ofa suit or arbitration proceedings, which is pre-existing
- i.e. before such notice or invoice was received by the corporate
debtor. The moment there is existence of such a displlte, the
operational creditor gets Olli of the clutches of the Code.
30. On the other hand, as we have seen, in the case of a corporate
debtor who commits a defalllt of a financial debt,·the adjudicating D
authority has merely to see the records of the information utility
or other evidence produced by the financial creditor to satisfy
itself that a default has occurred. It is ofno matter that the debt is
disputed so long as the debt is "due" i.e. payable unless interdicted
by some law or has not yet become due In the sense that it is E
payable at some future date. It is only when this is proved to the
satisfaction of the adjudicating authority that the adjudicating
authority may reject an application and not otherwise."
The fact that these differences obtain under the Code would have
no direct bearing on whether Section 9(3)(c) ought to be construed in F
the manner indicated by Dr. Singhvi.
22. It was also submitted that Sections 65 and 76 of the Code
provide for criminal prosecution against banks issuing false bank
certificates and that a foreign bank issuing such a certificate may not be
amenable to the jurisdiction of the Code. It is unnecessary to answer 0
this submission in view of the fact that the necessity for such a certificate
has itself been held by this judgment to be directory in nature ..
23. Equally, Dr. Singhvi 's argument that the Code leads to very
drastic action being taken once an application for insolvency is filed and
admitted and that, therefore, all conditions precedent must be strictly H
780 SUPREME COURT REPORTS [2017] 13 S.C.R.
A construed is also not in sync with the recent trend of authorities as has
been noticed by a concurring judgment in Ms. Eera through Dr.
Manjula Krippendorf v. State (Govt. of NCT of Delhi) & Anr,
Criminal Appeal Nos. 1217-1219 of2017 decided on July 21, 2017. In
this judgment, the correct interpretation of Section 2(l)(d) of the
B Protection of Children from Sexual Offences Act, 2012 arose. After
referring to the celebrated Heydon's case, 76 E.R. 637 [1584] and to
the judgments in which the golden rule of interpretation of statutes was
set out, the concurring judgment ofR.F. Nariman, J., after an exhaustive
survey of the relevant case law, came to the conclusion that the modern
trend of case law is that creative interpretation is within the lakshman
C Rekha of the Judiciary. Creative interpretation is when the Court looks
at both the literal language as well as the purpose or object of the statute,
in order to better determine what the words used by the draftsman of
the legislation mean. The concurringjudgment then concluded:
"It is thus clear on a reading of English, U.S., Australian and our
D own Supreme Court judgments that the 'lakshman Rekha' has
in fact been extended to move away from the strictly literal rule
of interpretation back to the rule of the old English case of
Heydon, where the Court must have recourse to the purpose,
object, text, and context of a particular provision before arriving
at a judicial result. In fact, the wheel has turned full circle. It
E started out by the rule as stated in 1584 in Heydon's case, which
was then waylaid by the literal interpretation rule laid down by the
Privy Council and the House of Lords in the mid 1800s, and has
come back to restate the rule somewhat in terms of what was
most felicitously put over 400 years ago in Heydon's case."
F In dealing with penal statutes, the Court was confronted with a
body of case law which stated that as penal consequences ensue, the
provisions of such statutes should be strictly construed. Here again, the
modem trend in construing penal statutes has moved away from a
mechanical incantation of strict construction. Several judgments were
G referred to and it was held that a purposive interpretation of such statutes
is not ruled out. Ultimately, it was held that a fair construction of penal
statutes based on purposive as well as literal interpretation is the correct
modem day approach.
24. However, Dr. Singhvi cited Raghunath Rai Bareja v. Punjab
H National Bank, (2007) 2 SCC 230 and relied upon paragraphs 39 to 47
MACQUARIE BANK LIMITED v. SHILPI CABLE 781
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for the proposition that the literal construction of a statute is the only A
mode of interpretation when the statute is clear and unambiguous.
Paragraph43 of the said judgment was relied upon strongly by the learned
counsel, which states:
"In other words, once we depart from the literal rule, then any
number of interpretations can be put to a statutory provision, each B
judge having a free play to put his own interpretation as he likes.
This would be destructive ofjudicial discipline, and also the basic
principle in a democracy that it is not for the Judge to legislate as
that is the task of the elected representatives of the people. Even
ifthe literal interpretation results in hardship or inconvenience, it C
has to be followed (see G.P. Singh 's Principles of Statutory
Interpretations, 9th Edn., pp. 45-49). Hence departure from the
literal rule should only be done in very rare cases, and ordinarily
there should be judicial restraint in this connection."
Regard being had to the modem trend of authorities referred to in
the concurring judgment in Ms. Eera through Dr. Manjula D
Krippendorf(supra); we need not be afraid ofeach Judge having a
free play to-put ·forth his own interpretation as he likes. Any arbitrary
interpretation, as opposed to fair interpretation, of a statute, keeping the
object of the legislature in mind, would be outside the judicial ken. The
ta_sk of a Judge, When he looks at the literal language of the statute as E
well as the object and purpose of the statute, is not to interpret the
· provision as he likes but is to interpret the provision keeping in mind
Parliament's language and the object that Parliament had in mind. With
this caveat, it is ~!ear that judges are not knight-errants· free to roam
around in the interpretative world doing as each Judge likes. They are
bound by the text of the statute, together with the context in which the F
statute is enacted; and both text and context are Parliaments', and not
what the Judge thinks the statute has been enacted for. Also, it is clear
that for the reasons stated by us above, a fair construction of Section
9(3)(c ), in consonance with the object sought to be achieved by the
Code, would lead to the conclusion that it cannot be construed as a G
threshold bar or a condition precedent as has been contended by Dr.
