A Demand Notice of an Unpaid Operational Debt can be issued by a Lawyer on behalf of the Operational Creditor: SC [Read Judgment]

A two judge bench of the Supreme Court of India, in the case of Macquarie Bank Limited Vs. Shilpi Cable Technologies Ltd. held that a demand notice of an unpaid operational debt can be issued by a lawyer on behalf of the operational creditor.

The appellant had approached the honorable court aggrieved by decision of NCLAT in not recognizing the notice issued by the advocate/lawyer on behalf of the appellant as notice under Section 8 of the Insolvency and Bankruptcy Code, 2016.

The issue before the honorable court was whether a demand notice of an unpaid operational debt can be issued by a lawyer on behalf of the operational creditor.

Senior Advocate Mukul Rohatgi, appearing on behalf of the appellants contented that a perusal of Form 5, that a “person authorized to act on behalf of the operational creditor” is a person who can sign Form 5 on behalf of the operational creditor. Also, the 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.

Senior Counsel Dr. A.M. Singhvi, appearing on behalf of the respondent argued that a lawyer’s notice cannot be given under Section 8, read with the Adjudicating Authority 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.

The two judge bench comprising of Justice R.F.Nariman and Justice Navin Sinha observed “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 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 “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. Therefore, a conjoint reading of Section 30 of the 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.”

Allowing the appeals the court held that demand notice of an unpaid operational debt can be issued by a lawyer on behalf of the operational creditor.

The bench also directed the National Company Law Tribunal to proceed with the matters under the Code on a remand of these matters to it.