# MACQUARIE BANK LIMITED v. SHILPI CABLE TECHNOLOGIES LTD

- **Citation:** [2017] 13 S.C.R. 751
- **Court:** Supreme Court of India
- **Decided:** 2017
- **Bench:** R. F. Nariman, Navin Sinha
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/macquarie-bank-limited-v-shilpi-cable-technologies-ltd-31933
- **Pages:** 49

## Headnote

Insolvency and Bankntptcy Code, 2016:
s.9(3)(c) - Provision in relation to operational debt, contained
A
B
in s.9(3)(c) of the Code if mandatory or directory - Held: SubC
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
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SUPREME COURT REPORTS
[2017) 13 S.C.R.
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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
0
Insolvency and Bankruptcy (Application to Adjudicating Authority)
Rules, 2016 - Forms 3 and 5.
E
F
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.
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
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.

## Text

_Characters 0–39,866 of 109,161. This is a partial read: ask again with offset=39866 for what follows._

[2017] 13 S.C.R. 751
MACQUARIE BANK LIMITED
v.
SHILPI CABLE TECHNOLOGIES LTD.
(Civi!Appea1No.15135of2017)
DECEMBER 15,2017
[R. F. NARIMAN AND NAVIN SINHA, JJ.]
Insolvency and Bankntptcy Code, 2016:
s.9(3)(c) - Provision in relation to operational debt, contained
A
B
in s.9(3)(c) of the Code if mandatory or directory - Held: SubC
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
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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
0
Insolvency and Bankruptcy (Application to Adjudicating Authority)
Rules, 2016 - Forms 3 and 5.
E
F
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.
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
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]
H
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
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 selfcontained 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
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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
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-BD)
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[2017] 13 S.C.R.
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Whether a demand notice of an unpaid operational debt can
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c
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F
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
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
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
"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
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
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]
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]
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
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 :
[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
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;
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
B
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E
F
G
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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
B
National Bank (2007) 2 SCC 230 : [2006] 10 Suppl.
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
E
[2000] 3 SCR .019
referred to
Para 16
[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
G
(1961] 3 SCR 763
referred to
Para32
I 1985] 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
[1991) l Suppl. SCR 387
(2009) 3 SCR 735
(1991) 1 Suppl. SCR 187
relied on
relkd on
relied on
relied on
Para 36
Para 36
Pam 36
Para 37
CIVIL APPELLATE JURISDJCTION: Civil Appeal No.15135
A
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.
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./
c
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
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SUPREME COURT REPORTS
(2017] 13 S.C.R.
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.
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
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
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
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
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
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
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
of judgments 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
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
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
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
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
NCLT and NCLAT.
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SUPREME COURT REPORTS
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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
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
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
E
be complied with. A further argument was made that the definition in
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
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.
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 of judgments and is applicable inasmuch
as when a statute requires a particular thing to be done in a particular
manner, it must be done in that manner or not at all. He also referred us
A
B
c
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
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.
E
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,
according to the learned senior counsel, has merged in an order of this
Court dismissing an appeal from the said judgment.
G
9. According to the learned senior counsel, a lawyer's notice
cannot be given under Section 8, read with the Adjudicating Authority
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SUPREME COURT REPORTS
[2017] 13 S.C.R.
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
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
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
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.
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"3. In this Code, unless the context otherwise requires,----
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( 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-
( 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
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2 of the Companies Act, 2013; and
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( d) such other institution as the Central Government may by
notification specify as a financial institution;
(23) ·'person" includes-
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;
(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;
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
B
c
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;
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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 creditorG
(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;
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764
SUPREME COURT REPORTS
[2017] 13 S.C.R.
A
(b) the repayment of unpaid operationol debt --
B
c
D
E
(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
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.
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
delivery of the notice or invoice demanding payment under subsection (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.
(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
furnishG
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(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
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.
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-
(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
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
B
c
(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;
(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
or there is a record of dispute in the information utility; or
( e) any disciplinary proceeding is pending against any proposed
resolution professional:
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F
Provided that Adjudicating Authority, shall before rejecting an
application under sub-clause (a) of clause (ii) give a notice to the
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applicant to rectify the defect in his application within seven days
of the date of receipt of such notice from the adjudicating
Authority.
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[2017) 13 S.C.R.
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(6) The corporate insolvency resolution process shall commence
from the date of admission of the application under sub-section
(5) of this section.
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xxx xxx xxx
The Insolvency and Bankruptcy (Application to Adjudicating
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
(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
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copy of the application filed with the Adjudicating Authority, by
registered post or speed post to the registered office of the
corporate debtor.
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I.
2.
3.
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 of corporate debtor].
2. Please find particulars of the unpaid operational debt below:
PARTICULARS OF OPERATIONAL DEBT
TOTAL AMOUNT OF DEBT, DETAILS
OF TRANSACTIONS ON ACCOUNT OF
WHICH DEBT FEIL DUE, AND THE
DATE FROM WHICH SUCH DEBT
FELL DUE
AMOUNT
CLAIMED
TO
BE
IN
DEFAULT AND THE DATE ON WHICH
THE DEFAULT OCCURRED (ATTACH
THE WORKINGS FOR COMPUTATION
OF DEFAULT IN TABULAR FORM)
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 REGISTRAR
OF COMPANIES (IF THE CORPORATE
DEBTOR IS A COMPANY)
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F
G
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768
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4.
5.
B
6.
7.
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SUPREME COURT REPORTS
[2017] 13 S.C.R.
DETAILS OF RETENTION OF TITIE
ARRANJEMENTS (IF ANY) IN RESPECT
OF
GOODS
TO
WHICH
TIIE
OPERATIONAL DFBT REFERS
RECORD OF DEFAULT WITII TIIE
INFORMATION lJilLITY (IF ANYl
PROVISION OF LAW, CONlRACT OR
OTIIER DOCUMENT UNIER WHICH
DEBT HA5 BOCOME DUE
LIST OF OOCUMENTS ATTACHED TO
THIS APPLICATION
IN ORDER TO
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:
F
G
H
(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.
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
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,
MACQUARIE BANK LIMITED v. SHILPI CABLE
769
TECHNOLOGIES LTD. [R. F. NARIMAN, J.)
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
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.
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
INITIATE CORPORATE INSOLVENCY RESOLUTION
PROCESS UNDER THE CODE.
(Under rule 6 of the Insolvency and Bankruptcy (Application to
Adjudicating Authority) Rules, 2016)
To,
The National Company Law Tribunal
[Address]
From,
[Date)
[Name and address for correspondence of the operational
creditor]
In the matter of [name of the corporate debtor]
Subject: Application to initiate corporate insolvency
resolution process in respect of [name of the corporate
debtor) under the Insolvency and Bankruptcy Code, 2016.
A
B
c
D
E
F
G
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SlJPREME COURT REPORTS
[2017] 13 S.C.R.
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Madam/Sir,
B
I.
2.
c
3.
D
I.
2.
3.
E
.
4.
F
5.
6.
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7.
H
[Name of the operational creditor], hereby submits this
application to initiate a corporate insolvency resolution process in
the case of [name of corporate debtor].