Singhvi.
25. Dr. Singhvi then argued that the application of the principle in
Taylor (supra) should be followed when it comes to the correct
interpretation of Section 9(3)(c) of the Code. The principle of Taylor H
782 SUPREME COURT REPORTS [2017) 13 S.C.R.
A (supra), namely that where a statute states that a particular act is to be
done in a particular manner; it must be done in that manner or not at all,
was followed by the Privy Council in Nazir Ahmad v. King Emperor,
63 IA 3 72 ( 1936). In that case, the Privy Council held that Sections I 64
and 364 of the Code of Criminal Procedure, I 898 prescribed the mode
B in which confessions are to be recorded by Magistrates, when made
during investigation, and a confession before a Magistrate not recorded
in the manner provided was inadmissible. In Ukha Kolbe v. State of
Maharashtra (1964) I SCR 926 at 948-949, a Constitution Bench of
this Court held that the principle contained in Taylor (supra) would not
apply when proof of a specified fact could be obtained by means other
C than that statutorily specified. The argument in that case was that Sections
129A and 129B prescribed the mode of talcing blood in the course of
investigation of an offence under the Bombay Prohibition Act, I 949, and
that, therefore, production or examination of a person before a registered
medical practitioner during the course of such investigation is the only
D method by which consumption of an intoxicant may be proved. After
setting out Sections l 29A and 129B and the judgment of the Privy Council
in Nazir Ahmad (supra), this Court held:
"The rule in Taylor v. Tt0•lor [( 1875) I Ch D 426) on which the
Judicial Committee relfod has, in our judgment, no application to
this case. Section 66(2), as we have already observed, does not
E
prescribe any particular method ofproof of concentration of alcohol
in the blood of a person charged with consumption or use of an
intoxicant. Section 129-A is enacted primarily with the object of
providing when the conditions prescribed are fulfilled, that a person
shall submit himself to be produced before a registered medical
F practitioner for examination and for collection of blood.
Undoubtedly, Section 129-A(l) confers power upon a Police or a
Prohibition Officer in the condition~ ~~~ "•( tu compel a person
suspected by him of having consumed itlht liquor, to be produced
for examination and for collection of blood before a registered
medical practitioner. But proof of concentration of alcohol may
G be obtained in the manner described in Section 129-A(l) and (2),
or otherwise; that is expressly provided by sub-section (8) of
Section 129-A, The power of a Police Officer to secure
examination of a person suspected of having consumed an
intoxicant in the course of investigation for an offence under the
H Act is undoubtedly restricted by Section 129-A. But in the present
MACQUARIE BANK LIMITED v. SHILPI CABLE 783
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case the Police Officer investigating the offence had not produced A
the accused before a medical officer; it was in the course of his
examination that Dr Kulkarni, before any investigation was
commenced, came to suspect that the appellant had consumed
liquor, and he directed that specimen of blood of the appellant be
collected. This step may have been taken for deciding upon the B
line of treatment, but certainly not for collecting evidence to be
used against the appellant in any possible trial for a charge of an
offence of consuming liquor contrary to the provisions of the Act.
If unlawful consumption of an intoxicant by a person accused,
may be proved 9therwise than by a report obtained in the conditions
mentioned in Section 129-A(l) and(2), there would be no reason C
to suppose that other evidence about excessive concentration of
alcohol probative of consumption is inadmissible. Admissibility of
evidence about concentration of alcohol in blood does not depend
upon the exercise of any power of the Police or Prohibition Officer.
Considerations which were present in Nazir Ahmad case [( 1936) D
LR 63 IA 372] regarding the inappropriateness of Magistrates
being placed in the same position as ordinary citizens and being
required to transgress statutory provisions relating to the method
of recording confessions also do not arise in the present case."
26: This judgment applies on all fours to the facts of the present
case inasmuch as, like Section 129A(8) of the aforesaid Act, proof of E
the existence of a debt and a default in relation to such debt can be
proved by other documentary evidence, as is specifically contemplated
by Section 9(3)(d) of the Code. Like Section 66(2) of the aforesaid Act
in Ukha Kolhe (supra), Section 8 of the Code does not prescribe any
particular method of proof of occurrence of default. Consequently, we F
are of the opinion that the principle contained in Taylor (supra) does not
apply in the present situation.
