WHO CAN SERVE A DEMAND NOTICE UNDER IB CODE ?
A demand notice under Section 8(1) of the IB Code can be delivered by the person himself or by his duly authorised representative.
CAN AN ADVOCATE SERVE A DEMAND ON BEHALF OF AN OPERATIONAL CREDITOR?
In Macquarie Bank Limited Vs Shilpi Cable Technologies Ltd. 2018 (145) SCL 236, the SC dealt with the issue as to whether an advocate can issue a demand notice on behalf of an operational creditor.
The Court considered that the expression used is “demand notice is delivered” and not “issued”. It also appreciated a vital aspect that Section 238 of IB Code does not override the provisions of the Advocates Act. Hence, it validated the act to be as per the law.
It is worthwhile to note that most of the operational creditors prefer and insist that the demand notice is delivered under the signature of a lawyer.
The Court held that
“since there is no clear disharmony between the two Parliamentary 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(1)(g) of the Constitution to practice one’s profession. 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.
HOW MANY DAYS DOES AN OPERATION CREDITOR HAS TO WAIT FOR BEFORE FILING AN APPLICATION, AFTER SENDING A DEMAND NOTICE?
As per Section 9 of the Code, an Operational Creditor can file an application for initiation of CIRP against the Corporate Debtor only after the expiry of 10 days from the date of delivery of demand notice to the Corporate Debtor.
The SC in Macquarie Bank Limited (supra), held that it is only if, after the expiry of the period of the said 10 days, the operational creditor does not either receive payment from the corporate debtor or notice of dispute, that the operational creditor may trigger the insolvency process by filing an application before the adjudicating authority under Sections 9(1) and 9(2).
Therefore, the waiting period of 10 days is mandatory in nature and any application filed prior to the same will be premature and will be liable for rejection by the Adjudicating Authority.
A similar provision also exists under the Negotiable Instruments Act, 1881 wherein there is a restriction in filing complaint under Section 138 of the Act prior to the lapsing of the period of 15 days.
To know more about the demand notice and other aspects related to demand notices under IB Code, please feel free to connect with our IB Code expertised law firm in Mumbai & Ahmedabad.
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