27. Also, in Madan & Co. v. Wazir Jaivir Chand ( 1989) I SCC
264 at 268-270, the interpretation of Section 11 of the Jammu and Kashmir
Houses and Shops Rent Control Act, 1966 was under consideration of G
this Court. As stated in paragraph 4 of the judgment, the controversy in
that case turned on the question whether the notice sent by the Respondent
by registered posf can be said to have been served and the Petitioner
can be said to have been in receipt of the said notice. In the words of
the judgment:
H
784 SUPREME COURT REPORTS [2017] 13 S.C.R.
A "4. On the terms of the above sections, the controversy in this
case turned on the question whether the notice sent by the
respondent by registered post on 26-11-1976 can be said to have
been served and the petitioner can be said to have been
in receipt of the said notice. If the answer to this question is in
the affirmative, as held by all the courts concurrently, there is
B
nothing further to be said. The contention of the appellant tenant
however, is that the statute postulates a factual service of the
notice on, and the actual receipt of it by, the tenant and that this
admittedly not being the position in the present case, no eviction
could b.ave been decreed.
c 5. Shri Soli J. Sorabjee, learned counsel appearing for the tenant
submitted that the safeguards in Sections 11 and 12 of the Act are
intended for the benefit and protection of the tenant and that,
therefore, where the Act provides for the service of the notice, by
post, this requirement has to be strictly complied with. He referred
D to the decisions in Hare Krishna Das v. Hahnemann Publishing
Co. Ltd.[(1965-66) 70 Cal WN 262] and Surajmull
Ghanshyamdas v. Samadarshan Sur [AIR 1969 Cal 109 : ILR
( 1969) I Cal 379] to contend that such postal service can neither
be presumed nor considered to be good service where the letter
is returned to the sender due to the non-availability of the
E addressee. He urges that, in the absence of any enabling provision
such as the one provided for in Section I 06 of the Transfer of
Property Act, service by some other mode, such as affixture, cannot
be treated as sufficient compliance with the statute. In this context,
he referred to the frequently applied rule in Taylor
F v. Taylor [(1875) I Ch D 426] that where a power is given to do
a certain thing in a certain way, the thing must be done in that way
or not at all and that othF methods of p:rfor n<1I1ce are necessarily
forbidden. He urged that even if servi~e by affixture can be
considered to be permissible, there are stringent prerequisites for
service by affixture, such as those outlined in Order V Rules 17
G to 19, of the Code of Civil Procedure (CPC) and that these
prerequisites were not fulfilled in the present case. He pointed
out that even under the CPC, service by such affixture can be
recognised as valid only if sincere and vigilant attempts to serve
the notice on the addressee personally are unsuccessful. In the
H
MACQUARIE BANK LIMITED v. SHILPI CABLE 785
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present case, it is submitted, the evidence shows that the postman A
mad~ no serious efforts to ascertain the whereabouts of the
addressee even though the evidence showed that a servant of the
petitioner firm was known to the postman and was present in the
neighbourhood. He, therefore, submitted that the High Court should
have dismissed the suit for eviction filed by the landlord on the
B
ground that the requirements of Sections 11 and 12 of the Act
were not satisfied."
The Court turned down the contention based on Taylor (supra) in
the following terms:
"We are of opinion that the conclusion arrived at by the courts c
below is correct and should be upheld. It is true that the proviso to
clause (i) of Section 11(1) and the proviso to Section 12(3) are
intended for the protection of the tenant. Nevertheless it will be
easy to see that too strict and literal a compliance of their language
would be impractical and unworkable."
D
xxxxxxxxx
"In this situation, we have to choose the more reasonable, effective,
equitable and practical interpretation and that would be to read
the word "served" as "sent by post", correctly and properly
addressed to the tenant, and the word "receipt" as the tender of E
the letter by the postal peon at the address mentioned in the letter.
No other interpretation, we think, will fit the situation as it is simply
not possible for a landlord to ensure that a registered letter sent
by him gets served on, or is received by, the tenant."
This judgment is also supportive of the proposition that when the
F
principle in Taylor (supra) leads to impractical, unworkable and
inequitable results, it cannot be applied out of context in situations which
are predominantly procedural in nature.
28. The decision in Smart Timing (supra) by the NCLAT, which
was relied upon by the impugned judgment, was then pressed into service G
by Dr Singhvi stating that an appeal from this judgment has been dismissed
by this Court and that, therefore, following the principle in Kunhayammed
v. State of Kerala (2000) 6 SCC 359, the NCLAT'sjudgment has merged
with the Supreme Court's order dated August 18, 2017, which reads as
follows:
H
786 SUPREME COURT REPORTS [2017) 13 S.C.R.
A "Heard the learned counsel appearing for the appellant.
We do not find any reason to interfere with the order dated
19.05.2017 passed by the National Company Law Appellate
Tribunal, New Delhi. In view of this, we find no merit in the appeal.
Accordingly, the appeal is dismissed."
B
Whether or not there is a merger, it is clear that the order dated
August 18, 2017 is not "law declared" within the meaning ofArticle 141
of the Constitution and is of no precedential value. Suffice it to state
that the said order was also a threshold dismissal by the Supreme Court,
having heard only the learned counsel appearing for the appellant.
c
29. Dr. Singh vi then relied upon the Viswanathan Report dated
November 2015, in particular Box 5.2, which reads as follows:
Box 5.2- Trigger for IRP
D
I. The IRP can be triggered by either the debtor or the creditors
by submitting docwnentation specified in the Code to the
adjudicating authority.
2. For the d~btor to trigger the IRP, she must be able to submit
all the docun1entation that is defined in the Code, and may be
E specified by the Regulator above this.
3. The Code differentiates two categories of creditors: financial
creditors where the I iability to the debtor arises from a solely
financial transaction, and operational creditors where the
liability to the debtor arises in the form of future payments in
exchange for goods or services already delivered In cases where
F a creditor has both a solely financial transaction as well as an
operational transaction with the entity, the creditor will be
considered a financial creditor to the extent of the financial debt
and an operational creditor to the extent of the operational debt
is more than half the full liability it has with the debtor.
4.The Code will require different docwnentation for a debtor, a
G financial creditor, and an operational creditor to trigger the IRP.
These are listed Box 5.3 under what the Adjudicator will accept
as requirements to trigger the IRP.
H
MACQUARIE BANK LIMITED v. SHILPI CABLE 787
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30. Item 2 in Box 5.2 does show that for the corporate debtor to A
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 B
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 ltem2(c) in Box 5.3, the Committee, byway of drafting
instructions for how the IRP can be triggered, states:
"If an operational creditor has applied, the application contains: c
i. Record of an undisputed bill against the entity, and where
applicable, information of such undisputed as filed at a registered
information utility."
31. When it comes to the Joint Committee report dated April 2016, D
the draft Section contained therein, namely the definition of financial
institution contained in Section 3(14) of the Code, has added into it a
sub-clause (c) which is a public financial institution as defined in Section
2(72) of the Companies Act, 2013. Apart from this, the draft statute that
was placed before the Joint Committee contains Section 9(3 )(c) exactly
as it is in the present Code. This report again does not throw much light E
on the point at issue before us.
32. Shri Mukul Rohatgi strongly relied upon a recent judgment
delivered by this Court in Surendra Trading Company v. Juggilal
Kamlapat Jute Mills Company Limited and Others, Civil Appeal
No. 8400 of2017 decided on September 19, 2017. In this case, the F
question of law framed by the NCLAT for its decision was whether the
time limit prescribed for admitting or rejecting a petition for initiation of
the insolvency resolution process is mandatory. The precise question
was whether, under the proviso to Section 9(5), the rectification of defects
in an application within 7 days of the date of receipt of notice from the
G
adjudicating authority was a hard and fast time limit which could never
be altered. The NCLAT had held that the 7 day period was sacrosanct
and could not be extended, whereas, insofar as the adjudicating authority
is concerned, the decision to either admit or reject the application within
the period of 14 days was held to be directory. This Court, in disagreeing
H
788 SUPREME COURT REPORTS [2017) 13 S.C.R.
A with the ~CLAT on the 7 day period being mandatory, held:
"We are not able to decipher any valid reason given while coming
to the conclusion that the period mentioned in proviso is mandatory.
The order of the NCLAT, thereafter, proceeds to take note of the
provisions of Section 12 of the Code and points out the time limit
B for completion of insolvency resolution process is 180 days, which
period can be extended by another 90 days. However, that can
hardly provide any justification to construe the provisions ofproviso
to sub-section (5) of Section 9 in the manner in which it is done. It
is to be borne in mind that limit of 180 days mentioned in Section
12 also starts from the date ofadrnission of the application. Period
c prior thereto which is consumed, after the filing of the application
under Section 9 (or for that matter under Section 7 or Section 10),
whether by the Registry of the adjudicating authority in scrutinising
the application or by the applicant in removing the defects or by
the adjudicating authority in admitting the application is not to be
D taken into account. In fact, till the objections are removed it is not
to be treated as application validly filed inasmuch as only after the
application is complete in every respect it is required to be
entertained. In this scenario, making the period of seven days
contained in the proviso as mandatory does not commend to us.
No purpose is going to be served by treating this period as
E mandatory. In a given case there may be weighty, valid and
justifiable reasons for not able to remove the defects within seven
days. Notwithstanding the same, the effect would be to reject the
application,
The court further went on to hold:
F
"Further, we are of the view that the judgments cited by the
NCLAT and the principle contained therein applied while deciding
that period of fourteen days within which the adjudicating authority
has to pass the order is not mandatory but directory in nature
would equally apply while interpreting proviso to sub-section (5)
G of Section 7, Section 9 or sub-section (4) of Section 10 as well.
After all, the applicant does not gain anything by not removing the
objections inasmuch as till the objections are removed, such an
application would not be entertained. Therefore, it is in the interest
of the applicant to remove the defects as early as possible.
H
MACQUARIE BANK LIMITED v. SHILPI CABLE 789
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Thus, we hold that the aforesaid provision of removing the defects A
within seven days is directory and not mandatory in nature.
However, we would like to enter a caveat.
We are also conscious of the fact that sometimes applicants or
their counsel may show laxity by not removing the objections within
the time given and make take it for granted that they would be B
given unlimited time for such a purpose. There may also be cases
where such applications are frivolous in nature which would be
filed for some oblique motives and the applicants may want those
applications to remain pending and, therefore, would not remove
the defects. In order to take care of such cases, a balanced
approach is needed. Thus, while interpreting the provisions to be c
directory in nature, at the same time, it can be laid down that ifthe
objections are not removed within seven days, the applicant while
refilling the application after removing the objections, file an
application in writing showing sufficient case as to why the
applicant could not remove the objections within seven days. When D
such an application comes up for admission/order before the
adjudicating authority, it would be for the adjudicating authority to
decide as to whether sufficient cause is shown in not removing
the defects beyond the period of seven days. Once the adjudicating
authority is satisfied that such a case is shown, only then it would
entertain the application on merits, otherwise it will have right to E
dismiss the application."
This judgment also lends support to the argument for the appellant
in that it is well settled that procedure is the handmaid of justice and a
procedural provision cannot be stretched and considered as mandatory,
when it causes serious general inconvenience. As has been held in F
Mahanth Ram Das v. Ganga Das (1961) 3 SCR 763 at 767-768, we
have traveled far from the days of the laws of the Medes and the Persians
wherein, once a decree was promulgated, it was cast in stone and could
not be varied or extended later:
"Such procedural orders, though peremptory (conditional decrees G
apart) are, in essence, in terrorem, so that dilatory litigants might
put themselves in order and avoid delay. They do not, however,
completely estop a court from taking note of events and
circumstances which happen within the time fixed. For example,
it cannot be said that, if the appellant had started with the full
H
790 SUPREME COURT REPORTS (2017] 13 S.C.R.
A money ordered to be paid and came well in time but was set upon
and robbed by thieves the day previous, he could not ask for
extension of time, or that the Court was powerless to extend it.
Such orders are not like the law of the Medes and the Persians.
Cases are known in which Courts have moulded their practice to
meet a situation such as this and to have restored a suit or
B
proceeding, even though a final order had been passed."
33. Insofar as the second point is concerned, the first thing that is
to be noticed is that Section 8 of the Code speaks of an operational
creditor delivering a demand notice. It is clear that had the legislature
wished to restrict such demand notice being sent by the operational
c creditor himself, the expression used would perhaps have been "issued"
and not "delivered". Delivery, therefore, would postulate that such notice
could be made by an authorized agent. In fact, in Forms 3 and 5 extracted
hereinabove, it is clear that this is the understanding of the draftsman of
the Adjudicatory Authority Rules, because the signature of the person
D "authorized to act" on behalf of the operational creditor must be appended
to both the demand notice as well as the application under Section 9 of
the Code. The position further becomes clear that both forms require
such authorized agent to state his position with or in relation to the
operational creditpr. A position with the operational creditor would perhaps
be a position in the company or firm of the operational creditor, but the
E expression "in relation to" is significant. It is a very wide expression, as
has been held in Renusagar Power Co. Ltd. v. General Electric
Co., ( 1984) 4 SCC 679 at 704 and State of Karnataka v. Azad Coach
Builders (P) Ltd. (2010) 9 SCC 524 at 535, which specifically includes
a position which is outside or indirectly related to the operational creditor.
F It is clear, therefore, that both the expression "authorized to act" and
"position in relation to the operational creditor" go to show that an
authorized agent or a lawyer acting on behalf of his client is included
within the aforesaid expression.
34. Quite apart from the above, Section 30 of the Advocates Act
G states as follows:
"Right of advocates to practise.-Subj eel to provisions of this
Act, every advocate whose name is entered in the State roll shall
be entitled as of right to practise throughout the territories to which
this Act extends,-
H
MACQUARIE BANK LIMITED v. SHILPI CABLE 791
TECHNOLOGIES LTD. [R. F. NARIMAN, J.]
(i) in all courts including the Supreme Court; A
(ii) before any tribunal or person legally authorised to take
evidence; and
(iii) before any other authority or person before whom such
advocate is by or under any law for the time being in force entitled
to practise." B
That the expression "practise" is an expression of extremely wide
import, and would include all preparatory steps leading to the filing of an
application before a Tribunal. This is clear from a Constitution Bench
judgment of this Court in Harish Uppal (Ex-Capt.) v. Union of India,
(2003) 2 sec 45 at 72, which states: c
"The right of the advocate to practise envelopes a lot of acts to be
performed by him in discharge of his professional duties. Apart
from appearing in the courts he can be consulted by his clients, he
can give his legal opinion whenever sought for, he can draft
instruments, pleadings, affidavits or any other documents, he can D
participate in any conference involving legal discussions, he can
work in any office or firm as a legal officer, he can appear for
clients before an arbitrator or arbitrators etc."
35. The doctrine of harmonious construction of a statute extends
also to a harmonious construction of all statutes made by Parliament. ·In E
Harshad S. Mehta v. State of Maharashtra (2001) 8 SCC 257 at
280-81, the Special Court (Trial of Offences Relating to Transactions in
Securities) Act, 1992 was held, insofar as the criminal jurisdiction of the
Special Court was concerned, to be harmoniously construed with the
Code of Criminal Procedure, 1973 in the following terms:
F
"48. To our mind, the Special Court has all the powers ofa Court
of Session and/or Magistrate, as the case may be, after the
prosecution is instituted or transferred before that Court. The width
of the power of the Special Court will be same whether trying
such cases as are instituted before it or transferred to it. The use G
of different words in Sections 6 and 7 of the Act as already noticed
earlier also shows that the words in Section 7 that the prosecution
for any offence shall be instituted only in the Special Court deserve
a liberal and wider construction. They confer on the Special Court
all powers of the Magistrate including the one at the stage of
H
792 SUPREME COURT REPORTS (2017] 13 S.C.R.
A investigation or inquiry. Here, the institution of the prosecution
means taking any steps in respect thereof before the Special Court.
The scheme of the Act nowhere contemplates that it was intended
that steps at pre-cognizance stage shall be taken before a court
other than a Special Court. We may note an illustration given by
Mr Salve referring to Section 157 of the Code. Learned counsel
B
submitted that the report under that section is required to be sent
to a Magistrate empowered to take cognizance of offence. In
relation to offence under the Act, the Magistrate has no power to
take cognizance. That power is exclusively with the Special Court
and thus report under Section 157 of the Code will have to be se.nt
c to the Special Court though the section requires it to be sent to the
Magistrate. It is clear that for the expression "Magistrate" in
Section 157, so far as the Act is concerned, it is required to be
read as "Special Court" and likewise in respect of other provisions
of the Code. If the expression "Special Court" is read for the
expression "Magistrate", everything will fall in line. This
D
harmonious construction of the provisions of the Act and the Code
makes the Act work. That is what is required by principles of
statutory interpretation. Section 9( 1) of the Act provides that the
Special Court shall in the trial of such cases follow the procedure
prescribed by the Code for the trial of warrant cases before the
E Magistrate. The expression "trial" is not defined in the Act or the
Code. For the purpose of the Act, it has a wider connotation and
also includes in it the pre-trial stage as well. Section 9(2) makes
the Special Court, a Court of Session by a fiction by providing that
the Special Court shall be deemed to be a Court of Session and
shall have all the powers ofa Court of Session. In case, the Special
F
Court is held not to have the dual capacity and powers both of the
Magistrate and the Court of Session, depending upon the stage of
the case, there will be a complete hiatus. It is also to be kept in
view that the Special Court under the Act comprises of a High
Court Judge and it is a court of exclusive jurisdiction in respect of
G any offence as provided in Section 3(2) which will include offences
under the Indian Penal Code, the Prevention of Corruption Act
and other penal laws. It is only in the event of inconsistency that
the provisions of the Act would prevail as provided in Section 13
thereof. Any other interpretation will make the provision of the
Act unworkable which could not be the intention of the legislature.
H
MACQUARIE BANK LIMITED v. SHILPI CABLE 793
TECHNOLOGIES LTD. (R. F. NARIMAN, J.]
Section 9(2) does not exclude Sections 306 to 308 of the Code A
from the purview of the Act. This section rather provides that the
provisions of the Code shall apply to the proceedings before the
Special Court. The inconsistency seems to be only imaginary.
There is nothing in the Act to show that Sections 306 to 308 were
intended to be excluded from the purview of the Act."
B
Similarly, in CTO v. Binani Cements Ltd. (2014) 8 SCC 319 at
332, the rule of construction of two Parliamentary statutes being
harmoniously construed was laid down as follows:
"35. Generally, the principle has found vast application in cases of
there being two statutes: general or specific with the latter treating c
the common subject-matter more specifically or minutely than
the former. Corpus Juris Secundum, 82 C.J.S. Statutes § 482
states that when construing a general and a specific statute
pertaining to the same topic, it is necessary to consider the statutes
as consistent with one another and such statutes therefore should
be harmonised, if possible, with the objective of giving effect to a D
consistent legislative policy. On the other hand, where a general
statute and a specific statute relating to the same subject-matter
cannot be reconciled, the special or specific statute ordinarily will
control. The provision more specifically directed to the matter at
issue prevails as an exception to or qualification of the provision E
which is more general in nature, provided that the specific or special
statute clearly includes the matter in controversy
(Edmondv. United States (137 LEd2d 917: 520 US 651 (1997)]
, Warden v. Marrero [41LEd2d 383: 417 US 653 (1974)] )."
More recently, in Binoy Viswam v. Union of India (2017) 7 p
SCC 59 at 132, this Court construed the Income Tax Act, 1961 and the
Aadhaar (Targeted Delivery of Financial and Other Subsidies, Benefits
and Services) Act, 2016 harmoniously in the following manner:
"98. In view of the above, we are not impressed by the contention
of the petitioners that the two enactments are contradictory with G
each other. A harmonious reading of the two enactments would
clearly suggest that whereas enrolment of Aadhaar is voluntary
when it comes to taking benefits of various welfare schemes even
ifit is presumed that requirement of Section 7 oftheAadhaar Act
that it is necessary to provide Aadhaar number to avail the benefits
H
794 SUPREME COURT REPORTS [2017] 13 S.C.R.
A of schemes and services, it is up to a person to avail those benefits
or not. On the other hand, purpose behind enacting Section 139-
AA of the Act is to check a menace of black money as well as
money laundering and also to widen the income tax net so as to
cover those persons who are evading the payment of tax."
B 36. The non-obstante clause contained in Section 238 of the Code
will not override the Advocates Act as there;, nn inconsistency between
Section 9, read with theAdjudicatingAuthority Ruks and Forms referred
to hereinabove, and the Advocates Act. In Balchand Jain v. State of
M.P. ( 1976) 4 SCC 572 at 585-86, the anticipatory bail provision contained
in Section 438 of the Code of Criminal Procedure was held not to be
c wiped out by the non-obstante clause contained in Rule 184 of the
Defence and Internal Security of India Rules, 1971. Fazal Ali, J.
concurring with the main judgment, held:
"16. Having regard to the principles enunciated above, we feel
that there does not appear to be any direct conflict between the
D provisions of Rule 184 of the Rules and Section 438 of the Code.
However, we hold that the conditions required by Rule 184 of the
Rules must be impliedly imported in Section 438 of the Code so as
to form the main guidelines which have to be followed while the
court exercises its power under Section 438 of the Code in offences
E contemplated by Rule 184 of the Rules. Such an interpretation
would meet the ends of justice, avoid all possible anomalies and
would at the same time ensure and protect the liberty of the subject
which appears to be the real intention of the legislature in enshrining
Section 438 as a new provision for the first time in the Code. We
think that there is no real inconsistency between Section 438 of
F the Code and Rule 184 of the Rules and, therefore, the non obstantc
clause cannot be interpreted in a manner so as to repeal or override
the provisions of Section 438 of the Code in respect of cases
where Rule 184 of the Rules applies."
Similarly, in R.S. Raghunath v. State of Karnataka ( 1992) I
G SCC 335 at 348, the non-obstante clause contained in Rule 3(2} of the
Kamataka Civil Services (General Recruitment) Rules, 1977 was held
not to override the Karnataka General Service (Motor Vehicles Branch)
(Recruitment) Rules, 1976. It was held:
H
MACQUARIE BANK LIMITED v. SHILPI CABLE 795
TECHNOLOGIES LTD. [R. F. NARIMAN, J.]
"As already noted, there should be a clear inconsistency between A
the two enactments before giving an overriding effect to the non-
obstante clause but when the scope of the provisions of an earlier
enactment is clear the same cannot be cut down by resort to non-
obstante clause. In the instant case we have noticed that even the
General Rules of which Rule 3(2) forms a part provide for B
promotion by selection. As a matter of fact Rules 1(3)(a) and
3( 1) and 4 also provide for the enforceability of the Special Rules.
The very Rule 3 of the General Rules which provides for
recruitment also provides for promotion by selection and further
lays down that the methods of recruitment shall be as specified in
the Special Rules, if any. In this background if we examine the C
General Rules it becomes clear that the object of these Rules
only is to provide broadly for recruitment to services of all the
departments and they are framed generally to cover situations
that are not covered by the Special Rules of any particular
department. In such a situation both the Rules including Rules
0
1(3)(a), 3(1) and 4 of General Rules should be read together. If
so read it becomes plain that there is no inconsistency and that
amendment by inserting Rule 3(2) is only an amendment to the
General Rules and it cannot be interpreted as to supersede the
Special Rules. The amendment also must be read as being subject
to Rules !(3)(a), 3(1) and 4(2) of the General Rules themselves. E '
The amendment cannot be read as abrogating all other Special
Rules in respect of all departments. In a given case where there
are no Special Rules then naturally the General Rules would be
applicable. Just because there is a non-obstante clause, in Rule
3(2) it cannot be interpreted that the said amendment to the General
F
Rules though later in point of time would abrogate the special rule
the scope of which is very clear and which co-exists particularly
when no patent conflict or inconsistency can be spelt out. As
already noted Rules 1(3)(a), 3(1) and 4 of the General Rules
themselves provide for promotion by selection and for
enforceability of the Special Rules in that regard. Therefore there G
is no patent conflict or inconsistency at all between the General
and the Special Rules."
In Central Bank of India v. State of Kerala (2009) 4 SCC 94
at 141-42, the non-obstante clauses contained in Section 34(1) of
H
796 SUPREME COURT REPORTS [2017] 13 S.C.R.
A Recovery of Debts Due to Banks and Financial Institutions Act, 1993
and Section 35 of the Securitisation and Reconstruction of Financial
Assets and Enforcement of Security Interest Act, 2002 were held not to
override specific provisions contained in the Bombay Sales Tax Act,
1959 and the Kerala Sales Tax Act 1963 dealing with a declaration of a
first charge in !he following terms:
B
"130. Undisputedly, !he two enactments do not contain provision
similar to the Workmen's Compensation Act, etc. In the absence
of any specific provision to that effect, it is not possible to read
any conflict or inconsistency or overlapping between !he provisions
of the ORT Act and the Securitisation Act on the one hand and
c Section 38-C of the Bombay Act and Section 26-B of the Kerala
Act on !he other and the non obstante clauses contained in Section
34(!) of the ORT Act and Section 35 of the Securitisation Act
cannot be invoked for declaring that the first charge created under
the State legislation will not operate qua or affect the proceedings
D initiated by banks, financial institutions and other secured creditors
for recovery of their dues or enforcement of security interest, as
the case may be.
13 l. The Court could have given effect to the non obstante clauses
contained in Section 34(1} of the ORT Act and Section 35 of the
E Securitisation Act vis-a-vis Section 38-C of the Bombay Act and
Section 26-B of the Kerala Act and similar other State legislations
only if there was a specific provision in the two enactments creating
first charge in favour of the banks, financial institutions and other
secured creditors but as Parliament has not made any such
provision in either of the enactments, the first charge created by
F the State legislations on the property of the dealer or any other
person, liable to pay sales tax, etc., cannot be destroyed by
implication or inference, notwithstanding the fact that banks, etc.
fall in the category of secured creditors."
Since there is no clear disharmony between the two Parliamentary
G statutes in the present case which cannot be resolved by harmonious
interpretation, it is clear that both statutes must be read together. Also,
we must not forget that Section 30 of the Advocates Act deals with the
fundamental right under Article 19( I )(g} of the Constitution to practice
one's profession. Therefore, a conjoint reading of Section 30 of the
H Advocates Act and Sections 8 and 9 of the Code together with the
MACQUARIE BANK LIMITED v. SHILPI CABLE 797
TECHNOLOGIES LTD. [R. F. NARIMAN, J.]
Adjudicatory Authority Rules and Forms thereunder would yield the result A
that a notice sent on behalf of an operational creditor by a lawyer would
be in order.
37. However, Dr. Singhvi referred to Rule 4 of the Debts Recovery
Rules and Section 434(2) of the Companies Act, 1956, which state as
follows: B
"4. Procedure for filing applications.-
(!) The application under section 19 or section 31A, or under
section 30(1) of the Act may be presented as nearly as possible in
Form-I, Form-II and Form-III respectively annexed to these rules
by the applicant in person or by his agent or by a duly authorised C
legal practitioner to the Registrar of the Bench within whose
jurisdiction his case falls or shall be sent by registered post
addressed to the Registrar.
(2)An application sent by post under sub-rule (I) shall be deemed
to have been presented to the Registrar the day on which it was D
received in the office of the Registrar.
(3) The application under sub-rule(!) shall be presented in two
sets, in a paper book along with an empty file size envelope bearing
full address of the defendant and where the number of defendants
is more than one, then sufficient number of extra paper-books E
together with empty file size envelopes bearing full address of
each of the defendant shall be furnished by the applicant.
xxxxxxxxx
434. COMPANY WHEN DEEMED UNABLE TO PAY ITS
DEBTS- F
(2) The demand referred to in clause (a) of sub-section (1) shall
be deemed to have been duly given under the hand of the creditor
if it is signed by any agent or legal adviser duly authorised on his
behalf, or in the case of a firm, if it is signed by any such agent or
legal adviser or by any member of the firm." G
The argument then made was that when Parliament wishes to
include a lawyer for the purposes oflitigation or to a pre-litigation stage,
it expressly so provides, and this not being so in the Code, it must be
inferred that lawyers are excluded when it comes to issuing notices
H
798 SUPREME COURT REPORTS [2017] 13 S.C.R.
A under Section 8 of the Code. We are afraid that this argument must be
rejected, not only in view of what has been held by us on a reading of the
Code and on th,e harmonious construction of Section 30 of the Advocates
Act read with the Code, but also on the basis ofajudgmentofthis Court
in Byram Pcstonji Gariwala v. Union Bank of India, (l 992) 1 SCC
31 at 4 7-48. In this judgment, what fell for consideration was Order
B
XXIll Rule 3 of the Code of Civil Procedure, 1908 after its amendment
in 1976. It was argued in that case that a compromise in a suit had,
under Order XXlll Rule 3, to be in writing and "signed by the parties".
It was, therefore, argued that a compromise effected by counsel on
behalf of his client would not be effective in law, unless the party himself
c signed the compromise. This was turned down stating that Courts in
India have consistently recognized tne traditional role of lawyers and the
extent and nature of the implied authority to act on behalf of their clients,
which included compromising matters on benalf of their clients. The
Court neld there is no reason to assume that the legislature intended to
curtail such implied authority of counsel. It then went on to hold:
D
"38. Considering the traditionally recognised role of counsel in
the common law system, and the evil sought to be remedied by
Parliament by the C.P.C. (Amendment) Act, 1976, namely,
attainment of certainty and expeditious disposal of cases by
reducing the terms of compromise to writing signed by the parties,
E
and allowing the compromise decree to comprehend even matters
falling outside the subject matter of the suit, but relating to the
parties, the legislature cannot, in the absence of express words to
such effect, be presumed to have disallowed the parties to enter
into a compromise by counsel in their cause or by their duly
F autnorised agents. Any such presumption would be inconsistent
with the legislative object of attaining quick reduction of arrears
in court by elimination of uncertainties and enlargement of the
scope of compromise.
39. To insist upon the party himself personally signing the
G agreement or compromise would often cause undue delay, loss
and inconvenience, especially in the case of non-resident persons.
It has always been universally understood that a party can always
act by his duly authorised representative. If a power-of-attorney
holder can enter into an agreement or compromise on behalf of
his principal, so can counsel, possessed of the requisite
H
MACQUARIE BANK LIMITED v. SHJLPI CABLE 799
TECHNOLOGIES LTD. [R. F. NARJMAN, J.]
authorisation by vakalatnama, act on behalf of his client. Not to A
recognise such capacity is not only to cause much inconvenience
and loss to the parties personally, but also to delay the progress of
proceedings in court. If the legislature had intended to make such
a fundamental change, even at the risk of delay, inconvenience
and needless expenditure, it would have expressly so stated.
B
40. Accordingly, we are of the view that the words 'in writing
and signed by the parties', inserted by the C.P.C. (Amendment)
Act, 1976, must necessarily mean, to borrow the language of Order
III Rule I CPC:
"any appearance, application or act in or to any court, required or c
authorized by law to be made or <lune by a party in such court,
may except where otherwise expressly provided by any law for
the time being in force, be made or done by the party in person, or
by his recognized agent, or by a pleader, appearing, applying
or acting as the case may be, on his behalf:
D
Provided that any such appearance shall, if the court so directs,
be made by the party in person."
38. Just as has been held in Gariwala (supra), the expression "an
operational creditor may on the occurrence ofa default deliver a demand
notice ....." under Section 8 of the Code must be read as including an E
operational creditor's authorized agent and lawyer, as has been fleshed
out in Forms 3 and 5 appended to the Adjudicatory Authority Rules.
39. For all these reasons, we are of the view that the NCLAT
judgment has to be set aside on both counts. Inasmuch as the two
threshold bars to the applications tiled under Section 9 have now been
F
removed by us, the NCLAT will proceed further with these matters
under the Code on a remand of these matters to it. The appeals are
allowed in the aforesaid terrns.
Ankit Gyan Appeals allowed.
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